Budget hangover

Scotland is waking up to a pretty severe hangover from yesterday's budget. Apart from the personal impact on the low paid in particular, there will be a big impact on public services.

Translating the UK budget cuts into Scottish expenditure can only be estimated until the Comprehensive Spending Review in the autumn, when the Barnett consequentials for Scotland will be calculated. The best estimate from yesterday’s figures is that this will mean a cut in the block grant of around £4.75bn by 2014 – a real terms cut of 16%. This is less than the headline 25% cut in non-protected departmental allocations, because of the proportion of devolved spending that is in protected departments, primarily health. However, we should recognise that protected in real terms means in accordance with the Treasury inflation allowance. This is 1.5% this year, when real inflation is currently 5.1%. The UK government is maintaining an inflation target of 2% for next year, so this is likely to mean a real terms cut in spending, even in protected departments.

Government budget allocations are also only part of the story. The real cuts at council and health board level will be much greater. They start by factoring in unavoidable commitments including:


• Real inflation exceeding Treasury allowance (particularly energy)
• Increased demand on services
• Reduction in income
• Concordat and other service growth (e.g. class sizes)
• Impact of council tax freeze
• Strengthening balances
• Part year impact of cuts


I took part in a BBC radio phone in programme this morning. From the those calling in there was a growing realisation of the impact this will have on the Scottish economy. For every one job lost in the public sector between .70 and 1 job could be lost in the private sector. This will seriously slow up growth, or at worst cause a double dip recession. Either way misery for many workers and their families.