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Monday, 28 November 2016

Post-Autumn Statement Analysis Suggests Real-Terms Cuts to Scotland’s Budget

FAI  - The Fraser of Allander Institute held a post-Autumn Statement briefing on Friday at the University of Strathclyde.

The presentations – from Director, Graeme Roy and Head of Fiscal Analysis, David Eiser – outlined how the downward revision in growth forecasts following the UK’s decision to leave the EU was impacting upon the outlook for the public finances.

The analysis concludes that the Scottish Budget will be broadly flat in real terms between 2016-17 and 2017-18 (indeed, it will increase marginally) however, overall, the Scottish Government’s resource budget will fall by over 3% in real terms up to 2020-21.

This forecast is similar to that set out by George Osborne back in March, suggesting that the new Chancellor will continue with his predecessors plan to constrain public spending as he looks to tackle a weakening UK fiscal position and uncertain economic outlook.

Given the Scottish Government’s existing spending commitments in key areas such as health and childcare, this implies a real terms cut in unprotected portfolios of between 10-14% (with the range depending upon how well Scottish tax revenues perform relative to equivalent revenues in the UK).

In contrast to the outlook for the resource budget, the Scottish Government’s capital budget will benefit from an £800 million boost to capital investment over the period to 2020-21. Coupled with the power to now borrow up to £450 million per year, this implies a significant increase in the overall amount the Scottish Government has available to spend on new roads, hospitals and schools.


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