The Scottish Budget will receive more than £8bn in additional spending in 2020-2021 than it was expected to in February.
The substantial increase amounts to almost £1,500 more per head than was planned.
As the Fraser of Allander Institute said in a paper released before today’s Spending Review announcement by Chancellor Rishi Sunak: “In the context of a block grant at the start of the year of £30bn, that is clearly a substantial increase.”
The University of Strathclyde institute went on to say: “The pace at which new funding has been allocated and new policies have been announced means that keeping track of how the additional funding has been allocated in Scotland is not always easy.
The paper written by the Institute’s David Eiser said that more than £2bn of Barnett consequentials – the Scottish share of the UK budget allocated by population – remain to be allocated although some of that has already been committed by the Scottish Government.
The Fraser of Allander’s analysis shows that more than £2.4bn additional funding has been allocated to health, business has received more than £1.5bn of grant support plus £900m of Business Rate reliefs.
As the institute paper said: “A plethora of policies have been targeted at households most at need of financial support, with funding totalling over £400m.
“And new funding has been made available to support further and higher education and develop new training and employability initiatives.
The Chancellor’s spending plans set out in today’s Spending Review, will form a crucial backdrop to the deliberations of Scottish Government Finance Secretary Kate Forbes MSP when she sets out her Budget on 28 January.
As the institute says: “Of critical importance here will be the extent to which Covid-related funding changes announced during 2020/21 – particularly around the NHS and business support measures – will be baked-in to departmental settlements, or will be unwound in the expectation of the beginnings of recovery.”
The speed at which all this has already moved is dazzling for experienced economy watchers.
The Chancellor announced an initial set of UK measures in his Budget on 11 March including additional funding for the NHS in England and business rates relief for businesses in the retail and hospitality sectors in England.
This generated Barnett consequentials – additional proportional spending – for the Scottish budget.
By mid-April £3.5bn of additional spending had been allocated to Scotland as a result of Covid-related spending in England. This figure had increased to £4.6bn by the time of the UK Government’s Summer Economic Update in July.
Because of the need for speed the Treasury changed from Barnett to a system of guaranteed sending for the three devolved administrations.
On 24 July the Scottish Government was guaranteed a minimum of £6.5bn uplift – an upfront guarantee that provided £800m over and above what would it have received had Barnett been applied in the normal way.
As the institute paper said: “The guaranteed amount was increased to £7.2bn on 9 October and then to £8.2bn on 11 November.”
It went on: “The scale of this increase in block grant allocation is unprecedented.”
While not all of the additional allocation will go to additional spending – around £900m will offset additional business rate reliefs.
And as the institute article highlighted: a spending increase of £7bn would equate to 23% higher spending than was anticipated at the time of the budget.
But the key question that the Institute highlighted is what will happen with cash as yet unallocated by the Scottish Government.
The Autumn Budget Revision (ABR) set out how £6bn of Covid-related consequentials are formally allocated, leaving £500m unallocated.
In delivering the ABR, Kate Forbes insisted that whilst this £500m was formally unallocated, it was ‘committed’
She told MSPs; “This leaves just over £500m of COVID-19 resource consequentials formally unallocated, but I can remind opposition members who appear to be confused about the nature of a budget revision, that this funding is fully committed to the COVID-19 response.
“It will be formally allocated through the spring budget revision – a budget revision is a retrospective, budget process.”
The new arrangements – replacing Barnett consequentials with guaranteed funding – allow for much needed certainty and flexibility.
But as the institute paper said: “The challenge is that it becomes extremely difficult, if not impossible, to know whether the Scottish Government is fulfilling commitments to ‘pass on’ health related consequentials to the health budget, or local government consequentials to the local government budget.”
These are unprecedented times and new measures were required for speed and providing certainty of the funds being there.
But the unfortunate result is a regrettable lack of transparency of where exactly all the budget has gone and whether crucial areas like health and local government – which provides key aid to business – are actually getting their fair share.