Scottish Budget 2024-25

 There were no big surprises in the draft Scottish Budget published today. I set out the background to the Budget in a briefing for the Jimmy Reid Foundation, and it was always going to be challenging given the economic environment and the appalling UK Autumn Statement. 

There was little cash to spread very thinly. The NHS and social care budget predictably got the lion's share, although even that is well below what it needs. Within that budget section, social care did best, which is the right priority given the impact of delayed discharge on our hospitals. However, welcome though £12 per hour is for workers, it is unlikely to bring significant numbers of new staff into the sector. We need £15 per hour, and we need it quickly, along with funding for sick pay. Mental health, drug, and alcohol services are going to have a difficult year.

NHS staffing will remain a big problem in the coming year, as growth in staff numbers is likely to continue falling behind the rest of the UK. 

The Scottish Child Payment is at least being uprated but short of where many organisations felt it should be to maintain progress on tackling child poverty. As the Scottish Fiscal Commission's (SFC) report shows, Social Security payments with no equivalent in the Block Grant are the biggest additional cost to the Scottish Budget.

On income, changes to Income Tax are a welcome progressive change to the banding structure. Again, the Deputy First Minister was urged to go further on tax reform by a coalition of over 60 organisations in a letter I signed on behalf of the Reid Foundation. Tackling Scotland's key challenges requires long-term thinking rather than more sticking plasters. 

There is also a shocking lack of consistency. Progressive Income Tax changes must be contrasted with the regressive Council Tax freeze. If fully funded, the resources could be better targeted to support public services and the cost of living crisis. This chart from the recent FoA budget report is a reminder of falling real terms local government spending, particularly on non-statutory services, over the last decade.

As with the UK Budget, I am more interested in the Scottish Fiscal Commission report, which gives a longer-term perspective. Their fiscal forecast is summarised in this chart. Revenue will be up 8% by 2028/9, but capital will be down by 20%. Our crumbling infrastructure is about to crumble some more! The Scottish Government is heading towards the capital borrowing cap, strengthening the case for the same prudential borrowing powers as local government.

The SFC also highlights the drop in living standards between 2021-22 and 2023-24 as the largest reduction since Scottish records began in 1998. They are unlikely to recover to 2021 levels until 2026. 

The SFC also assumes average devolved public sector pay growth of 4.5% in 2024-25. This includes an average basic pay award of 3.0% and pay progression and churn. They also forecast a fall in Scotland’s public sector employment from 2023-24 onwards. Overall, the SFC indicated slightly higher wage growth in Scotland than in the UK, plugging the current gap. Some sectors are doing better than others this year. 

In conclusion, the report card would have to say, could do better. Some steps in the right direction with progressive income tax changes and spending priorities. However, that has to be balanced by only modest tax reform and limited support for alleviating child poverty, coupled with the absurd council tax freeze.