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January Budget must close Scotland’s delivery gap on key priorities, says IPPR Scotland

The Scottish Budget in January should aim to quicken the pace of delivery of the First Minister’s four key priorities of eradicating child poverty, tackling the climate emergency, growing the economy and ensuring high quality and sustainable public services.

Recent IPPR Scotland polling confirmed that faith in the next Scottish government to deliver on the public’s priority areas is rapidly dwindling. Arguably this stems from the persistent delivery gap across a range of policy areas.

Therefore, it is essential that the Scottish government step up to the challenge of policy credibility at the next Budget, linking spending to targets and outcomes with much more rigour.

1. Eradicating child poverty

Data for 2023-24 (the latest available data) confirms that relative child poverty in Scotland fell to 22 per cent, missing the Scottish government’s interim target of 18 per cent. Over the same period child poverty in the UK increased to 31 per cent. The growing divergence in child poverty is largely explained by the introduction of the Scottish Child Payment which is now having a tangible impact in reducing child poverty in Scotland.

The UK government’s recent Budget decision to abolish the two-child limit has freed up around £120 million in the next financial year which the Scottish government had previously earmarked for this purpose.

Previous IPPR Scotland research has shown that on current trajectories the Scottish government’s 2030 target will be missed by some distance. Our assessment is that an increase in the Scottish Child Payment to £36 per week would be affordable with the money earmarked to mitigate the two-child limit and help lift 5,000 children out of poverty.

The Scottish government should increase the Scottish Child Payment to £36 in the next financial year.

2. Tackling the climate emergency

The Scottish government’s draft climate change plan is a step in the right direction but lacks crucial information about costs and how they will be shared fairly across society. The Scottish government has responded to calls to link the fiscal budget with climate policy, but this has only gone as far as badging spending items as positive or negative for emissions.

The fiscal and carbon budgets must now be fully aligned in order that politicians and the public can assess with precision:

how much of the cost of climate action is being shared collectively through the public finances and how much is left to households and businesses to shoulder themselves; and,
what impact the government expects its budget measures to have in reducing emissions, thereby clarifying the contribution public spending is making to achieving the carbon budgets.

3. Growing the economy

Growing the economy should be considered alongside, and not apart from, the First Minister’s other priorities. The ways in which higher economic output is achieved will have tangible impact on the other priorities. There must also be some realism about what devolved public policy can achieve in terms of higher growth over the short-to-medium term.

This Budget should:

prioritise measures that will help unlock the significant investment opportunities in Scotland’s more fragile regional economies. This is likely to mean additional investment to ease supply side constraints in skills and rural transport and housing infrastructure.
provide a sustainable settlement for Scotland’s colleges which play a vital role in helping young people into employment as well as meeting the skills needs of employers. Colleges are a key mechanism helping to drive productivity growth in Scotland’s regional economies.
at least maintain the economic development budget. Nearly a decade after the last enterprise and skills review, the structure and remit of the enterprise networks remain subject to a vigorous ongoing debate. Meanwhile, agency budgets are seeing year on year cuts. This is unsustainable and risks opportunities being lost. Those proposing abolishing or consolidating agencies should explain precisely how their functions can be delivered more efficiently.
seek to increase year on year the funding for employability and family support measures such as childcare, measures that complement work and help underpin genuinely inclusive growth. Forthcoming IPPR Scotland research shows that investing in areas that complement work is one of the mechanisms that enables other countries to marry higher social spending with significantly better economic outcomes.

4. Sustainable public services

The Scottish government needs to be realistic about potential savings to be achieved through productivity improvements and deployment of new technologies. As forthcoming IPPR Scotland research will confirm in the new year, productivity growth in labour intensive services such as health, social care, education and policing is intrinsically slow. The fiscal gap confirmed by the Scottish government’s own Medium-Term Financial Strategy (MTFS) is highly unlikely to be filled by rapid productivity improvements.

A more credible approach to improving public services within a framework of sufficient and stable public finances must:

be built on a credible long term tax strategy. The tax strategy published alongside last year’s budget failed to provide a coherent vision for the future of devolved taxation. Higher revenues cannot be achieved exclusively from taxing higher earners.
ensure that workers and service users have a full and proper role in designing and delivering more efficient systems that provide better outcomes for all.

Beyond the First Minister’s priorities the Budget should:

address the fiscal challenge set out in the Medium-term Financial Strategy in a serious fashion. Increasing spending over the short term without a plan to address the fiscal gap is not a viable strategy. Again, a credible long-term tax strategy has to be part of a broader approach to fill the fiscal gap.
demonstrate genuine progresstowards the preventative spending agenda recommended by the Christie Commission over a decade ago, recognising that to do so effectively will require early stage investment.

Stephen Boyd, IPPR Scotland director, said:

“January’s Budget is a critical test of the Scottish government’s credibility. The First Minister has been clear about his four key priorities, but the commitment has often not translated to delivery. This Budget must show how spending decisions will tangibly reduce child poverty, drive climate action, support inclusive economic growth and set out a realistic plan for a sustained delivery of public services. That means tough choices, clearer links between money and outcomes, and a longterm plan to address Scotland’s growing fiscal challenge.”

AVAILABLE FOR INTERVIEW:

IPPR Scotland director Stephen Boyd is available for interviews.

CONTACT:

Sukhada Tatke, media and impact officer at IPPR Scotland: s.tatke@ippr.org 07901169121

Stephen Boyd, IPPR Scotland director: s.boyd@ippr.org

NOTE TO EDITORS:

IPPR Scotland shapes public policy in pursuit of a fairer, greener, more prosperous Scotland.