Finance Committee warns of huge financial challenges on public finances as Scotland recovers from the pandemic
By Lucy Ashton
After undertaking pre-budget scrutiny for 2022-23 and examining Scotland’s public finances in the wake of COVID-19, Holyrood’s Finance & Public Administration Committee has warned of huge financial challenges facing the Scottish Budget.
MSPs say the pandemic has required public investment on an unprecedented scale and speed and its impact will be felt for years to come.
In its report published today, the Committee notes that lasting COVID-19 effects cannot be addressed in one budget round and calls for a longer-term planning approach.
The consequences of the pandemic and Brexit, combined with ongoing challenges like demographic change, will require a focused and sustained approach through 2022-23 and beyond.
The Committee also sees “greater economic and societal benefits” in prioritising preventative spending on areas such as poverty and inequality, the health of the nation and environment.
Committee Convener Kenneth Gibson MSP said:“Public finances will be under significant pressure in the next few years and the Scottish Government faces difficult decisions on how it prioritises both revenue raising and expenditure.
“Focussed and sustained policy-prioritisation over a number of years will be needed to increase productivity to address the decline in our working age population and grow Scotland’s economy.
“We believe there is a strong argument that the limits on the Scottish Government’s current resource borrowing powers are not sufficient.
“We also believe greater economic and societal benefits can be derived from prioritising preventative spending measures – whether to protect the environment or the nation’s health.
“The resource spending review provides an opportunity to introduce bold measures to optimise resources and create a wellbeing economy.
“A theme running through this report is the need for sustained longer-term policy approaches, multi-year funding and greater fiscal sustainability if the Scottish Government is to effectively respond to the enduring challenges of Scotland’s aging population, climate change and reduce inequalities.”
The Committee asks the Scottish Government to set out in the Scottish Budget 2022-23 and Medium-Term Financial Strategy how it intends to manage the economy to meet its net zero commitments by 2045, an issue it will return to in early course.
Elsewhere in the report, the Committee recommends that the Scottish Government’s National Performance Framework be re-positioned to the heart of government and linked more closely to budget planning and spending priorities. It also asks the UK and Scottish Governments as part of the forthcoming Fiscal Framework review to consider:
• How communication and transparency can be improved
• Strengthening the Framework to deal with any future health and economic shocks that might affect Scotland disproportionately
• Ensuring more flexibility for the Scottish Government to carry forward and manage budgets across the years, learning from the pandemic experience.