Finance Secretary Kate Forbes has said Scotland is facing an “unprecedented cost of living crisis”.
Speaking at Holyrood, she set out the Scottish Government’s Resource Spending Review - the first time it has published a multi-year programme since 2011.
“The UK currently has the highest inflation of any G7 country - almost twice the rate of France - Brexit has made this problem worse, with increases in food prices, hitting the poorest hardest.
“We are experiencing an unprecedented cost of living crisis, inflation is at a 40-year high of 9% with households facing considerable hardship.”
The new public spending framework - which is not a budget - outlines how more than £180bn will be invested to deliver priorities for Scotland.
A targeted capital spending review has also been published to address a reduction in capital investment by the UK Government. This will invest around £18bn up to 31 March 2026, with more than £500m of additional funding directed to net zero programmes, compared to previous plans.
Forbes said inflation has limited the Scottish Government’s funding increases.
“Following a real-terms reduction of 5.2% between last year and this, our real terms funding grows by only 2% across the whole four-year period, after accounting for the devolution of social security benefits.
“That is the stark reality - reflected in the commentary by the IFS and Fraser of Allander Institute last weekend - but it is not inevitable, it is the result of a deliberate choice by the UK Government – as they sit on their hands.
“While the Chancellor has provided welcome, if limited support for households, the chill winds of Tory austerity are blowing when it comes to spending on public services.”
Forbes has said the public sector will need to reform to become more efficient.
She told MSPs reforms would focus on areas including digitalisation, the public sector estate and improving public procurement.
“The UK Government has chosen not to act on public sector pay, meaning our more progressive approach, with public sector wages on average 7% higher than where the UK Government is the employer, is funded from within our severely limited budget.
“We do not intend to take the same approach as set out by the UK Government today, but we do need to reshape and refocus the public sector post-Covid and the spending review calls upon all of the public sector to look creatively at ways to sustainably address that challenge, while seeking to ensure fair increases.”
Forbes added: “Today I set out an ambitious but realistic public spending framework for the years ahead - it does not ignore the realities of our financial position, but neither does it roll back on our ambitions for change.”
Further changes to Scotland’s fiscal position and to tax and social security forecasts are expected to shift the funding picture ahead of annual budgets. The spending review however does prioritise sending in key policy areas, which are:
Tackling child poverty and supporting households and businesses with the cost of living
- £22.9bn for social security assistance
- increasing the Scottish Child Payment from £10 to £25 and expanding eligibility by the end of this year
- providing universal free school meals to primary school children in P1 to 5 and expanding provision beyond that
- uprating devolved benefits
Securing stronger public services
- investing £73.1bn in health and social care including developing a National Care Service
- increasing investment in frontline health services by 20% over this Parliament
- spending more on primary and community care to ensure people get the right treatment in the right place
- funding of £42.5bn for local government for the delivery of services
- investing £11.6bn in the justice system
Achieving net zero and tackling the climate crisis
- up to £75m per year to deliver the Heat in Building Strategy, enabling £1.8 billion investment towards decarbonisation
- up to £95m towards meeting woodland creation targets
- £46m to introduce the community bus fund and an increase in funding for concessionary travel schemes
- investment of over £12m in peatland restoration
- £4m of resource spending alongside £150m capital and financial investment for the North East and Moray Just Transition Fund
Building a stronger, fairer and greener economy
- capital investment of £581m to support the economy, including our enterprise agencies and the Scottish National Investment Bank
- continuing through the Inward Investment Plan to attract high quality inward investment in areas such as energy transition and the space sector
- pushing forward with the export growth plan A Trading Nation to scale up Scotland’s international reach
- embedding entrepreneurship in education, to give young people opportunities to start and grow businesses
The spending review provides a platform for engagement ahead of the next budget on how best to reform Scotland’s public sector to become more efficient. The statement noted that this means rapidly digitalising the public sector, maximising revenue through public sector innovation, reforming the public sector estate and the public body landscape, and improving public procurement.
The annual Medium Term Financial Strategy has also been published to provide the economic and fiscal context for the Resource Spending Review and Capital Spending Review.
Scottish Labour finance spokesperson Daniel Johnson said: “Scots are about to be hit by the worst drop in disposal cash since records began but the SNP have nothing to offer except empty rhetoric and the same old spin.
“Their economic mismanagement has led to Scots' wages growing more slowly than the rest of the UK, making this cost of living crisis all the more painful and draining money from public coffers.
“Scots have been paying the price the SNP’s warped priorities and disastrous incompetence for years, and now things are set to get even worse.”
Responding to the Spending Review, Scottish Liberal Democrat finance spokesperson John Ferry commented: “Under the SNP, the Scottish economy has consistently been outpaced by the rest of the UK, meaning there’s less money to spend.
“We’ve seen money frittered away on botched projects - from the ferries to the census - ScotWind, the best chance for generations to bring serious money into the public purse, was sold on the cheap after the government capped how much companies were allowed to pay.
“Next they want to spend countless millions stripping powers from local communities to create an expensive centralised National Care Service.”
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