Brexit could see Scottish Government budget slashed by up to £1.3bn a year, warns IPPR Scotland

Scottish Parliament - credit: Holyrood

The Scottish Government could see its budget slashed by up to £1.3bn a year as a result of slow growth following the Brexit vote, according to new forecast from IPPR Scotland.

IPPR Scotland forecast that Holyrood’s budget will be cut by between £330m and £1.34 billion per year by 2019/20 as a result of lower economic growth and tax receipts following the June vote to leave the European Union.

The think tank qualified the findings by saying the final amount will depend on the policies presented by Chancellor Philip Hammond at next week’s autumn statement, but when taking into account the £2bn cut planned before the Brexit vote, Holyrood’s share could be cut by a total of between £2.33 billion and £3.34 billion by 2019/20 compared to 2015/16.

The analysis is based on an IFS report, which found that slower growth and higher inflation will lead to a £25.3bn black hole in the UK finances.

IPPR Scotland formulated three scenarios, varying from a 21.6 per cent cut to Holyrood’s non-protected departments if the chancellor makes back the £25bn figure through spending cuts alone; a 17.4% cut when involving tax rises, borrowing and other spending cuts; while if the Chancellor makes good the entire £25bn through extra borrowing, there would be no additional cut to the Scottish Government budget.

An IPPR spokesperson concluded: “Any fiscal stimulus from the UK Government at next week’s Autumn Statement, or indeed any lessening of spending cuts, will only likely be short-term relief and will not change the need for public spending cuts and deficit reduction for many years to come.”

A Scottish Government spokesman said: “This latest analysis further illustrates that Brexit is far and away the biggest threat to Scotland’s economy, jobs and long-term prosperity.

“The potential cost of leaving the EU to the Scottish economy is up to £11.2 billion per year by 2030, while Fraser of Allander Institute has forecast Brexit could cost Scotland 80,000 jobs over the next decade.”