Scotland business

Holyrood budgets 'facing 18% fall over seven years'

Image caption The calculation of an 18% fall in spending power assumes the current funding system continues

The spending power of Holyrood budgets could fall by nearly 18% over seven years because of UK spending plans, according to the Scottish government.

Its analysis has suggested the impact of cuts will be deeper and longer than previously forecast.

Last November Chancellor George Osborne said efforts to bring the UK deficit under control would go beyond his initial five-year plan.

He said slow growth in the economy was responsible.

The calculation by Scottish government economists of an 18% cut in real terms in the spending power of the Scottish Parliament assumes the current funding system continues.

However, new tax-varying powers are coming to the Scottish Parliament under the Scotland Bill.

That legislation could see the pathway of Holyrood funding change if MSPs choose to vary tax from the levels set for the rest of the United Kingdom.

Spending power

It also reflects inflation at higher levels than expected, having the effect of eroding spending power faster.

Previous calculations suggested there would be an 11% real terms cut between the financial year 2010-11 and 2014-15.

It is now reckoned the cuts will be nearly 18% in real terms between 2010-11 and 2016-17.

Assuming public spending would then rise again, it is calculated that spending would only return to its 2010-11 levels in 2027-28.

The Scottish government previously said the impact of spending cuts over the period of reductions and recovery would be £39bn if all the cuts are added together, but it now says that has risen to £51bn.

That is out of a total, cumulative budget over the 18 years of around £500bn.

'Paying the price'

Finance Secretary John Swinney said: "The UK government's failure to achieve significant growth in the economy has seen the chancellor extend his borrowing and cuts programme even further - and this new analysis is further evidence that the UK government is funding the cost of failure, and that Scotland is paying the price."

Mr Swinney is due to attend a meeting of finance ministers in London on Monday, when he is expected to reiterate his call for the UK government to provide additional investment in infrastructure projects.

A Treasury spokeswoman said: "Only four months ago, the UK government provided an extra £300m for capital projects in Scotland.

"It is for the Scottish government to decide how to spend this money.

"We have repeatedly supported the Scottish government with capital projects, by providing an additional £50m for the Caledonian Sleeper Service and access to £100m of pre-payments to bring forward work on the Forth Road Crossing.

She added: "We look forward to discussing these issues with John Swinney on Monday. In particular, we look forward to hearing how they plan to get young people into work, using the extra £20m given to them as a result of the Youth Contract."

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