Financial Crisis In Scotland Looms As Committee Warns of Impending Resource Gap

First Minister of Scotland Humza Yousaf speaks to the media after First Minster's Questions at the Scottish Parliament in Holyrood, Edinburgh, on June 15, 2023. Jane Barlow/PA Media

Scotland’s finance and public administration committee has highlighted the prospect of the country running out of money in a report.

The committee’s report, released today, underscores the Scottish Government’s projection of a potential £1 billion resource spending gap in 2024/2025, which could escalate to £1.9 billion by 2027/2028. As the nation grapples with significant financial strain, difficult decisions on taxation, spending priorities, and public service reforms are on the horizon.

The report delves into the challenges faced by Scotland’s long-term funding, painting a concerning picture. The Scottish Fiscal Commission (SFC) cautions that the government’s spending over the next five decades is expected to surpass available funding by an average of 1.7 percent annually, amounting to £1.5 billion in today’s prices.

These projections are rooted in looking at the ageing population, raising concerns about increased demand for public services and the corresponding impact on government spending and tax revenues.

Liz Smith MSP, the Tory shadow cabinet secretary for Finance and Local Government, has sharply criticised the Scottish National Party (SNP) government’s “short-term thinking,” stating that it has long been a defining characteristic of their financial strategy.

In a statement to The Epoch Times, Ms. Smith emphasised that this approach has led to a substantial budget deficit, severe cuts to essential services, and stagnant economic growth in Scotland.

SNP Branded ‘Short-Term Thinking’

“Short-term thinking has, for years, been a hallmark of this SNP government’s approach to public finances,” she said.

“It’s what has created a black hole in the budget, savage cuts to frontline services, and stagnant growth.”

Scotland faces soaring inflation and a cost-of-living crisis, with a projected 4 percent decrease in real disposable income per person by the end of 2023/2024, marking the sharpest fall in living standards the country has ever experienced.

The report also sheds light on the financial woes of ordinary citizens, with household budgets under immense pressure.

Given this challenging backdrop, the committee’s focus for the Pre-Budget scrutiny this year centred on the “Sustainability of Scotland’s Public Finances.”

Ms. Smith pointed out that various authoritative bodies, including the SFC, the Auditor General, and the Scottish Parliament’s finance committee, have all raised concerns about the lack of forward planning under the SNP regime.

“The SFC, the auditor general, and now the Scottish Parliament’s own finance committee have all criticised the lack of forward planning under the SNP.

“All the economic projections show that public services will become unaffordable without reform, increased productivity and attracting people to live and work in Scotland.

“Yet the SNP continually shift their focus, have to fire-fight on different fronts, and are distracted by their own constitutional obsessions, rather than the real priorities.

“Scotland desperately needs a government with a strategic plan for growth, in order to protect future public service spending and fund pay settlements announced by SNP ministers. Yet there is still little sign that the SNP has taken any of this on board.”

Concerns Over Financing Net Zero Targets

The report emphasises findings from the committee’s inquiry into the Scottish Government’s public service reform program, identified as a crucial area to balance the books. Additionally, ongoing concerns related to fiscal transparency, alignment between spending decisions and National Outcomes, and financing net-zero targets were revisited.

The committee’s analysis involved consultations with experts, public engagement events, and hearings with witnesses, including the deputy first minister and Cabinet Secretary for Finance.

The insights gathered from these interactions informed the report’s recommendations, urging immediate attention to the pressing financial challenges facing Scotland.

A Scottish Government spokesperson told The Epoch Times: “The Scottish Government fully recognises that we face one of the most challenging financial situations since devolution, with the COVID-19 pandemic, the war in Ukraine, and high inflation putting significant pressure on households, the economy and public finances.

“As we set out in the Medium-Term Financial Strategy, we will do all we can within our powers to ensure public finances are on a sustainable path.

“The Scottish Government will carefully consider the Finance and Public Administration Committee’s report and provide a full response to the committee after the Scottish Budget is published on Dec. 19.”

As Scotland faces a potential fiscal crisis, SNP First Minister Humza Yousaf will be looking to try and calm economic worries ahead of a potential general election next year.