SCOTLAND'S top financial institution has given an initial verdict on Rachel Reeves's Spring Statement, noting "significant reductions in funding for the Scottish Government" relative to what was previously forecast.
The Fraser of Allander Institute at the University of Strathclyde issued a statement following the Chancellor's announcement on Wednesday, in which Reeves blamed “increased global uncertainty” as the Office for Budget Responsibility (OBR) slashed its forecast for economic growth in 2025 from 2% to just 1%.
She confirmed cuts to welfare worth around £4.8 billion a year by 2029/2030, as well as cuts to Government departments.
It is estimated the Scottish Budget "will be around £900 million worse off on the current side in 2029/30 than previously projected," if no changes are made to what was announced by Reeves.
Analysis by the institute found an additional £28m in funding for the Scottish Government in 2025/26, but "significant reductions in funding for the Scottish Government relative to what was previously included in the forecasts" when the larger picture was taken into account.
João Sousa, deputy director of the Fraser of Allander Institute, said £200m and £435m cuts in implied funding for the Scottish Budget in 2028/29 and 2029/30 were "particularly significant".
"In the very short-term, there is a small amount of additional funding (£28m) for the Scottish Government in 2025-26 due to a small increase in departmental spending at UK Government level," Sousa explained.
"Towards the end of the forecast, however, the picture is significantly more challenging in terms of what it means for Holyrood’s finances.
"The cuts in departmental budgets announced by the UK Government – even after accounting for some consequentials from employment support programmes and DWP delivery of welfare reforms – mean significant reductions in funding for the Scottish Government relative to what was previously included in the forecasts.
"Of particular significance are the £200m and £435m cuts in implied funding for the Scottish Budget in 2028-29 and 2029-30.
"The current forecast points to the PIP reforms reducing the block grant adjustment for social security devolution by increasing amounts, from £177m in 2027/28 to £455m in 2029/30."
He added: "Put together, and in the absence of any other changes, the Scottish Budget would be around £900m worse off on the current side in 2029/30 than previously projected.
"On the other hand, some additional capital spending on areas which are devolved in Scotland – so aside from the defence spending increases - are expected to raise the Scottish Government’s capital budget by nearly £250m by 2029/30 relative to current plans."
The news comes one day after Scottish Secretary Ian Murray claimed that UK Government welfare cuts would have "zero" impact on the Scottish Government's Budget.
Finance Secretary Shona Robison reacted to the statement, saying spending cuts announced by the Chancellor risk harming some of the most vulnerable people in society
Robison said: “Today’s statement from the Chancellor will see austerity cuts being imposed on some of the most vulnerable people in our society. The UK Government appears to be trying to balance its books on the backs of disabled people.
“Not content with these cuts, the UK Government is still expected to short-change Scotland’s public services on additional employer National Insurance costs to the tune of hundreds of millions of pounds. This will be felt in public services that people rely on up and down the country – services such as our NHS, GPs, dentists, social care providers, and universities.
“The UK Government’s choice to increase defence investment is welcome, but its choices to short-change public services and deliver austerity cuts to some of the most vulnerable are deplorable.”
