The Scottish Government’s Finance and Public Administration Committee (FPAC) has warned that Scotland’s short-term approach to financial planning has exacerbated a potential £1.5 billion spending gap.
The FPAC’s report comes ahead of the Scottish budget on 19th December, which sets out the government’s spending and taxation plans.
The report provides recommendations on Scotland’s fiscal policy in areas such as spending priorities, investment, and reform.
The SNP convener of the cross-party FPAC, MSP Kenneth Gibson, commented that:
“As the Scottish budget approaches, we have seen little evidence to suggest a shift away from the Scottish government’s short-term approach to financial planning.”
“That approach has also been hampered by a reliance on one-year UK financial settlements.”
“We strongly recommend that the Scottish government produces a full response to the fiscal commission’s sustainability report setting out the actions it will take to address longer-term challenges.”
The Scottish Fiscal Commission (SFC), an independent forecaster, projects government spending to exceed estimated funding by an average of £1.5 billion a year in today’s prices under current policies.
The FPAC’s report criticises the government for not prioritising affordability when pursuing its three stated missions of equality, opportunity, and community.
Policies, such as the Scottish Child Payment and a planned National Care Service, aim to tackle these missions but come at a cost.
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According to the SFC, the government’s social security spending will increase from £5.3 billion to £7.8 billion over the next five years, while its capital budget will be 16% smaller in real terms.
The Scottish committee recommends setting out areas of spending that are not achieving its missions and stresses the importance of infrastructure investment in stimulating economic growth.
In September, Audit Scotland found that the government will be unable to deliver its planned £26 million public infrastructure investment due to reduced capital budgets, higher costs, and increased maintenance.
The FPAC report partly blames the real terms decline in funding on the UK government’s failure to “inflation-proof” Scotland’s capital budget.
It views public service reform as a way to help “balance the books” but criticises the Scottish government for falling behind by changing its reform programme multiple times.
Responding to the report, the Scottish Conservatives finance spokesperson Liz Smith said to the Times that:
“Short-term thinking has, for years, been a hallmark of this SNP government’s approach to public finances.”
“It’s what has created the black hole in the budget, savage cuts to frontline services, and stagnant growth.”
A Scottish Government spokesperson told the Herald that:
“As we set out in the medium-term financial strategy, we will do all we can within our powers to ensure public finances are on a sustainable path.”
Image via Rayna Carruthers.