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The Progressive Policy Think Tank

'Enormous challenge’ for Holyrood following larger than expected cut in Scotland grant - IPPR Scotland on the UK Spending Review

The UK Spending Review has been announced showing spending cuts for Scotland. The Scottish budget will see real terms cuts of 3.9% (real terms, cumulative) and, within that, day to day spending dropping by 5.0% (real terms, cumulative) by 2019/20. Capital investment will increase by 5.2% over the same time (real terms, cumulative).

However, the Scottish Government has announced increased funding for the NHS, childcare and affordable housing. Taking into account announcements already made, together with income from Scottish Business Rates and the ability of the Scottish Government to borrow for capital funding,

IPPR Scotland estimate this will mean a real terms cut of 2.7% overall (real terms, cumulative) by 2019/20 and a cut of 10.7% to non-protected departments in Scotland (real terms, cumulative) by 2019/20 – this mean non-protected departments will be funded at £1.5b less per year, in real terms, by 2019/20 compared to now.

Our analysis suggests that reversing these cuts entirely through an income tax rise would add around 3p to every income tax rate in Scotland.

This is marginally worse than estimates published by IPPR Scotland earlier this week, before the Chancellor’s announcement today.

Russell Gunson, Director of IPPR Scotland, said:

“The UK Government has confirmed our forecasts of real terms cuts to Scotland over the next four years. These spending cuts would be enough of a challenge for the Scottish Parliament, however coming on the back of five years of similar cuts, the challenge looks enormous. With commitments made by the Scottish Government to increase spending on the NHS, affordable housing and childcare in Scotland, then non-protected departments could see billions of pounds of cuts over the coming years.

“In terms of spending in reserved areas, the scrapping of proposals to cut Tax Credits in Scotland will be welcomed. However other changes to benefits, including to Universal Credit and Housing Benefit, will need to be studied very closely for their impacts on some of the poorest families in Scotland. Equally, new revenue raising policies in the rest of the UK, like the Apprentices Levy and increased stamp duty for additional homes in England and Wales, need to be looked at for their potential for income in Scotland.

“The focus now moves from the UK Government’s decisions, to the Scottish Parliament’s budget later in December. Key decisions need to be made as to whether these cuts are passed on to Scottish departments, and if so where the axe falls, or whether the Scottish Government instead decides to raise tax revenue to help offset or fully reverse these cuts to the Scottish budget.”


Russell Gunson - [email protected] 07766 904 332

Danny Wright - [email protected] 07887 422789