Ministers face last gasp scramble to save £150m if request is refused

Scottish ministers could face a last gasp scramble to find a further £150 million of savings in day-to-day spending due to decisions made as part of the emergency budget review.

Johnswinney,thedeputyfirst minister and interim finance minister, outlined £1.2 billion of savings earlier this month. However, £150m of this comes from moving money from the capital budget to the resource budget, something that is not allowed under fiscal rules.

Capital funding is specifically for major infrastructure projects, while resource spending pays for day-to-day spending such as wages. Money can be movedfromtheresourcebudget to the capital budget, but not in the other direction.

In what is an exceptionally rare step, public finance minister Tom Arthur confirmed to

Holyrood’s finance committee the UK Government has been asked for permission to shift £150m from the capital budget to pay for day-to-day spending in Scotland. This has only happened once before, with a similarrequestturneddownby the UK Government during the Covid-19 pandemic.

The money will also not be able to be used to support pay deals, so would cover other resource spending commitments. Mr Arthur said this “flexibility” had been requested due to the exceptional circumstances of the cost-of-living crisis.

However,thetreasurysaidno decision would be made about whether to accept the request until the supplementary estimates process is finished, usuallyconcludinginlatefebruary. This process can lead to additional funding for the Scottish Government from the UK Government.

In March, finance secretary Kate Forbes complained about last-minute changes to Barnett consequentials,whichledtoan effective £38m cut to the Scottish budget. Should the request be turned down, Mr Swinney and Ms Forbes will be forced to find that £150m from the existing budget unless there is additionalukgovernmentfunding, potentiallyleadingtoadditional cuts to the £1.2bn set out.

Mrarthursaid:“thescottish Government has requested from the Treasury some limitedadditionalflexibilitytooffset a reduction in capital spending against resource budget commitments. The request has been made on a one-off basis giventheseriousnessofthesituationwefaceandintheabsence of additional funding from the UK Government to offset the significant reduction in our spending power.”