Be honest about scale of financial challenges ahead of Holyrood election, political parties urged

Political parties in Scotland have been urged by a leading think tank to “be honest” with the electorate over the scale of the financial challenges facing the country.

The Fraser of Allander Institute released a report on Friday setting the scene ahead of the Holyrood election in May, warning of the need for stark choices by whoever takes power.

Working with the Wales Governance Centre at Cardiff University, the Strathclyde University-based think tank 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.

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

Capital spending is due to drop by 60% following the completion of the new HMP Highland and HMP Glasgow facilities, with no major changes proposed to the rest of the prison estate, while wider justice spending is set to drop by 0.6% in real terms per year.

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.”

The report also took aim at the Government’s policy on public sector pay, which set a 9% increase in wages in the three years after 2025-26, which has been “nearly exhausted after two”.

The responsibility for public sector pay, the think tank said, will be for the next government to deal with.

Dr Joao Sousa, the deputy director of the think tank, 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.

“The reckoning has already happened on capital, 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 spokesman Craig Hoy said the report is “damning” on the Government’s handling of the public pay bill.

“John Swinney’s Government have recklessly given the green light to bumper pay deals and a bloated benefits bill without thinking of the costs that they would be hit with,” he said.

“The SNP’s latest Budget showed their sums simply do not add up, even if they keep hitting Scots with more and more taxes.

“The Scottish Conservatives were the only party in Holyrood to oppose the SNP’s plans and we offered credible alternative plans that would have given Scots a much-needed tax cut and finally tackled wasteful spending.

“If the SNP remain in power after May’s election, more pain will be on the way for hard-working Scots, who will continue to pay more and get less due to the SNP’s economic illiteracy.”

Scottish Labour finance spokesman Michael Marra said: “SNP ministers have recklessly mismanaged Scotland’s finances for years, leaving councils strapped for cash, our public services run down, and taxpayers picking up the tab.

“A Scottish Labour government would end the irresponsible spending, respect taxpayers’ cash, and restore our public services after decades of neglect by the SNP.

“In just three months’ time, the people of Scotland will be able to turn the page on almost 20 years of SNP failure and choose a new direction with Scottish Labour.”

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.”