Adobe StockA Holyrood committee has been unable to determine whether the Scottish Government’s tax and spending plans are affordable because of a lack of transparency from ministers, a report has found.
MSPs on the Finance and Public Administration Committee said the Government must provide “much greater transparency” on its progress in closing a near-£5bn financial black hole.
Their report warned the Scottish budget faces “substantial risks” if SNP ministers fail to deliver the three pillars of their Fiscal Sustainability Delivery Plan (FSDP): public service reform, economic growth, and tax.
Since winning the election, the SNP has announced a series of major reforms, including proposals to drastically shrink the number of NHS boards and regional councils.
The committee said the country faces “significant financial pressures” with an anticipated fiscal gap of £2.624bn in resource and £2.146bn in capital by 2029-30.
The country is facing economic pressures from inflation and rising energy prices which are squeezing household incomes and piling pressure on the Government’s budget.
The report found Holyrood faces a record £720m shortfall applied to next year’s budget because of weaker-than-expected income tax receipts compared with the rest of the UK.
It also said the UK Government’s prioritisation of defence spending is estimated to reduce capital funding for the Scottish Government by a further £87m in 2027/28.
Amid tough economic conditions, the committee warned the Scottish Government against using cash from the ScotWind project “routinely” as a “second reserve”.
Clare Haughey, SNP MSP and convener of the Finance and Public Administration Committee, said: “Our committee recognises the scale of the pressure on the Scottish budget, particularly in 2027-28.
“However, we have insufficient evidence to determine whether the Scottish Government’s tax and spending plans are affordable and sustainable.
“We are also concerned that the Scottish budget faces substantial risks if the three pillars of its Fiscal Sustainability Delivery Plan – including ambitious public service reform targets – are not delivered in full and on time.
“We therefore call on the Scottish Government to provide much greater transparency on progress in closing the fiscal gap and meeting reform targets.”
Ms Haughey said “as a first step” the Scottish Government should publish an updated FSDP alongside the Budget on December 3 and resume the annual publication of the Medium-Term Financial Strategy while committing to regular spending reviews.
“We also urge the government to update its public sector pay policy and tax strategy at the earliest opportunity,” she added.
“We heard from witnesses that the Scottish Government needs greater fiscal flexibilities and will undertake further work on this issue in the coming weeks to inform the upcoming fiscal framework review.
“Collectively, the recommendations in our report aim to strengthen fiscal sustainability and support the effective management of Scotland’s public finances.”
The Tories described the report as “extremely damning”.
Craig Hoy, the party’s finance spokesman at Holyrood, said: “Even one of their own backbenchers who leads this committee says it is typically shrouded in SNP secrecy, and they are unable to fully analyse (First Minister John) Swinney’s plans.
“This reeks of more economic incompetence from the nationalists, who are already presiding over a £5bn funding gap in Scotland’s finances.
“Scots who are sick of paying more but getting less deserve to know exactly what the sleekit SNP are planning.
“Swinney and Finance Secretary Jenny Gilruth must urgently respond to this report and be fully upfront ahead of the Budget being delivered.”
A Scottish Government spokesperson said: “This government has delivered a balanced budget every year and a comprehensive strategy and delivery plan has been published which sets out how we will close the gap between funding and spending by 2029-30, whilst ensuring spending is focused on frontline services such as the NHS, action to eradicate child poverty and other priorities.
“We are also taking forward a public service reform strategy to deliver services that are preventative, better joined up and more efficient.
“It is important to note, however, that the Scottish Government’s budget will be cut in real terms by around £650m next year – reducing the money we have to spend on public services and supporting people with the cost of living.
“Ministers note the committee’s report and will consider the recommendations within our current fiscal constraints.
“We will respond following the Budget publication on December 3.”
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