{"id":12540,"date":"2020-11-28T06:30:27","date_gmt":"2020-11-28T06:30:27","guid":{"rendered":"https:\/\/sceptical.scot\/staging\/?p=12540"},"modified":"2020-11-27T10:56:59","modified_gmt":"2020-11-27T10:56:59","slug":"spending-review-2020-and-scotland","status":"publish","type":"post","link":"https:\/\/sceptical.scot\/staging\/2020\/11\/spending-review-2020-and-scotland\/","title":{"rendered":"Spending Review 2020 and Scotland"},"content":{"rendered":"\n<p><strong>The 2020 Spending Review was underpinned by the anticipated \u2018scary\u2019 numbers on the UK economy and public finances.<\/strong><\/p>\n<p>The economy will shrink 11% this year and recover only about half that ground next year. Unemployment is forecast to reach 7.5% next year \u2013 and potentially higher under a \u2018no deal\u2019 Brexit scenario.<\/p>\n<p>The pandemic is anticipated to cause permanent damage \u2013 with the economy and earnings remaining lower even in five years\u2019 time than was expected before the arrival of Covid.<\/p>\n<p>The deficit is anticipated to reach 19% of GDP this year (close to \u00a3400 billion), and debt as a percentage of GDP will rise throughout the period to 2024\/25. But there is some good news in that debt servicing costs will actually fall. The debate about what is \u2018sustainable\u2019 in the context of UK public finances will continue to run.<\/p>\n<h2>But what does it all mean for Scotland?<\/h2>\n<p>The Spending Review does not cover welfare, and many of the specific policy announcements apply to England only.<\/p>\n<p>So, for example, the public pay policy announced by Sunak will not directly apply to NHS workers or teachers in Scotland \u2013 and it will be up to the Scottish Government to set pay policy in its budget in January.<\/p>\n<p>But spending by the UK Government on reserved matters does generate \u2018consequentials\u2019 for the Scottish budget.<\/p>\n<p>The two big questions from a Scottish perspective are:<\/p>\n<ul>\n<li>How much will Scotland\u2019s \u2018core\u2019 block grant \u2013 to cover normal devolved public services \u2013 increase in 2021\/22 compared to last year?; and<\/li>\n<li>How much of the additional monies to mitigate the effects of Covid-19 during 20\/21 will persist into next financial year?<\/li>\n<\/ul>\n<p>In terms of \u2018normal\u2019 public services, the Spending Review shows Scotland\u2019s core resource block grant increasing by \u00a31.3bn to \u00a331.7bn in 2021\/22. This implies real terms increases of 3.5% per year between 19\/20 and 21\/22, and for the first time takes the Scottish budget above 2010\/11 levels in real terms.<\/p>\n<blockquote>\n<p><em>But the block grant to fund capital spending will fall by \u00a30.3bn in 21\/22. This is something of a puzzle given the wider real terms increases in capital spending announced by the UK \u2013 and will need further exploration.<\/em><\/p>\n<\/blockquote>\n<p>What about the ongoing costs associated with Covid? At the moment, the Scottish budget is due to receive \u00a31.3bn of additional resource consequentials in 21\/22 as a result of the UK Government\u2019s currently anticipated Covid-related spending interventions in England.<\/p>\n<p>This figure should probably be thought of as a lower bound \u2013 further Covid-related interventions may be required throughout next year, and the Spending Review does set aside some reserve funding to address this eventuality.<\/p>\n<p>Nonetheless, in the context of \u00a38.2bn Covid consequentials received by the Scottish Government in 2020\/21, \u00a31.3bn represents a big fall \u2013 and implies that &nbsp;a big chunk of the Scottish Government\u2019s temporary spending in 20\/21, on business grants, NDR reliefs, support for transport providers, local authorities, the NHS, and so on \u2013 will need to be \u2018unwound\u2019 pretty quickly.<\/p>\n<p>At the moment, for example, the Spending Review works on the assumption that 100% business rates reliefs for businesses in tourism and hospitality sectors in England will cease completely in 2021\/22. But the Spending Review notes that the UK Government is<\/p>\n<p><em>\u2018considering options for further Covid-19 related support through business rates reliefs. In order to ensure that any decisions best meet the evolving challenges presented by Covid-19, the government will outline plans for 2021-22 reliefs in the New Year.\u2019<\/em><\/p>\n<p>The implication here is that, if some form of business rates reliefs for the hospitality sector does continue in England in 2021\/22, additional consequentials will flow to the Scottish budget at that point.<\/p>\n<p>The need to remain flexible in the face of huge ongoing uncertainty is inevitable \u2013 but the reasonable desire of the UK Government to be flexible is potentially at odds with the statement in the Spending Review that the settlement \u2018provides the devolved administrations with the certainty they need to set their budgets for 2021-22\u2019.<\/p>\n<h2>Union dimension<\/h2>\n<p>As part of its claim to \u2018unleash the potential of the Union,\u2019 the Spending Review also announced policies in relation to City and Growth Deals in Scotland, and the Shared Prosperity Fund \u2013 the replacement for EU Structural Funds.<\/p>\n<p>The announcement on \u2018City and Growth Deals\u2019 amounts to an acceleration of existing Deals covering Tay Cities, Borderlands, Moray and the Scottish Islands. Arguably this is more about soundbite than substance, with the schemes being implemented over 10 years rather than 15, but without any direct funding implications.<\/p>\n<p>The Spending Review also provided limited further details of the new UK Shared Prosperity Fund (UKSPF). Here, tensions are likely to emerge over both the levels of funding identified, and how funds will be allocated and prioritised.<\/p>\n<p>In terms of overall funding levels, the Spending Review commits to \u2018ramping up\u2019 UKSPF funding to \u00a31.5bn in future years to match EU funding receipts. Whilst \u00a31.5bn might match recent EU funding receipts, it ignores UK Government match funding that might have previously been provided, and the fact that receipts tend to be lower than allocations. Moreover in 2021\/22, funding amounts to just \u00a3220m to support local areas \u2018pilot\u2019 new approaches. .<\/p>\n<p>There will also be concern about the way in which the UKSPF may operate in a devolved context. The scheme will apparently operate \u2018UK wide, using the new financial assistance powers in the UK Internal Market Bill\u2019. Whilst the fine details are awaited, the lack of explicit reference to the devolved governments will antagonise intergovernmental relations in area where tensions are already running high.<\/p>\n<p>Written by David Eiser, Mairi Spowage and Graeme Roy and first published by <a href=\"httpss:\/\/fraserofallander.org\/uk-economy\/uk-budget\/spending-review-2020-and-scotland\/?utm_source=rss&amp;utm_medium=rss&amp;utm_campaign=spending-review-2020-and-scotland&amp;utm_source=Fraser+Blog+and+subs+list&amp;utm_campaign=56080e03d8-Email-Blog-RSS&amp;utm_medium=email&amp;utm_term=0_c855ea57f7-56080e03d8-12232401\">FAI<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8216;The scheme will apparently operate \u2018UK wide, using the new financial assistance powers in the UK Internal Market Bill\u2019. Whilst the fine details are awaited, the lack of explicit reference to the devolved governments will antagonise intergovernmental relations in area where tensions are already running high.&#8217;<\/p>\n","protected":false},"author":146,"featured_media":5075,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[319],"tags":[41,179],"class_list":["post-12540","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","tag-fiscal-framework","tag-scottish-economy"],"_links":{"self":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/12540","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/users\/146"}],"replies":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/comments?post=12540"}],"version-history":[{"count":0,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/12540\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media\/5075"}],"wp:attachment":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media?parent=12540"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/categories?post=12540"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/tags?post=12540"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}