Fraser of Allander: Scottish Government has not been 'prudent' in financial plans

The deputy director of the University of Strathclyde’s Fraser of Allander Institute (FAI) has accused the Scottish Government of failing to take a prudent approach to financial planning after finance secretary Shona Robison put a block on non-essential spending in order to fund public-sector pay rises.

According to a report in The Times newspaper, Robison told cabinet colleagues that their departments would have to call a halt to most of their spending plans to free up cash to settle pay deals with workers including refuse collectors and medical staff. It is thought the total bill will be somewhere in the region of £500m to £700m in the current year.

In a letter to ministers Robison said that meant that “emergency spending controls will now be introduced with immediate effect”.

“Any activity undertaken or commitment made that generates expenditure in 2024-25 must only proceed if it is truly essential and unavoidable,” she wrote.

“By unavoidable, I mean that the Scottish Government would otherwise breach its legal obligations or fail to provide essential support to emergency situations or cause significant economic damage across Scotland.”

However, while Robison said she had been influenced by uncertainty over UK Chancellor Rachel Reeves's spending plans and the impact that would have on the Scottish Government’s financial settlement, Dr João Sousa at the FAI said it is “unfair” for Robison’s to claim thedecision was purely a consequence of the fiscal framework.

“While some of this is a consequence of the fiscal framework, it would be unfair to blame it all on that,” he wrote on X.

“Lack of prudent planning by [the Scottish Government] is a major part of story. [The] 2024-25 budget was passed with no set pay policy. This meant that [the Scottish Government] left itself at the mercy of labour market conditions and it seems now it set aside little to no contingency for pay increases.

“Questions must be asked as to why this predictable issue wasn't foreseen and it now leaves [the Scottish Government] facing less palatable trade-offs with [the] added urgency of being in the middle of financial year.

“[That] probably also means cutting where spending can be stopped rather than on a considered value for money basis.”

It comes after auditor general Stephen Boyle published a blog earlier this week in which he said the “complex issues facing our public services are not intractable” but that “greater Scottish Government leadership is needed”.

“It’s been a bruising four years for the public sector,” he wrote. “First a gruelling pandemic and then a recovery stymied by inflation and tighter budgets.

“Longer-standing issues in the likes of the NHS, the justice system and beyond have become deeper rooted. Services are increasingly struggling to cope with demand.

“But these issues are not intractable. There is more our leaders can do to improve how they tackle such challenges – and that’s been borne out by the findings of audit work.”

However, he stressed that government ministers must back up ambitious announcements on spending with “shrewd governance” and called on the Scottish Government to ensure “rigorous planning that includes goals that are clear, measurable and achievable” is put in place around all policy announcements.

He added that “a focus on greater transparency and accountability around where money is being spent and why” is needed.

“Getting governance right goes hand in hand with an effective vision to reform the public sector. This is now urgent,” he wrote.

“But the best plan in the world is no use without effective leadership. It’s not enough, for example, for ministers to delegate reform by asking other public sector bodies to set out their own individual plans. The Scottish Government needs to take on a greater leadership role.

“We know other public bodies want that. It’s the priceless ingredient capable of galvanising other leaders to deliver change and more resilient public services.

“The Scottish Government needs to be clear about its vision, about the workforce it needs to deliver priority services, and how the public sector estate will change to provide those services.

“A shift to more preventative spending – a key part of any reform agenda – is also needed.”

Boyle has long made the case for public sector reform, telling Holyrood in a 2022 interview that there is a gap between political ambition and how things are delivered. In an interview last year he said that public sector reform was long overdue.

When it published its annual Government Expenditure and Revenue Scotland (Gers) statistics yesterday the Scottish Government said the deficit between its income and expenditure had increased from £19.1bn to £22.7bn between 2022-23 and 2023-24.

Robison blamed the UK Government for the rise, saying it is “important to emphasise that these figures reflect Scotland's status as part of the UK”.

“I welcome the fact that Scotland’s revenues grew last year, with those generated onshore growing faster than in the rest of the UK, thanks in part to our progressive approach to tax and the revenue from renewable energy,” she said.

“As the report makes clear, the notional deficit is not a reflection on the finances or policies of the Scottish Government – it is a reflection of UK Government choices.

“It is also important to emphasise that these figures reflect Scotland's status as part of the UK.

“As figures from the Office for National Statistics show, the UK economic model is driven by London and the South East of England. The UK Government retains control of 40 per cent of expenditure and over 70 per cent of revenues in Scotland. Indeed, a significant portion of the spending allocated to Scotland relates to servicing UK Government debt, which is paid at a higher rate than our European neighbours.”

Scotland Office minister Kirsty McNeill said the figures show Scots benefit from more spending per head than the UK average.

She said: “These figures underline the collective economic strength of the United Kingdom. By pooling and sharing resources across the UK, Scots benefit by £2,417 more per head in public spending than the UK average. That means more money for schools and hospitals, if the Scottish Parliament chooses to invest in those areas.

“Ensuring economic stability and then delivering economic growth are two of the driving missions of the UK Government. We have reset relationships with partners across the UK, and want to work closely with the Scottish Government to produce better results for people in Scotland.”