The Courier & Advertiser (Perth and Perthshire Edition)
Sustainability of budget called into question
Economists issue warning and request a debate
Spending on many key public services could be squeezed by almost 20% by 2020/21, economists have said.
A new report from the Fraser of Allander Institute has called for an honest debate on the future sustainability of Scotland’s budget, warning the status quo is “not an option”.
UK fiscal consolidation, a fragile economic environment and major policy commitments will mean declines in resources for non-protected public services, the Strathclyde Universitybased institute said.
Its analysis suggests real-terms resource spending on public services other than health could be almost 20% lower in 2020/21 than it was a decade earlier.
Scottish Government spending commitments on increasing funds for the health service, doubling free childcare provision, protecting the police budget and closing the attainment gap could mean cuts of 9% to 14% in other portfolios, the report suggests.
FAI director Professor Graeme Roy said: “The Scottish devolved budget faces considerable spending pressures in the years to come.
“In particular, rising health costs and an ageing population mean that commitments to health spending are continuing to squeeze funds for other public services.
“An open and transparent debate is needed about the sustainability – and options for reform – of Scotland’s devolved budget.”
The Scottish Government has said the time is right for a debate on the “progressive” use of income tax powers, opening the door to a potential rise.
However the report includes analysis from the Institute of Chartered Accountants (ICAS) warning that there is currently only limited understanding of Holyrood’s powers.
ICAS head of taxation Justine Riccomini said: “As the Scottish Government discusses the options to use its new income tax powers, it needs to factor in the interaction of income tax with other UK taxes as there are administrative and practical constraints to be considered when setting the rates and bands.”
Last week MSPs at Holyrood voted to back the principle of raising income tax after the SNP abstained.
Interim Scottish Labour leader Alex Rowley said: “This report endorses what Labour has been saying for years SNP ministers must finally sit up and realise that their approach to tax simply is not working.”
Liberal Democrat leader Willie Rennie said: “The SNP need to make up their mind where they stand on supporting services through taxation. They abstained in the vote last week. This is not good enough as a response.”
A Scottish Government spokesman said: “The Scottish Government is already taking action to begin an open and transparent debate on public finances, as called for in the report, with plans to publish a discussion paper on income tax.”