Next four years of government spending unveiled

The Scottish Government has outlined how it will focus public finances over the next four years.

The Resource Spending Review, which is not a budget, and a targeted capital spending review, have been published indicating how the Scottish Government will allocate £180bn over the next four years.

According to independent analysis from the Institute for Fiscal Studies, health spending is set to increase by 2.6 per cent in real terms over the next four years, but budgets for local government, the police, justice, universities, rural affairs are due to fall by around eight per cent.

Finance Secretary Kate Forbes said: "We are of course still recovering from the coronavirus pandemic. There is still acute pressure on the NHS, on business and the wider economy. The illegal Russian invasion of Ukraine is a humanitarian crisis, which is affecting the global economy. Rising energy prices and constrained supply chains have affected countries worldwide. While inflation is also  impacting other countries, it is not impacting them equally.

"The UK currently has the highest inflation of any G7 country– almost twice the rate of France. Brexit has made this problem worse, with increases in food prices, hitting the poorest hardest. We are experiencing an unprecedented cost of living crisis. Inflation is at a 40-year high of nine per cent with households facing considerable hardship.”

Spending on devolved Scottish social security benefits is forecast to increase from £3.9bn this year to £6.4bn in 2026-27, an increase of 48 per cent in real terms.

The Scottish Fiscal Commission expects spending on these benefits to be around £700m higher than the block grant adjustments added to the Scottish Government’s budget when these were devolved, largely due to reforms by the Scottish Government that are expected to lead to more people qualifying for payments, and increases some payments.

The Scottish Government has also introduced a range of additional benefits such as the Scottish Child Payment. These payments amount to a further £600m, meaning that the Scottish Government is forecast to be spending £1.3bn more on social security benefits than the funding it receives from the UK government following social security devolution.

David Phillips, associate director of the Institute for Fiscal Studies, said: “The relative winners are health, some smaller service areas, and above all social security spending. Spending on health is set to increase by 2.6 per cent in real-terms over the next four years, although this will almost certainly be slower than is needed to meet rising costs and demands.

“Indeed, on this basis, health services could really struggle over the next few years. Social security spending is forecast to increase by a much more substantial 48 per cent as new, more generous, Scottish benefits replace UK-wide benefits.”