logo
How the UK spending reviews will shape Scotland's finances

How the UK spending reviews will shape Scotland's finances

The UK Government has already trailed plans to increase defence spending, boost spending in the NHS, and reform social security. But it has said much less, so far, about day-to-day spending on public services. With limited headroom for new funding, any shift in priorities is likely to mean savings elsewhere.
Read more:
Spending decisions on reserved areas such as the industrial strategy, research and development, and defence procurement will all have an impact here in Scotland.
But the Scottish Government's budget will also be impacted too. Even with recent tax devolution, the Barnett Formula remains the most significant contributor to the Scottish Government's budget. The formula ensures that any increase or decrease in Whitehall spending in devolved areas – for example, health or education – triggers a population-based adjustment to Scotland's budget.
That means that what is announced in the spending review will not just matter for Whitehall departments, it will directly shape the financial envelope available to Holyrood. The onus then falls on the Scottish Government to set out its own spending priorities.
June's medium-term financial strategy will likely give a high-level overview, but for greater detail we will need to wait for our the spending review in Scotland. The Cabinet Secretary for Finance has indicated that a timeline for that review will be published in June.
The interaction between UK and Scottish Government fiscal policies does not stop with the Barnett Formula. Just last month, we were reminded of further – often subtle – interactions between developments in the UK and the Scottish budget.
Read more:
In publishing our updated five-year outlook at the Scottish Fiscal Commission, we highlighted how further fiscal pressures had emerged since the turn of the year. One such factor was the latest information on the Scottish Government's devolved tax and social security data, relative to the rest of the UK.
Under Scotland's fiscal framework, the Scottish budget does not always benefit when its tax revenues rise. What matters is whether those revenues are growing faster than their counterparts in the rest of the UK.
This is due to a core principle in the fiscal framework that seeks to protect the Scottish budget from shared UK-wide economic risks. But, on the other hand, this means that any divergence in performance between Scotland and the rest of the UK – the so-called net tax position – has a direct consequence on the level of funding available.
In recent times, we have seen an improving performance – and outlook – for revenues in the rest of the UK that is not being fully matched in the data for Scotland, leading to knock-on implications for Scotland's budget. This is one of the lesser-known intricacies of our devolved fiscal setup: stronger tax growth in England can mean less money for Holyrood than planned, even if Scotland's own outlook is unchanged.
Read more:
A similar issue arises in social security. As more benefits are devolved – including disability and carer payments – what matters is not just how much is spent, but how that compares to the funding received.
Scottish Ministers have made deliberate policy choices to expand eligibility and increase support, particularly in areas linked to child poverty and disability. Those choices have widened the gap between spending and funding.
But the latest forecasts show that planned UK Government reforms to reduce spending in England and Wales – especially through tighter eligibility for benefits related to disability and ill-health – might make that gap larger by lowering the equivalent funding to Scotland. By 2029–30, we project that annual spending on devolved social security will exceed funding by £2 billion.
Holyrood may have greater control over tax and spend decisions than in the past, but the budget remains integrated with decisions made in Westminster. Any meaningful strategy for Scotland's public finances – including in future spending reviews – must start with a clear understanding of that interdependence.
Graeme Roy is professor of economics at the University of Glasgow's Adam Smith Business School.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Is this the most confusing car brand of all time?
Is this the most confusing car brand of all time?

Auto Car

time16 minutes ago

  • Auto Car

Is this the most confusing car brand of all time?

The story behind car maker Talbot is far more complicated than you might think Open gallery Percy Lambert became the first person to do 100mph in this 1913 Talbot Stunning Talbot-Lago teardrop arrived in 1938 Talbot-Lago T26 racing car won several grand prix Rear-wheel drive Talbot Sunbeam Lotus was a hot hatch delight Close What is the most confusing car brand of all time? It's an intriguing question – and we reckon the answer might well be Talbot. The story started all the way back in 1888, when Charles Chetwynd-Talbot, the 20th Earl of Shrewsbury, founded a London taxi firm with the competitive advantage of using newfangled pneumatic tyres. Eight years later, the Earl entered business with one Adolphe Clément, who had made a fortune from said invention, to sell the Frenchman's tyres, bicycles and cars in London. In 1902, the pair strengthened their partnership, rebranding the cars Clément-Talbot. But after just a year they bisected their business: the Earl would sell cars badged Talbot in Britain, his partner cars badged Clément-Bayard in France. Amusingly in hindsight, adverts in Autocar stated that this change was being made 'in order to prevent confusion in the mind of the public'. In 1906, the Earl's London factory began making cars of its own design, separating the two firms yet further. Talbot soon started succeeding in races and reliability trials, earning it the nickname 'Invincible Talbot'. Its biggest coup came in 1913, when Percy Lambert became the first person to do 100 miles in an hour, lapping Brooklands in a 25hp special – even though 'he could hardly see for several laps' due to thick fog. Enjoy full access to the complete Autocar archive at the The Great War badly disrupted the London firm and literally gutted the Paris firm, and both struggled to recover afterwards. So in late 1919 the Earl sold up to Darracq, a British-owned French car maker; and in 1921 Clément sold his factory to local upstart André Citroën. The new owners of the Earl's old firm kept the Talbot brand for London-made cars and started using Talbot-Darracq for Paris-made cars. In short order, they bought Wolverhampton's Sunbeam and put the lot under the unfortunately named umbrella of STD Motors. Real excitement came in 1930 as Talbot ventured to Le Mans for the famous 24-hour race and upset the big players. Bentley scored a one-two with its 6.6-litre monsters, but Bugatti, Alfa Romeo, Mercedes and MG were all outclassed by Talbot's 2.3-litre 90s – 'really remarkable', said Autocar. It then twice repeated this impressive feat in the following years with its enhanced 105s. However, all was not well, as the Western world had plunged into a terrible economic depression and Sunbeam had long been unable to replicate Talbot's prosperity, eventually dragging STD under. Rootes, owner of Britain's Hillman and Humber car brands, came to the rescue of Sunbeam and Talbot, leading Autocar to proclaim: 'Under this energetic new management, there is no doubt that the Talbot name will continue to rank high in automobile circles.' It looked as though the Talbot-Darracq business would vanish – until an unexpected buyout by its managing director, the 'large and determined' Italian Antonio Lago. Henceforth two separate firms would use the Talbot brand, but to avoid confusion Lago's cars were usually referred to in Britain as Darracqs or Talbot-Lagos. The two firms trod diverging paths: Talbot built restyled humble Hillmans while Talbot-Lago went upmarket with its cars, provided chassis for coachbuilt stunners and competed in grands prix. In 1938, Rootes decided to merge Talbot and Sunbeam, introducing yet another hyphenated name to this already muddled lineage. Both Talbots enjoyed the 1950s: Talbot-Lago won grands prix and Le Mans with its T26 and crafted some beautiful luxury and sporting cars for the road, while Sunbeam-Talbot attracted envy for its saloons and convertibles – one of which also won the Coupes des Alpes in the hands of Stirling Moss. However, confusion persisted, leading Rootes to shorten Sunbeam-Talbot to just Sunbeam in 1954 – 'a short life but a merry one', we said. And five years later, Talbot-Lago's prolonged suffocation by postwar austerity and heavy taxation on luxury cars finally killed it, its assets being bought by Simca. But that was not the end of the story. Simca and Rootes both later became part of Chrysler Europe, and when that rotten business was dumped at PSA's door in 1979, guess which of its defunct brands – Alvis, Bugatti, Delage, Delahaye, Panhard, Simca, Sunbeam and Talbot – was deemed ripest for revival? 'It has the best image of strength with the European public,' president François Perrin-Pelletier explained to Autocar. 'Most of all, however, it is perceived by 80% of the British public as an English make and 80% of the French as a French make.' It didn't last long. Talbots either overlapped with other PSA models or were duds, so the next-generation models were redirected to Peugeot and the brand was consigned to die again with the Express van in 1994. Honestly, what a mess. Join our WhatsApp community and be the first to read about the latest news and reviews wowing the car world. Our community is the best, easiest and most direct place to tap into the minds of Autocar, and if you join you'll also be treated to unique WhatsApp content. You can leave at any time after joining - check our full privacy policy here. Next Prev In partnership with

SNP and Reform feed off each other – but Labour is still hungry
SNP and Reform feed off each other – but Labour is still hungry

Scottish Sun

time19 minutes ago

  • Scottish Sun

SNP and Reform feed off each other – but Labour is still hungry

Nats activists never tire of referring to Labour & Tories as two cheeks of the same a*** - the same charge can now be levelled at SNP and Nigel Farage's Reform CHRIS MUSSON SNP and Reform feed off each other – but Labour is still hungry SNP activists never tire of referring to Labour and the Tories as two cheeks of the same a***. Well, the same charge can now be levelled at the Nats and Nigel Farage's Reform UK. 1 Reform came a close third to the SNP and winners Labour Neither will want to hear this, but their equally destructive stances on funding Scotland's public services reveal yet another similarity between the two parties, vying for power at Holyrood next year with Labour. Both claim to be the outsiders standing up to the Westminster establishment, though for the SNP this is also not-so-subtle code for England. The stock-in-trade for both is to blame others for all ills. Both engineered referendums to leave major economic unions, and both lean heavily on populist rhetoric. And as we discovered in the run-up to last week's crunch by-election, they both want to cut Scotland's funding off at the knees. They want to do so to further their own narrow, political aims. For the SNP, that's independence. For Reform, electoral domination down south. As underlined by the Hamilton, Larkhall and Stonehouse by-election — where Reform came a close third to the SNP and winners Labour — support for Farage is surging amid falls in backing for traditional parties. Scottish Labour have been buoyed by that Hamilton result. and remain hungry for power. But they still face a huge battle. Because the more Reform's support grows, the more likely it becomes the SNP can win the 2026 Scottish Parliament elections with a far lower vote share than they got in 2021. And the two parties don't just share ideas — they are feeding off each other. There may be a point in the coming years — with Farage in No10 and the SNP in power at Holyrood — that these competing forms of nationalism create a perfect storm. Moment John Swinney is heckled by Reform UK campaigners as FM breezes past warring activists heads of Hamilton by-election Both parties have set out how they want the Scottish Government to have more independence in terms of funding, a move that would go a long way to ending the current 'pooling and sharing' of resources which Scotland voted to keep in 2014. The common theme is the scrapping of the Barnett Formula — the funding mechanism which drives Scotland's significantly higher share of public spending than the UK average. Last year, this meant thousands of pounds per person extra to spend on Scots services like the NHS and schools. Scotland spent £22.7billion more than the £88.5bn it raised in taxes in 2023/24. Including oil revenues, we brought in just £60 per head more in tax than the UK average. But we spent £2,417 per head more. Not a bad deal, you may think — unless you look for the worst in everything, as the SNP do. But Holyrood Finance Secretary Shona Robison wants to scrap this 'Union dividend'. She has resurrected an SNP aim to ditch the pooling and sharing — which means that extra spending is covered — and turn that £22.7bn overspend into Scotland's problem. Robison says that short of independence, 'moving to full fiscal autonomy for the Scottish Government would create a fairer system that would protect public services and allow investment in our economy'. Ms Robison knows full well that the opposite is true. Full fiscal autonomy may mean keeping all taxes raised in Scotland — income tax, VAT, corporation tax, oil revenues and so on. HOLYROOD sits just three days a week, when it's not enjoying long holidays. When it does, MSPs spend an inordinate amount of time debating meaningless motions. Last week, the Scottish Government staged a debate and vote congratulating itself for making 'significant progress' towards becoming one of 'Europe's fastest-growing start-up economies'. Some brass neck, given how anti-business and anti-growth the SNP have been. And the previous week, it had emerged that because Scotland's economy has lagged behind the UK average, we are losing hundreds of millions of pounds a year in funds for public services. That's the reality. So how about knuckling down to sorting that out, rather than grandstanding about this imaginary world? But it also means we have to pay for everything. And we simply can't afford it. It means the end of the Barnett Formula, and the Scottish Government having to find ten per cent of its GDP to fill that £22.7bn gap. Borrowing at these levels, even if it were possible, would provoke a response from the markets making Liz Truss's mini-budget disaster seem small fry. If you think the NHS and schools and roads are bad now, just wait for the super-charged austerity under full fiscal autonomy. It would be economic suicide, and Robison is not thick. Which leads me to think this is a kamikaze policy. Scots public services are the target, leading to the inevitable conclusion from SNP chiefs that things are so terrible the only way out of the wreck is independence. And what about Farage? Last week this newspaper tried to get some Scots policies out of him. Reform UK are quite light on those — meaning they really haven't got any. He did confirm he no longer wanted to axe MSPs — good news for the ones who could be elected for Reform in 2026. But one thing he did speak on during his Scots trip was scrapping the Barnett Formula. In his own words, he said it 'seems to me to be somewhat out of date', adding: 'What I'd like to see is a Scottish Government that's able to raise a bit more of its own revenue, and a Scottish economy that has genuine growth.' Like the SNP's funding policy, the consequences would be the opposite of what Farage says. It would strangle spending and growth. With a reduced settlement for public services here — while people in England get the same, or closer, to the current Scots levels — it would mean savage cuts, tax rises, or both. This would also suit the SNP's independence argument. Does Farage care much about that? I'm not sure he actually does. Scotland has never been his priority. Domination in England is. There would be a bit more money for England, styled as one in the eye for 'subsidy junkie' Scots, playing well to potential Reform voters down south. At the heart of it, like the SNP's stance, it's about making Scotland poorer, not wealthier. As the SNP's Trade Union Group put it last week: 'This is code for a bonfire of public services. And the effective end to devolution.' Correct. But they may want to look in the mirror, as SNP chiefs are proposing the same.

Can you trust Rachel Reeves' spending review numbers?
Can you trust Rachel Reeves' spending review numbers?

Sky News

time23 minutes ago

  • Sky News

Can you trust Rachel Reeves' spending review numbers?

Sky News' Sam Coates and Politico's Anne McElvoy serve up their essential guide to the day in British politics. The Home Office is the last department to finalise their budget with Chancellor Rachel Reeves ahead of Wednesday's spending review. All eyes are on Yvette Cooper and the noise that comes out of Westminster today and tomorrow that will indicate how much cash the home secretary has secured for things like policing. And, with Nigel Farage due to make a speech today, Sam and Anne catch up on a wild weekend for Reform - at the start of which party chairman Zia Yusuf resigned over a proposed ban on burkas - only for him to reverse his decision and return 48 hours later.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store