Finance Secretary Shona Robison faces challenges in the upcoming Scottish Budget despite receiving additional funding from the UK Government, experts have warned.
The Fraser of Allander Institute highlighted that the Scottish Government is set to receive £1.5 billion for the current financial year and £3.4 billion in 2025-26 from Chancellor Rachel Reeves’s UK Budget. However, Joao Sousa, deputy director at the think tank, emphasized that the budget situation remains “tricky” for Robison due to limited flexibility in spending.
The report pointed out that the majority of Scottish Government spending is allocated to health, pay, social security, and grants to local government, leaving little room for significant changes in budget allocation. This, coupled with the absence of a clear medium-term financial strategy from the Scottish Government, has made it challenging to plan for the future.
One major concern highlighted by the Institute is the impact of public sector pay rises on the overall budget. With the public sector wage bill accounting for over half of day-to-day spending, the report stressed that pay increases agreed upon in previous years will continue to affect budgetary decisions moving forward.
Moreover, the report raised concerns about the funding disparity in areas like social security, where costs exceed the funding received from the UK Government. This, combined with pressures from pay rises, increased national insurance contributions, and other commitments, leaves little room for additional funding in the upcoming budget.
The Institute also warned that if pay rises exceed expectations, the Scottish Government may need to take emergency measures to balance the budget. Despite efforts to address child poverty, the report noted that spending in this area remains relatively low compared to overall discretionary funding.
In conclusion, the Fraser of Allander Institute’s report underscores the challenges faced by Finance Secretary Shona Robison in navigating the complex budget landscape. While the additional funding from the UK Government provides some relief, the Institute cautions that careful planning and strategic decision-making will be essential to ensure a sustainable budget for the future.
