How will next SNP government tackle fiscal mess left by this one? #ScottishBudget

Eradicating child poverty? Growing the economy? Tackling climate crisis?  Ensuring quality public services? Reviewing the Scottish Budget and Spending Review 2026, John McLaren finds a weary government’s major ‘achievement’ has been to hide the cuts coming down the line – after the election.

The whole Budget debacle showed a government truly out of ideas and one that has virtually given up on trying, as personified in Shona Robison’s weary and stilted delivery.

And yet the governing SNP is on course to win another resounding victory at the polls in less than six months. What hope is there when such poverty of ambition, allied with an absence of strategy and of prioritisation, is rewarded rather than punished?

It’s worth taking the Budget and Spending Review apart and looking at what it provides with respect to advancing John Swinney’s self-proclaimed four priorities, as restated in the foreword to the Spending Review by the Cabinet Secretary.

First, eradicating child poverty

I won’t go through, yet again, how false a pledge this is – no definition of any element of it, no cost attached – but even in terms of reducing child poverty the Budget announcements amounted to small beer. A token amount towards families with children under one year old, a few bits and pieces. Meanwhile, on the other side of the ledger, Local Government – which provides many services crucial to children prospering – is serially underfunded, with real terms cuts in store.

There is no telling what the overall net impact might be on children’s well-being. Furthermore, big rises in council tax won’t help with the cost of living for many. David Phillips of the Institute for Fiscal Studies (IFS) estimates they will need to rise by 8% on average, per year, to make up for the Spending Reviews cut to the main Local Government budget. And let’s wait and see if that affordable housing programme comes to fruition. At both the Scottish and UK level, outcomes have a habit of falling well short of targets.

‘It is very difficult to tell how much Scotland spends on reducing child poverty.’ Fraser of Allander: Are the Scottish Government spending all the two child limit savings on reducing child povert?

Second, growing the economy

Well, a cut to the Enterprise budget isn’t a great start, although it probably hasn’t affected the Scottish Fiscal Commission (SFC)’s economic outlook very much. That remains a paltry 1.5% GDP growth a year to 2030. And the SFC’s review of Scottish productivity has resulted in them downgrading future growth to less than 1% a year. So, no economic renaissance in sight.

Third, tackling the climate emergency 

The Wind Power budget got hammered and the ‘Climate Action and Energy’ portfolio got the worst settlement of any portfolio over the next three years. Down 23% in real (inflation adjusted) terms, if you’re asking. So much for it being an emergency. Burn, baby, burn.

Fourth, ensuring high quality, sustainable, public services.

Not unless you’re Health, and maybe not even then. In terms of day-to-day spending almost all budgets are falling in real terms over the period of the Spending Review. Even Health is only rising by close to 2.5% a year, which is below the SG’s own estimate – from the Medium-Term Financial Strategy of earlier this year – that demand will be rising by around 3.3% a year.

Health, including the NHS, is also expected to make big efficiency savings (3% a year) which – as the SFC pointed out, using evidence from Audit Scotland – has not happened of late and is somewhere around the ‘heroic’ level in terms of assumptions. Top ups surely will be needed, coming from other, already stretched and declining, portfolio budgets.

These are the prospects for the SNP’s priorities, pity anything that isn’t a priority, like prisons.

Let’s just get past the election

And then there are the spending pressures that are simply being ignored but will almost definitely arise. A pay policy that sticks with an overall envelope of 9% over three years which implies an average, below inflation, pay award of 1.1% in 2027-28 – even lower for most NHS workers. Believable? Of course not but let’s just get past the election.

The Scottish Government also still maintains that it will reduce the public sector workforce by an average of 0.5% per year from 2025-26 to 2029-30, which would be a significant departure from recent trends.

I’ve already touched on the ‘ambitious’ level of efficiency savings outlined for the NHS above – an obvious, fiscal failure in the making. In addition, the Scottish Government is using up one-off windfalls, like the ScotWind licensing revenues, to pay for ongoing costs, such as above expected wage settlements. Another risky approach.

All of this means that much of this Budget will need to be revisited soon after the election, with further cuts, outside of Health and Social Security, being required.

How does playing politics with tax powers benefit Scotland?

What has the Scottish Government done with its increased tax powers over time? Largely played politics and lost out financially. As David Heald pointed out to the Finance Committee this week, with six income tax bands, it’s ludicrous that three are trivially different and then you get a jump up from 21% to 42%. The main aim of this, of course, is to allow a cheap political point to be scored, while simultaneously making the tax system unnecessarily complicated. Never a positive move, in economic growth terms. 

Meanwhile, the SFC estimate that policy differences with Westminster over income tax mean that, in 2026-27, Scottish income taxpayers will pay £1,754 million more, but the Scottish Budget will only benefit by £969 million. This, nigh on £800 million, shortfall – the so called “tax base performance gap” – comes about as a result of the workings of the Fiscal Framework that the Scottish Government negotiated and signed up for, alongside the ramifications of a slower (than the RUK) growing economy. Great, just what we need.

And the Mansion Tax? It’s not arriving until 2028 and will be based on current valuations – which is good – while the rest of the Scottish council tax system remains based on 1991 valuations – which is very bad. And what about the councils who don’t have any million-pound houses in their area, do they get any benefit?

An incoherent mess 

If the financial support were more focussed on the 5-10% with the highest needs then perhaps the system would be more successful in reducing inequalities of outcome.

Overall, this is not a fiscal ‘strategy,’ it is simply an incoherent mess. It is so bad that the government couldn’t even come up with any election bribes worth the name. Instead, their major ‘achievement’ has been to hide the real degree of cuts that are coming down the line. Perhaps the most dispiriting aspect of all of this is that no-one appears to be able to successfully hold the government to account on its obvious failings. The other Scottish political parties have made few real inroads in terms of criticising the settlement. The reality is that most of them would struggle to say where they would cut deeper, or not fund any major budget to the degree that the SNP intend to.

No party seems willing to take a hard look at public services and to prioritise where it might make the biggest difference. A good example of expensive but inefficient policy choices was illustrated recently by the Scotsman’s schools commentator, Cameron Wylie. Commenting on the fact that 43% of Scottish school pupils are now classified as having an additional support need, he contends that such a broad definition is probably not helping those most in need. A point reinforced by the fact that middle class schools have particularly high numbers of ASN pupils. If the financial support were more focussed on the 5-10% with the highest needs then perhaps the system would be more successful in reducing inequalities of outcome.

The same argument might apply to child poverty. Rather than targeting all those children calculated to be living in poverty, why not focus on those living in ‘extreme’ poverty? Eradicating ‘extreme’ poverty might be a more achievable, and worthwhile, aim.

Will the new guard seek to make a difference?

Finally – returning to the question of why such a knackered government retains such electoral support – is it simply that independence supporters believe this policy trumps all? Or is it because many voters think that the other ‘UK branch’ parties would be even worse at governing Scotland?

How deep does any such ‘loyalty’ to the current government go? And, if misplaced, what might sap the strength from such an allegiance? It’s difficult to see how the likes of the media or think-tanks, as currently formulated, could have a greater influence on political attitudes than at present.

So for now, we need to hope that the departing SNP old guard are replaced by a new guard with a bit more spirit about them and a yearning to make a difference, rather than simply to stay in power. Which seems a pretty faint hope.

The feature image is AI generated using Google Gemini