Budget overstated public spending increases, says think tank

A leading think tank has accused the Scottish Government of overstating spending increases in its budget.

Deputy First Minister John Swinney laid out the draft budget on Thursday, pledging a £1 billion increase in health and social care spending as well as £550 million more for local government.

Mr Swinney also announced a change to Scotland’s tax rates that will put more of the burden on those earning more than £43,000.

But the Institute for Fiscal Studies (IFS) has said the Government compared the new funding pledges to the budget last year and not the amount that was actually spent this year following funding increases from the UK Government and drawdowns from reserves.

The IFS also said the method of calculating inflation in the budget was likely to understate the impact it could have on public finances.

Local government spending, for instance, increased by £540 million as a result of the pay deals offered earlier this year, the think tank said, meaning the quoted increase would actually be at least a 5% drop in the real spending on local government this year.

As a result, real terms funding for devolved public services will be 1.6% lower next year than this year, not the touted 1.9% increase reported in the budget.

The think tank said: “Extra funding from the UK Government, an unexpected significant improvement in Scotland’s underlying tax revenue growth, and some modest tax rises have provided a decent boost to funding next year compared to what was previously planned.

“But by ignoring the in-year boosts to funding provided to many services this year, the budget document overstates the increases next year.

“So the outlook for services will be tougher than it looks – especially for local government, which is facing a substantial cut to its funding.”

The think tank did concede, however, that funding for public services such as local government or justice had increased more than was expected as a result of the spending review in May.

A Scottish Government spokesperson said:”As with every year, the Scottish Government has compared the proposed budget for 2023/24 to the allocations approved by Parliament in February 2022 for 2022/23. This shows the best like-for-like comparison of available funding at this stage in the budgetary cycle.

“We do not recognise several of the figures in the IFS article, particularly those relating to local government, and so are unable to comment on their calculations. We will look to work with the IFS to address any misunderstandings they may have.

“The UK Government has provided no additional funding for this year’s pay uplifts to respond to inflation and the Scottish Government is taking decisive action to support the delivery of public services in a challenging economic environment.”