Scottish ministers largely to blame for spending crisis, says watchdog

Scotland’s financial watchdog has said Scottish ministers are largely responsible for a spending crisis that is leading to deep cuts to non-essential services.

The Scottish Fiscal Commission, which has a similar role to the Office for Budget Responsibility in London, said ministers in Edinburgh had spent heavily on public sector pay deals without proper planning.

It said public sector pay accounted for £25bn of Scottish government spending last year, more than half of its money for day-to-day spending, and ministers had agreed to pay deals this year worth an average of 6.5% without budgeting for those awards.

“If a budget is set based on pay assumptions which are lower than those that materialise, this creates challenges with in-year management of the budget, requiring the government to reduce its planned spending on services,” the commission said. “The recent emergency spending controls the Scottish government has put in place for 2024-25 are the result of those challenges.”

Shona Robison, the Scottish finance secretary, has imposed tough emergency controls on all non-essential spending, and civil servants are being asked to find hundreds of millions of pounds in immediate savings.

She has blamed Rachel Reeves, the chancellor, arguing that the Treasury’s warning of a £22bn black hole in the UK government budget is a warning of immediate cuts to Scotland’s subsidy. Robison said this had created “significant uncertainty” about their funding.

“The first minister and I have both made clear that following the UK chancellor’s July statement, the Scottish government continues to face the most challenging financial situation since devolution,” she said.

The Scottish government has already reintroduced peak rail fares and abolished universal winter fuel payments for pensioners, and is now cutting free iPads and laptops for school pupils, and council spending on flood defences and nature restoration.

Government departments have been told to freeze recruitment, ban all non-urgent staff travel and sack outside consultants and public relations firms. The health and social care directorate has been told to cut £750m from its spending immediately.

Scottish Labour said these financial pressures had been predicted for several years, including by the fiscal commission. Anas Sarwar, the Scottish Labour leader, said that despite Robison’s assertions, the Treasury had not made a single cut to Scotland’s funding since Labour won the UK election.

He said the situation was the result of 17 years of Scottish National party incompetence in government. “Every single institution is weaker, not stronger,” he said.

Michael Marra, Scottish Labour’s finance spokesperson, said Robison and her colleagues were “in a blind panic” about their cost challenges. They had “no planning, no strategy for change,” he said.