IPPR Scotland - Hammond’s Brexit black hole could leave Scotland £1.3bn worse off
The black hole facing UK Chancellor Phillip Hammond could mean further cuts of up to £1.3 billion to Scotland’s budget, IPPR Scotland has warned.
Ahead of the UK government’s Autumn Statement next week, IPPR Scotland, the progressive cross-party think-tank, is warning that worsening UK public finances, as a result of Brexit, could mean further cuts to the Scottish Parliament’s budget.
Based on the Institute for Fiscal Studies’ projection of a £25bn gap in UK finances, per year by 2019/20, IPPR Scotland has modelled three scenarios for Scotland’s budgets. The first where all of the UK black hole is found through cuts to spending, and two further scenarios with lower levels of cuts:
- Scenario 1 – all of the £25.3bn is found from non-protected resource DEL spending in the UK (spending outside of health, education, defence and international aid)
- Scenario 2 – the UK Government finds half (£12.2bn) of the black hole through cuts to non-protected RDEL
- Scenario 3 – the UK Government funds a quarter of the black hole (£6.3bn) of non-protected RDEL spending cuts.
IPPR Scotland finds:
- Scenario 1 leads to further cuts to Scotland’s budget of £1.34bn per year by 2019/20 (in 2015/16 prices). This would see cuts to non-protected departments in Scotland of, in total, £3.34bn (in 2015/16 prices), or 21.6%, by 2019/20 compared to 2015/16.
- Scenario 2 would see further cuts of £670m per year by 2019/20 (in 2015/16 prices). This would see cuts to non-protected departments in Scotland of, in total, £2.67bn (in 2015/16 prices) or 17.4%, by 2019/20 compared to 2015/16.
- Even Scenario 3 would see further cuts £330m per year by 2019/20 (in 2015/16 prices). This would see cuts to non-protected departments in Scotland of, in total, £2.33bn (in 2015/16 prices), or 15.3%, by 2019/20 compared to 2015/16. If the UK Government make no further spending cuts and instead borrow to fund the £25.3bn black hole, this would see the cuts outlined for the Scottish Parliament budget continued as planned in March.
Any additional funding reduction would be on top of cuts already planned for Scotland’s budget over the course of this parliament. In March, IPPR Scotland found the cuts already facing Scotland’s unprotected departments (outside of health and police) would amount to £2bn per year by 2019/20 (in 2015/16 prices) compared to 2015/16.
If the UK Government funds the black hole through borrowing, this will have no direct effect on the Scottish Parliament’s budget in the short-term, but would likely prolong public spending cuts into the future.
Russell Gunson, director of IPPR Scotland, said:
“There is no doubt that Brexit will have a significant impact on Scotland – both in terms of our economy and the subsequent impact on public services. Scotland, like the UK, is facing a ‘growth shock’ pretty much in line with expectations prior to June’s EU referendum vote, which will likely leave a black hole in the UK’s finances.
“In his Autumn Statement next week, the UK Chancellor must spell out exactly what the impact of his policies on Scotland’s budget will be, in what were already hugely challenging circumstances. Any further cuts to day-to-day spending in the rest of the UK, could mean cuts for Scotland’s budgets too, on top of very significant cuts already planned over the coming years.
“It’s clear that in Scotland we need to come forward with new ideas to reform our public services so they deliver both the social justice and economic prosperity we need, even as public spending continues to drop over the coming years.”
Ash Singleton, external affairs manager, IPPR Scotland, 07887 422 789
For broadcast bids, please contact Russell Gunson, director, IPPR Scotland, 07766 904 332
IPPR Scotland’s analysis is outlined in a submission to the Scottish Parliament’s Finance and Constitution Committee, ahead of verbal evidence on Wed 16 November: http://www.parliament.scot/S5_Finance/20161111CompletePUBLICPapers.pdf