Inflationary Pressures (United Kingdom Government Funding)

– in the Scottish Parliament on 21st September 2022.

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Photo of Kenneth Gibson Kenneth Gibson Scottish National Party

7. To ask the Scottish Government what indications it has received that additional funding will be provided by the United Kingdom Government to deal with inflationary pressures. (S6O-01362)

Photo of John Swinney John Swinney Scottish National Party

Despite the huge challenges that the Scottish budget faces

, the UK Government has offered no support to deal with inflationary pressures. With inflation now at more than 10 per cent and predicted to go higher, the Scottish budget is worth around £1.7 billion less than it was when it was presented to Parliament in December.

The Scottish budget is fixed, we cannot vary Scottish income tax in year, our reserve funding is fully allocated and our borrowing powers are woefully inadequate. We need to secure from the UK Government the necessary financial flexibility to enable us to address the very real financial challenges that we face this financial year.

Photo of Kenneth Gibson Kenneth Gibson Scottish National Party

Does the cabinet secretary agree that, without additional resources to match rising wage, energy and other costs, Scotland’s public sector will struggle to maintain services and staff? Does he agree that, given that poorest areas will be hit hardest, additional funding is essential if the UK Government is serious about its own levelling up agenda?

Photo of John Swinney John Swinney Scottish National Party

I have indicated in a number of responses to members this afternoon the challenges that we face, which I set out openly to Parliament two weeks ago. The effect of inflation on our budget is to undermine its value to the tune of £1.7 billion. That means that there is intense pressure on the ability to deliver public services and to afford the increases in public sector pay that are significantly higher than those that were envisaged at the time of setting the budget.

That is why I, along with my colleagues in Wales and Northern Ireland, have appealed to the UK Government to have an approach to the fiscal event on Friday that meets the needs of these days and addresses the risk that, unless specific action is taken, increasing inequality and a damaging impact on the poorest in our society will be the consequence of the UK Government’s actions.

Photo of Paul Sweeney Paul Sweeney Labour

Will the Deputy First Minister agree that, in addition to the consequential fiscal transfers that are available to the Scottish Government to respond to the cost of living pressures, the introduction of new tax levies on wealth and assets such as land, and the issuing of sub-sovereign bonds to finance public sector capital investments, should be explored as a matter of urgency?

Photo of John Swinney John Swinney Scottish National Party

I am perfectly happy to explore those questions, although I think that the question on the issue of sub-sovereign debt would be outwith the competence of the Scottish Parliament. However, I am happy to explore that question with Mr Sweeney if he writes to me with his thoughts about how that might be done.

I welcome Mr Sweeney’s question, however, because it highlights the need to recognise the limitations of the current range of responsibilities and powers that we have to deal with the crisis that we face. Parliament as a whole needs to engage with the fact that, as we are in a situation in which during a financial year we largely have a fixed budget, unless the UK Government decides to expand public expenditure in England, we have no ability to deal with inflationary pressures or changes in dynamics other than to take money from one area of policy and apply it to another. I wrestle with that dilemma every day of the week just now, and I will have to come back to Parliament about it in the course of the next few weeks.