Scots told to brace for 'tough decisions' amid public spending squeeze

Shona Robison promised public services will not “crumble away” but said the Scottish Government will have to decide what to “deprioritise”.

Labour blamed as winter fuel payments cut in Scotland

She made the comments as official statistics showed Scotland’s public spending deficit has risen to £22.7 billion, compared to just over £18 billion the previous year, amid a drop in revenue from North Sea oil and gas.

The latest annual Government Expenditure and Revenue Scotland (GERS) figures show there was an estimated deficit of 10.4 per cent of GDP in 2023/24, compared to 4.5 per cent for the UK.

Meanwhile, ministers confirmed the Scottish version of the winter heating payment will now be means-tested following the same decision by the UK Government. Ms Robison called this a “painful, painful decision”. During a visit to Edinburgh Napier University to mark the publication of the GERS figures, she was asked about reports emergency spending controls have been put in place in response to public sector pay deals. She pointed to Chancellor Rachel Reeves’ recent announcement of a £22 billion “hole” in the public finances.

Ms Robison said: “You cannot make £22 billion of public sector cuts without consequences, and those consequences will be felt here in Scotland as well. Now, we are working through the detail of that and we will be fully transparent with the decisions that we’re having to make.”

She said pay deals for teachers and NHS staff down south will also have “huge consequences” for Scotland as they are not fully funded and other workers will take note. “That contagion across the board is very challenging indeed,” she added.

Ms Robison said all the Scottish Government can do is constrain spending. “This is going to be a really, really tough, tough year,” she told journalists.

The finance secretary said she will make a “fiscal statement” when Holyrood returns from its summer recess next month. There is already speculation the rollout of free school meals will be affected, as well as the scrapping of peak-time ScotRail fares, which is currently subject to a time-limited pilot.

Asked if the dire financial warnings could wreck public services, Ms Robison said: “We’ll make sure they don’t crumble away and our priority is clear in making sure that we sustain public services, that we continue to tackle poverty and that we continue to invest in net zero and transforming our economy – those are our key priorities. But we will have to decide what we deprioritise, and that work is ongoing.”

She raised the prospect of a reduction in the public sector workforce. “What I have said in the letter saying we are putting in strict controls is that for the foreseeable future, only recruitment in those absolutely critical areas like, for example, blue light services, can move forward,” she said. “There is absolutely going to be restraint on recruitment.”

The Scottish Government will work with the public sector, she said, to pinpoint what “voluntary options” are available in light of a policy of not allowing compulsory redundancies.

The GERS figures show total revenue increased in Scotland from £86.9 billion to £88.5 billion. Of this, £4 billion was North Sea revenue, down from £7.9 billion in 2022/23, following falls in energy prices and production.

Government expenditure per person in Scotland is £2,417 higher than the rest of the UK, with £20,418 spent on average for every single person north of the border.

Non-North Sea revenue increased by £5.7 billion in 2023/24 – a rise of 7.2 per cent, with income tax and onshore corporation tax both growing. Total spending for Scotland increased by £6.3 billion to £111.2 billion, with additional funding for the NHS and Scottish Child Payment.

Ms Robison said the deficit is “not a reflection on the finances or policies of the Scottish Government – it is a reflection of UK Government choices”.

She added: “As an independent nation, we would have the powers to make different choices. As it is, we are using all the powers we do have to deliver our priorities of growing the economy, investing in net zero, eradicating child poverty and delivering strong public services.”

She hailed the increase in revenue, which she said was due in part to “our progressive approach to tax and the revenue from renewable energy”.

But the Scotland Office pointed to the level of spending per head north of the border. “These figures underline the collective economic strength of the United Kingdom,” said minister Kirsty McNeill.

“By pooling and sharing resources across the UK, Scots benefit by £2,417 more per head in public spending than the UK average. That means more money for schools and hospitals, if the Scottish Parliament chooses to invest in those areas.

“Ensuring economic stability and then delivering economic growth are two of the driving missions of the UK Government. We have reset relationships with partners across the UK and want to work closely with the Scottish Government to produce better results for people in Scotland.”

The Scottish Conservatives also touted the so-called “union dividend”, with finance spokeswoman Liz Smith saying: “Once again, their own Government’s stats underline the huge – and growing – union dividend that Scotland derives from being part of a strong United Kingdom. Every single person in the country is £2,400 better off because we are part of the UK.”

Scottish Labour finance spokesman Michael Marra said that despite the higher public spending per head in Scotland, “Scots will be right to question why they aren’t seeing better public services as a result of this extra public spending”.

GERS sets out revenues raised in Scotland alongside public spending north of the border, and is prepared independently of Scottish ministers. Its figures have long been a focus of debate when it comes to the finances of an independent Scotland.

Excluding the North Sea, Scotland had a deficit of 13.2 per cent of GDP (£26.6 billion).