Pre-budget Scrutiny 2024-25 - The Sustainability Of Scotland's Finances

10th November 2023

The Finance and Public Administration Committee's Pre-Budget 2024-25 scrutiny takes place at a time of significant financial strain. Indeed, the Scottish Government has itself projected a potential £1 billion resource spending gap in 2024-25, rising to £1.9 billion by 2027-28. Difficult decisions lie ahead in relation to its approach to
taxation, prioritisation of spending and the reform of public services.

The longer-term funding position is no less challenging. The Scottish Fiscal Commission (SFC) warns that Scottish Government spending over the next 50 years is projected to exceed the estimated funding available by an average of 1.7% each year, or £1.5 billion in today's prices, under current Scottish and UK Government fiscal policies. Scotland's population is projected to continue to grow older, with potential implications for the future demand of public services, as well as Government spending and tax revenues.

Household budgets also continue to be squeezed. The population continues to face stubbornly high inflation and a cost-of-living crisis, with real disposable income per person expected to fall by 4% by the end of 2023-24. This, the SFC notes, would be Scotland's highest fall in living standards on record.

Against this background, the Committee has focused our Pre-Budget scrutiny this year on the Sustainability of Scotland's Public Finances. Our report also includes the findings and recommendations arising from our recent inquiry into the Scottish Government's public service reform programme, given the Scottish Government identified this as a clear area of focus to help it ‘balance the books'. We also revisit some ongoing areas of interest such as enhancing fiscal transparency, improving links between spending decisions and National Outcomes, and financing the delivery of net zero targets.

To set the context to, and inform our Pre-Budget Scrutiny for 2024-25, we first heard from the SFC and the Deputy First Minister and Cabinet Secretary for Finance in early June 2023, in relation to Scotland's Economic and Fiscal Forecasts - May 2023, and the Scottish Government's sixth Medium-Term Financial Strategy (MTFS).

Our call for views ran between June and August 2023, receiving 27 submissions. We then held three evidence sessions with a range of witnesses, before hearing from the Deputy First Minister on 3 October.

In August, for the first time, we also held an engagement event with members of the public and representatives from public bodies, local government and the business community, to hear first-hand about their priorities for the Scottish Budget 2024-25 and beyond.

The views we heard informed our questioning of witnesses, including the Deputy First Minister, and our recommendations in this report. The Committee thanks all those who took the time during both inquiries, to contribute their views, which have helped shape our findings. We are also grateful to our adviser, Professor Mairi Spowage, for her invaluable expertise throughout this inquiry.

Read the full report HERE
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