Scotland politics

IPPR think tank warns of Scottish budget cuts

George Osborne Image copyright AFP
Image caption George Osborne's spending review will have an impact on the Scottish block grant

Some Scottish government departments could see their budgets cut by nearly a tenth by the end of the next spending review period, a think tank has warned.

The Institute of Public Policy Research (IPPR) Scotland has predicted the impact of Chancellor George Osborne's spending review, due on Wednesday.

The Scottish Parliament budget could fall by 1.4% over four years, it said.

A UK government spokesman said financial security required getting the budget deficit under control.

The IPPR modelled the impact on Scottish budgets of two scenarios - a 26.5% cut in spending to non-protected departments in the UK, and a 40% cut.

While it concluded that the scale of cuts would be less severe in Scotland than elsewhere in the UK, it said that even under the less dramatic scenario, there would be major financial pressures.

The report said the Scottish government's spending commitments - such as protecting NHS spending and providing 30 hours of free childcare a week - meant that non-protected departments such as justice, local government and employment would face the heaviest cutbacks.

Assuming a 26.5% cut in UK non-protected spending, it predicted:

  • Scottish non-protected departments would lose 9.2% of their budgets by the end of the parliament
  • These departments would see cuts of £1.3m per year in real terms
  • Capital budgets would increase markedly in year three, and by 11.7% over the four years
  • NHS spending would increase by 7.2%

If the cuts announced by George Osborne were steeper, involving a 40% reduction for non-protected UK departments, then the knock-on effect for Scotland would be cuts for Scottish non-protected departments of 13.5% by 2019/20, it said.

Image copyright Thinkstock
Image caption The Scottish Parliament could offset some of the cuts through tax increases or borrowing

The cuts could be lessened if the Scottish government chose to use tax raising or borrowing powers, but IPPR Scotland director Russell Gunson said Scottish ministers would have some big choices to make.

He said: "The new powers from the Smith Commission may offer hope for later in the next parliament, as tax raising and borrowing powers come into effect, decoupling more of the budget in Scotland from the spending decisions of the UK government.

"However, much depends how these changes are implemented, which is still very much up in the air.

"It's clear that Scotland is likely to be facing significant cuts to unprotected departments. It will now be down to the Scottish Parliament as to how much of these cuts are passed on, which spending areas will be hardest hit, or whether tax revenue can be increased to lessen the blow."

'Significant austerity'

A Scottish government spokesman said that while details of Scotland's block grant would not be available until later this week, it was clear the Chancellor was planning "significant austerity" over the coming years.

"This is austerity through choice, not necessity, and the Scottish government has consistently demonstrated that the UK's deficit and debt can be brought down without the need for huge public spending cuts as set out by the UK government," the spokesman said.

A UK government spokesman said the Chancellor's spending review aimed to deliver economic security for the whole of the UK.

He added: "Key to this is delivering sustainable public finances and getting the deficit under control to prepare the country for any economic shocks that lie ahead.

"The UK government is committed to implementing the Smith agreement and delivering more powers for the Scottish Parliament. As the IPPR rightly says it will be down to the Scottish government to decide how it uses those powers to manage to its own priorities."

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