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The Progressive Policy Think Tank

Scotland facing “really difficult” budget

IPPR Scotland analysis has revealed the scale of public spending cuts facing Scotland, in advance of the Scottish Government’s draft budget.

The analysis has found that:

  • Annual departmental spending in Scotland could be more than £700m lower (2017/18 prices) in 2019/20 compared with 2017/18.
  • This would equate to around a 2p increase in the basic rate of tax in Scotland.
  • Without tax rises, there could be cuts of £1.3bn to non-protected departments in Scotland (outside of Health and Police) between 2017/18 and 2019/20 (per year in 2017/18 prices). This represents 10.4% cuts over just two years.
  • Protecting non-protected departments over the next two years would require a tax increase of around 4p in the basic rate of tax in Scotland.

Scotland’s budget has seen eight years of cuts and counting since 2010/11. The UK budget last month saw yet more cuts to Scotland’s day-to-spending through the Scotland block grant. However, given devolution of tax powers to Scotland, Scottish tax revenues will be important in setting Scotland’s budget. IPPR Scotland has analysed tax projections for Scotland’s taxes, produced at the UK level, and found that cuts to day-to-day spending (RDEL) could be £700m a year lower in real terms by 2019/20 compared to this year (2017/18). This is a significant level of spending cuts, and would equate to around a 2p increase in the basic rate of tax in Scotland.

With spending commitments to protect the NHS and police spending, this could see cuts to non-protected departments of £1.3bn per year by 2019/20 compared to this year, around 10.4% cuts in just two years. This could equate to an increase in the basic rate of tax in Scotland of around 4p.

Russell Gunson, Director of IPPR Scotland, said:

"Scotland is facing a really difficult budget this week, with further cuts to the Scotland block grant. We’ve looked at the UK projections for Scotland’s taxes, and, if correct, it shows that cuts to day to day spending could reach £700m per year by 2019. With commitments in Scotland to increase funding on the NHS and to protect police funding, cuts to everything else could reach £1.3bn per year by 2019, over 10% in just two years.

“The Scottish Government has started a debate on tax, and is clearly considering increasing income tax in Scotland. We welcome this and clearly tax rises are going to be needed to help reduce public spending cuts over the next year or two. However, tax rises alone are unlikely to end the cuts we face for long.

“Any increase in tax may only buy us a year or two of protection from cuts on this scale. Either we will need to see further tax rises over the coming years or find ways to deliver a significantly stronger Scotland economy, and increased tax receipts".

 ENDS

 
Contacts

Rosie Corrigan, 07585772633, r.corrigan@ippr.org

Russell Gunson, 07766 904 332, r.gunson@ippr.org

Notes

IPPR Scotland is IPPR’s dedicated think-tank for Scotland. We are cross-party, progressive, and neutral on the question of Scotland’s independence. IPPR Scotland is dedicated to supporting and improving public policy in Scotland, working tirelessly to achieve a progressive Scotland. For more information, visit: https://www.ippr.org/scotland

Non-protected departments in Scotland are those outside of Health spending and Police spending. We also included a cash-terms protected for colleges.

The analysis is based on UK forecasts for Scotland’s tax revenue, produced by the Office for Budget Responsibility. However, it is the newly created Scottish Fiscal Commission who will make forecasts that will feed in to the Scotland draft budget. These forecasts will be all-important on Thurs 14th December.

Equally, the analysis does not take account of any underspend and carry forward the Scottish Government has been able to do between this year and next.

Resource DEL spending is distinct from Capital DEL or AME funding, or financial transactions. Only RDEL can be used to fund the day-to-day costs of public services like schools, hospitals and public sector pay.