Economists attack SNP for 'can-kicking strategy' over looming public pay crisis

John Swinney’s government had agreed a three-year public sector pay deal of 9 per cent. But with more generous than planned agreements with workers agreed in the first two years of the deal, SNP ministers have been left with around 1 per cent for next year’s pay negotiations - a real-terms pay cut.

The government would have to boost revenue by cutting other parts of the budget or raise income through taxation to pay for any further pay negotiations.

A stark new report from economists at the Fraser of Allander Institute, has found that pay settlements have exceeded the Scottish government’s own published pay policy every year since 2022.

Working with the Wales Governance Centre at Cardiff University, the study found the three-year pay policy set out 12 months ago has been nearly exhausted in two years, with no acknowledgement of the issue in last month’s Budget.

Last week, resident doctors agreed a pay deal of a 4.25 per cent increase in 2025-26 and 3.75 per cent in 2026-27 – a settlement that matches one accepted by nurses and other healthcare staff.

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The economists have warned that pay growth ahead of the amount set aside by the Scottish government has been a major factor in successive in-year emergency reviews. A warning has been issued that the lack of an integrated and sustainable approach is poised to create a crunch point after the election.

The Fraser of Allander Institute has stressed that settlements for areas such as health look much too small to pay for deals already agreed with workers.

Dr João Sousa, deputy director of the institute, said: “The Scottish government’s approach to pay is symptomatic of a broader can-kicking strategy.

“Its budget has only been financed in recent years on the back of windfalls, be they from better-than-expected tax forecasts or Barnett consequentials.

“But with a tight Block Grant settlement for the next few years, relying solely on non-recurring funding sources is not an option.

READ MORE: Scottish resident doctor strike called off as BMA accepts improved SNP pay offer

“The reckoning has already happened on capital (spending), and whoever is in power after May will have to seriously grapple with implausible settlements in areas such as health and justice.”

Scottish Conservative finance spokesperson, Craig Hoy, said: “This damning report confirms the SNP are shamefully kicking the can down the road rather than tackling this issue head on.

“John Swinney’s government has recklessly given the green light to bumper pay deals and a bloated benefit bill without thinking of the costs that they would be hit with.

The report pointed to issues in health, social care, justice and post-school education finances to be tackled by the next administration.

Along with low growth in health spending in the past two decades, the report said government waiting times targets are still being missed.

While spending on social care increased, it was absorbed by rising costs, with the think tank claiming the amount of social care provided may actually have decreased since the 2021 election.

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On education, funding for universities has dropped 17 per cent in real terms and 8 per cent for colleges, with funding for the Scottish Funding Council (SFC) set to be cut by a further 10 per cent in real terms in the coming years.

Proposed funding in the government’s spending review for justice, the report added, was “particularly implausible, particularly in the face of the courts and prisons crisis”.

Professor Mairi Spowage, the director of the Fraser of Allander Institute, said: “The health service and the adult social care system will be front and centre of the spending pressures faced by the incoming administration, and the post-school education system will be key to delivering the economy necessary to fund the public services that Scotland expects and needs.

“The picture that emerges is a set of critical challenges that must be faced head-on.

“Scottish government funding is tight throughout the spending review period, while health service performance remains some way off its targets.

“Meanwhile, public sector pay pressures are a source of concern, as is the muddied picture on adult social care and the falling funding of post-school education in real terms.

“The next Scottish Parliament will need to make hard choices, and the electorate needs parties to be honest about the scale of the challenges and how they plan to tackle them.”

A Scottish government spokesperson said: “The Scottish government has delivered a balanced budget every year despite the challenging financial environment we have faced.

“We value public sector workers, who all play a vital role in delivering excellent local services for people and communities across the country. Thanks to the decisions the Scottish government has taken on public sector pay, public sector workers in Scotland are the best rewarded in the UK.

“Public sector pay deals balance prudent financial management with securing early agreements, protecting service delivery and avoiding industrial action.”