The Scottish Squeeze

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Official figures on the Scottish budget for 2010-11 show major cuts are ahead.

We now have the official take on yesterday’s Pre Budget Report, courtesy of the Scottish Parliament’s Information Centre (SPICE).

Their post-PBR report (if you follow the logic) confirms that the coming year – 2010-2011 – is going to be tough, very tough. The bottom line: Scottish minister will have £814.4m less to spend than was originally planned.

But first up: the good news. As a result of yesterday’s statement an extra £23 million will flow to Scotland in 2010-2011 – through so-called Barnett Consequentials.

Sounds technical?  Well, essentially it’s a mechanism to even up funding north and south of the border post devolution. If the UK Government spends in a devolved area – Scotland gets it’s budget topped up; if they cut funding in a devolved area – we get less.   

Yesterday the Chancellor decided to spend extra on free school meals in England and Wales – so we get more, £23m more.  Scottish ministers are able to spend this money in any way they choose. But that’s only part of the story.  

The onset of recession has sparked a series of decisions by UK and Scottish ministers since the Draft Budget for 2009-10 was originally set.

These have already produced significant deductions from next year’s cash pot – far in excess of yesterday’s boost.

They include:

-          minus £128.6m in Barnett consequentials as a result of the 2008 pre-budget report

-          minus £391.7m in Barnett consequentials from the full budget in April

Add to that £347m for capital projects brought forward from next year’s budget (with the approval of Scottish ministers) to boost the Scottish economy at the height of the downturn.

Taken together it means a grim outlook in which the scottish Government has significantly less to play with.

So those are the figures, but what about the politics? Well, the arguments are well rehearsed.

For Alex Salmond it’s a direct result of the “Labour recession in Westminster.” With any recovery still fragile, the First Minister believes now is not the time for cuts.  

In particular he says Mr Darling’s decision not to accelerate further capital funding places 5,000 Scottish jobs at risk - expect to hear plenty more about that.

From the UK Government’s perspective the Scottish budget (£30 billion plus) will still be at its highest ever level – in cash terms, more than double that available to Donald Dewar. 

Scottish Secretary Jim Murphy insists Scottish ministers should simply spend it more wisely. 

Either way – the squeeze is well and truly on.