The Scotsman Bulletin Thursday August 15 2024 #GovernmentSpending

The Scotsman

Scotsman deputy editor Alan Young looks at government spending with political editor Alistair Grant

Transcript

00:00Hello and welcome to the Scotsman's Daily Bulletin for Thursday. I'm Alan Young, I'm

00:12Deputy Head of the Scotsman. I'm joined by our political editor Alistair Grant to talk

00:16about the big story today. Hi Alistair.

00:19Hello, how's it going?

00:21Good. Let's have a look at the front page and we'll get an idea of what we're going

00:26to be talking to Alistair about because yesterday really grim economic news from Finance Secretary

00:34Shona Robison. She was launching the annual GERS figures yesterday, which are always really

00:40controversial, but it's fair to say it was dominated by an unrelated emergency freeze

00:50on all public spending. It's going to mean things like only frontline roles in the public

00:55sector are going to be filled, the possibility of voluntary redundancies of projects being

01:01halted. It really is pretty grim. We do have, being plugged on the front page there, our

01:10daily festival supplement, which is your essential guide to everything happening in Edinburgh

01:17and I also want to point out the Stonehenge story, probably my favourite story of the

01:22day. So the altar stone at Stonehenge has now been found to be Scottish. Who would have

01:29thought it? But Alistair, there's no way to dress this up really. It is grim and there

01:36are big cuts on the way.

01:38Yeah, it's extremely grim. So Shona Robison, the Finance Secretary, was asked about reports

01:44yesterday. As you say, she was launching GERS, the Government Expenditure and Revenue Scotland,

01:50a report that comes out annually about Scotland's spending and how much Scotland is raising in

01:54revenue and the discrepancy between the two. And that was showing a £22.7 billion public

02:01spending deficit in Scotland, a rise from the previous year, mostly as a result of North

02:06Sea oil and gas revenues decreasing. So they've halved over the last year. But like you say,

02:12there's this kind of linked but separate issue of the kind of tight in-year finances that we're

02:19facing over the coming weeks and months. And there was a report, reports in the media about a letter

02:25that Shona Robison had sent out to government departments putting in these kind of emergency

02:29spending controls. Like you say, saying that money shouldn't be spent on projects unless it

02:34absolutely has to be, unless there's kind of a legal obligation to do so or it would be economically

02:39disastrous if they didn't do it. And Shona Robison yesterday saying, you know, being quite candid

02:45about the challenge ahead, effectively telling people in Scotland to brace for tough decisions

02:50in the coming weeks and months. There's going to be a squeeze in public spending. She said that

02:54public services will not crumble away, but I think the fact that she used that language was worrying

02:59in and of itself. But she was quite clear that Scottish Government is going to have to deprioritise

03:05some things. So she was effectively pointing to two different pressures here. So Chancellor

03:12Rachel Reeves, the new Labour Chancellor, people might remember a couple of weeks ago,

03:16stood up in Westminster and said that effectively there was a 22 billion pound black hole that

03:22Labour had not been aware of before they took office and they were now going to have to deal

03:26with it. So they made some decisions around obviously winter fuel payments, other things

03:30that happened, but effectively they're trying to find that money, trying to plug that gap

03:36and that will have a knock-on impact in Scotland. And Shona Robison was also pointing to the impact

03:41of public sector pay deals down south and in Scotland as well, but particularly those ones

03:46down south, NHS staff teaching the impact that they will have. They're not going to be fully funded,

03:51so part of the way the UK Government's funding them is through cuts to department spending.

03:56That doesn't get passed on to Scotland in consequentials. The other issue is that Shona

04:01Robison used this word contagion, which I thought was a bit notable, but she was effectively making

04:06the point that workers across the public sector look at the deal that other workers are getting,

04:11such as teachers, such as NHS staff, say, for example, and say, you know, why can't we have

04:16the same? So it has an impact on pay deals across the board. And she's effectively saying you can't

04:21make £22 billion of public sector cuts without consequences. Those consequences will be felt in

04:27Scotland. She's going to stand up in Holyrood in the Scottish Parliament when it returns from its

04:31summer recess next month and make a financial statement. That's what she called it. Someone

04:36asked her if she would call it a mini-budget. She tried to bat that away, but she's going to

04:40make a financial statement and outline exactly where these pressures are going to be felt.

04:45But the Scottish Government already yesterday said that its version of the winter fuel payment

04:51will now be means tested, so it will no longer be universal, meaning hundreds of thousands

04:56of pensioners who might have otherwise received it will no longer do so. The Scottish Government

05:01saying it was left with no choice, they didn't have the money to fund it if the UK government

05:04had made that decision. But I think we should expect, yeah, I think a general kind of squeeze

05:10in the public sector. Like you say, the public sector becoming smaller. Voluntary redundancies,

05:15I think, are definitely on the cards. Things like offices may be merging. I think in terms

05:20of policies that affect people, people are already speculating about the rollout of free school meals

05:26might not go as planned. Things like the pilot that's been ongoing at the moment for

05:32getting rid of peak time ScotRail fares. I can't really see that continuing if the public finances

05:38are this grim. There's no way to sugarcoat it really. It's really grim. I think the grey clouds

05:46of winter are definitely gathering. You mentioned the public sector pay deals. I'll say in the news

05:52this week, because we had one at the start of the week to avert the bin worker strike which was

05:59going to take place from Wednesday and potentially hit the Edinburgh Festival, the Scottish Government

06:05found £77 million extra to fund that deal. Has done similar in the past. Jumped in at the last

06:13minute and found extra money to put in a better offer. There's a lot of chat about how this has

06:23just emboldened the unions. And like you say, possibly the contagion which Shona Robson

06:31mentioned, have they essentially made a run for their own back?

06:37I think it's so difficult. From the trade union's point of view, they are dealing with what they

06:41called below inflation pay rises. Their workers are feeling the pressure themselves, the cost of

06:47the living crisis, the impact of inflation. They're feeling the squeeze. So of course they're going to

06:53go for the best deal that they can get for their workers. Many of whom they would say, particularly

06:57without those council pay deals we saw at the start of the week, are not particularly well paid

07:01and yet do jobs that are absolutely essential to the running of society, as we've seen two years

07:07ago when we saw those bin strikes and just how quickly things seem to disintegrate when you've

07:11not got people doing those roles. So trade unions would argue their case there. They're obviously

07:15going to go out and bat for their workers. But it's also true that that money has to come from

07:20somewhere. And if the Scottish Government makes more money available, in this case, like you say,

07:25£77 million, it's got to come from somewhere. It doesn't just come from nowhere. So it's going to

07:30be taken out of the budget elsewhere. It's going to have an impact on other areas of the budget.

07:35And as Shona Robison said, other workers then look to that and that becomes a kind of benchmark

07:39figure that other people want as well. So I think it's such a difficult situation all round

07:46and the government is really in a tight corner here. But I think one of the points I think is

07:52worth making is that, you know, I think an economist from Fraser of Allander was actually

07:56making this point on Twitter yesterday, that, you know, the government must have seen this coming.

08:00It's not as if this has been a kind of unexpected development. And, you know, it was very late in

08:05coming to public sector pay policy. It wasn't part of the budget. And so it's kind of, you know,

08:11it's the government acting as if this is something that's kind of been sprung on them.

08:15I don't think is accurate. They must have seen it coming down the line. There is an element

08:18that they failed to prepare for it. And now the chickens are coming home to roost.

08:23So we'll get a statement from Shona Robison when Parliament resumes. And then I guess it's all eyes

08:32on the UK budget, which will be coming shortly after that, which will have huge ramifications,

08:38may actually impact on what Shona Robison says. Yeah, so we'll have this financial statement,

08:45as I say, when Holyrood returns, we'll then have the programme, or around the same time,

08:49we'll have the programme for government, actually, that Scottish government sets out as kind of

08:53legislative priorities for the coming year, what it wants to put into law, what changes it wants to

08:57make over the coming parliamentary year. We'll then have the autumn statement, like you say,

09:02and then we'll have the Scottish budget in December. So it's just like, it's basically

09:06just one financial thing after another. And I think this plays, if you want to look at the bigger

09:11picture, this plays very much into, you know, Labour have come in as a new government in

09:16Westminster, with a very difficult financial situation, but they're going to be wanting to

09:21to show that they're changing things, that they're turning the country around,

09:24that they're trying to have an impact in these key areas. The SNP has been in power for a long

09:29time in Scotland and is now feeling the crunch itself as a party that has been the incumbent,

09:35it's been in power for almost two decades, or certainly will be by the time of the next

09:38Holyrood election. So I think you can already see these political narratives developing as we

09:43approach the 2026 Holyrood election, with the SNP defending a record that's maybe in some people's

09:49eyes a bit patchy, amidst this really tight financial squeeze. I think you can see already

09:54what that election is going to be fought on, and all this stuff will feed into it.

09:59Thanks very much for all that, Alastair. Interesting times ahead, certainly. Please

10:03keep an eye on Scotsman.com throughout the day for all the very latest news and analysis. If you can

10:08do subscribe and then you'll be able to read and watch absolutely everything that we do,

10:13and if you're out and about today as ever, please do pick up a copy of the paper.

10:17But from me and from Alastair, it's bye for now.

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