More Funding Needed For Public Sector Pay Deals

1st August 2022

The UK Government has been urged to provide additional funding for public sector pay deals or the Scottish Government may be unable to fund equivalent offers without cuts to public services, according to Deputy First Minister John Swinney.

In a letter to the Chancellor of the Exchequer Nadhim Zahawi, Mr Swinney outlines concerns that last year's UK Spending Review, which determined the majority of the current Scottish Budget, did not take into account the level of pay increase recently proposed by the independent pay review bodies.

Mr Swinney also warned that the UK Spending Review did not consider the wider effects of rising inflation and that without any further funding, the Scottish Government may only be able to propose similar pay rises by reducing budgets elsewhere which would have a knock-on impact on the public sector’s ability to respond more widely to the cost of living crisis.

The letter states:

"I write to notify you that I have taken on responsibility for the Finance and Economy portfolio whilst the Cabinet Secretary, Kate Forbes, is on maternity leave.

"I look forward to working with you and, while I appreciate there may be some limitations on the business of the UK Government pending conclusion of the Conservative leadership process, I am open to engagement with you through this period. I also appreciate the value of the on-going dialogue between our respective officials.

"There is one urgent issue I would wish to take the opportunity to raise given its importance to the delivery of public services in Scotland. Further to the joint letter from devolved administration finance ministers to you on 15 July, and in light of the UK Government’s subsequent announcements regarding public sector pay, I am concerned that no associated funding is being provided to meet these additional costs.

"Last year’s UK Spending Review, which as you know determines the majority of the Scottish Budget, did not take account of the levels of pay uplift now proposed or indeed the wider effects of inflation. The associated reduction in spending power across public-sector budgets is deeply worrying for our public services and our capacity to respond to the cost of living crisis, which will undoubtedly bring renewed challenges through the coming autumn and winter period. Given our fixed budgets, our restricted borrowing powers and the inability to change tax policy in year, the lack of additional funding for public sector pay deals via the Barnett Formula means the Scottish Government could only replicate these pay deals for public workers in Scotland with deep cuts to public services.

"I would urge you to consider appropriate funding for public sector pay, and would welcome early discussions with you on this matter."