{"id":6131,"date":"2017-11-23T18:14:48","date_gmt":"2017-11-23T18:14:48","guid":{"rendered":"https:\/\/sceptical.scot\/staging\/?p=6131"},"modified":"2026-04-18T19:34:32","modified_gmt":"2026-04-18T19:34:32","slug":"hammonds-budget-scottish-consequentials","status":"publish","type":"post","link":"https:\/\/sceptical.scot\/staging\/2017\/11\/hammonds-budget-scottish-consequentials\/","title":{"rendered":"Hammond’s Budget: Scottish consequentials"},"content":{"rendered":"\n

Chancellor Philip Hammond surprised many with a headline grabbing \u00a32 billion of consequentials for the Scottish Budget. So where is the money coming from and what does it mean for the overall Scottish Budget?<\/strong><\/p>\n\n\n\n

Hammond was able to offset some pretty dire figures about the outlook for the economy with a series of new policy announcements \u2013 particularly targeted at supporting housing in England.<\/p>\n\n\n\n

The table below summarises the consequentials for Scotland.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

<\/p>\n\n\n\n

Over the period 2017-18 to 2020-21, the Scottish budget will be boosted by around \u00a32bn in total.<\/p>\n\n\n\n

Within this, \u00a31.6bn \u2013 or just over 80% \u2013 is in the form of capital spending with 20% on the resource side of spending. Resource spending is that which covers day-to-day spending on things like pay and service delivery.<\/p>\n\n\n\n

Capital spending<\/h2>\n\n\n\n

Of the \u00a31.6 bn capital uplift, the vast majority of this is in so-called financial transactions.<\/p>\n\n\n\n

Financial transactions are becomingly increasingly common for a wide variety of activities, although they can\u2019t be used to support day-to-day spending on public services. Instead they are initiatives that help support investment in the economy through the provision of government-backed loans and equity.<\/p>\n\n\n\n

The UK Government announced a series of measures to support first-time buyers through the use of financial transactions. As housing is devolved to the Scottish Parliament, the Scottish budget receives additional consequentials.<\/p>\n\n\n\n

In total, the increase in financial transactions to the Scottish Budget is worth around \u00a31.1bn over the period from 17\/18 to 2020\/21.<\/p>\n\n\n\n

Scottish Ministers are constrained in how these financial transactions can be used, but they are not restricted to providing loans  to homebuyers alone (e.g. they could provide loans to small businesses).<\/p>\n\n\n\n

The Budget also announced around an additional \u00a3500m more traditional capital spending, i.e. investment in roads and public buildings (on top of which is added a further \u00a360m of support for the Edinburgh City Deal).<\/p>\n\n\n\n

Resource spending<\/h2>\n\n\n\n

There was also an increase in consequentials for resource spending. These consequentials are more modest, with a cumulative increase of around \u00a3350m over 2017-18 to 2019-20.<\/p>\n\n\n\n

The rise of just \u00a38m for 2017-18 is particularly modest. The Chancellor announced additional spending on health in England of \u00a3350m. This would normally translate into higher consequentials for Scotland than \u00a38m (i.e. closer to \u00a330m), but cuts elsewhere \u2013 particularly in the Department of Education\u2019s Budget \u2013 have offset this increase.<\/p>\n\n\n\n

Next year the increase is \u00a3180m \u2013 to put this in context the Scottish Government\u2019s proposals for increasing income tax next year ranged between \u00a380m-\u00a3250m.<\/p>\n\n\n\n

Real-terms impact on the budget<\/h2>\n\n\n\n

As the chart highlights, the resource block grant remains on track to fall in real terms over the next two years.<\/p>\n\n\n\n

By 2019\/20 the resource block grant will be around \u00a3500m lower than in 17\/18 (although only \u00a3375m relative to 2016\/17).<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

<\/p>\n\n\n\n

In contrast, the block grant for capital expenditure (even excluding financial transactions) is forecast to increase in real terms over the next two years, by 6% in 18\/19 and 8% the following year.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

<\/p>\n\n\n\n

What does this mean for next month\u2019s Scottish Budget?<\/h2>\n\n\n\n

Firstly, it is important to remember that today\u2019s budget is only half the story. To find out the exact profile of the Scottish Budget over the next few years we require the tax forecasts from the Scottish Fiscal Commission (and how they will interact with how the resource block grant outlined above will be adjusted). What will be crucial will be the SFC\u2019s assessment of the outlook for the Scottish economy, which is now even more interesting in the light of today\u2019s much weaker outlook for the UK provided by the OBR.<\/p>\n\n\n\n

Secondly, the significant cut in stamp duty for first time buyers in England will not apply in Scotland. Of course, the Scottish Government will face pressure to implement a similar cut to LBTT in Scotland, but a tax cut is likely of course to reduce the government\u2019s revenues. Housing affordability is not quite so acute as in parts of England \u2013 notably London and the South East \u2013 but it is still an issue. The question for the Scottish Government is whether or not it thinks the best way to address housing affordability in Scotland is through offering more generous tax breaks.<\/p>\n\n\n\n

Finally, with the consequentials from today\u2019s Budget landing primarily on the capital side, the challenge remains for Derek Mackay as to how best to balance his resource budget with major commitments like additional support for the NHS, more money for childcare and public sector pay uplifts all to be paid for.<\/p>\n\n\n\n

First published by Fraser of Allander Institute<\/a><\/em><\/p>\n\n\n\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

‘… the challenge remains for Derek Mackay as to how best to balance his resource budget with major commitments like additional support for the NHS, more money for childcare and public sector pay uplifts all to be paid for.’<\/p>\n","protected":false},"author":146,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[319],"tags":[41,36],"class_list":["post-6131","post","type-post","status-publish","format-standard","hentry","category-economy","tag-fiscal-framework","tag-scottish-government"],"_links":{"self":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/6131","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=6131"}],"version-history":[{"count":2,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/6131\/revisions"}],"predecessor-version":[{"id":18879,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/6131\/revisions\/18879"}],"wp:attachment":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media?parent=6131"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/categories?post=6131"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/tags?post=6131"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}