Kate Forbes

In the Resource Spending Review published yesterday and covering the period from 2023/24 to 2026/27, the government said it would exceed the commitment to £200 million annual capitalisation of SNIB in order to deliver “inclusive economic growth”.

However, the Fraser of Allander Institute at the University of Strathclyde warned that the enterprise agencies see their allocations decline by 16 per cent under the review.

The review, which is not a budget, outlines how ministers will focus public finances in the coming years to tackle child poverty, address the climate crisis, strengthen the public sector as Scotland recovers from Covid and grow a stronger, fairer and greener economy.

A targeted capital spending review has also been published to address a reduction in capital investment by the UK Government. As well as supporting the NHS and affordable housing, the capital spending review will invest around £18 billion up to 31 March 2026, with over half a billion of additional funding directed to net zero programmes compared to previous plans.

Finance Secretary Kate Forbes said: “We are of course still recovering from the coronavirus pandemic. There is still acute pressure on the NHS, on business and the wider economy. The illegal Russian invasion of Ukraine is a humanitarian crisis, which is affecting the global economy. Rising energy prices and constrained supply chains have affected countries worldwide. While inflation is also impacting other countries, it is not impacting them equally.

“The UK currently has the highest inflation of any G7 country – almost twice the rate of France. Brexit has made this problem worse, with increases in food prices, hitting the poorest hardest. We are experiencing an unprecedented cost of living crisis. Inflation is at a 40-year high of nine per cent with households facing considerable hardship.

“Today’s Resource Spending Review is not a Budget. However, it is essential to share high-level financial parameters with public bodies, local government and the third sector, so we can plan ahead together.

“Today I set out an ambitious but realistic public spending framework for the years ahead. It does not ignore the realities of our financial position, but neither does it roll back on our ambitions for change.”

However, Philip Whyte, director of IPPR Scotland, warned: “With an assumed cash-terms increase of £5.7 billion over the period, the Scottish Government have essentially applied a cash-terms freeze to most portfolios and spread what’s left over across the rest.

“While those increases are obviously welcome, it’s also been a missed opportunity. It leaves little headroom for future years at a time when we need to supercharge funding and delivery of efforts to tackle poverty and the climate crisis, and when households and the economy are teetering on the brink. It’s also left to future budgets to show how progressive taxation will further fund progressive policy.

“Ultimately, it’s a Spending Review which had the opportunity to take difficult decisions, and a fresh approach to how resources are allocated. Instead, there’s a risk it falls short of what will likely be required to meet the challenges ahead – but without more detail we are still in the dark.”

Sandy Begbie CBE

Sandy Begbie CBE, chief executive of Scottish Financial Enterprise, said: “The Cabinet Secretary laid bare the serious challenges for Scotland’s public finances in the government’s Spending Review this afternoon, emphasising that difficult decisions must be taken in the months ahead.

“As we navigate significant economic uncertainty, it is vital the government reinforces its commitment to a green economic recovery by focusing its efforts on measures that will create sustainable growth and jobs for the future.

“Scotland’s financial services industry has a vital role to play in this process and we have called for measures which should be an immediate priority for government, including improving our lagging productivity through, amongst many other things, a dedicated entrepreneurial strategy.

“We were encouraged that our calls were heeded and entrepreneurialism is now a key pillar in the government’s national strategy for economic transformation. Its significance has only grown in recent months and the focus must now be on delivery. The financial services industry is determined to be a constructive partner of government in efforts to bring this forward at pace.”

David Eiser, deputy director of the Fraser of Allander Institute, said: “There was much talk in the run up to the publication of this Spending Review of a ‘black hole’ in Scotland’s finances – that is, the gap between the Scottish Government’s aspirations for the spending review and the finance available. Of course, in practice, they’ve had to make decisions to cut back those aspirations to fit within the finance available.

“The result has been a number of spending lines frozen in cash terms – in practice, real terms cut of roughly seven per cent over the period. This includes local government, much of policing and justice, higher education and enterprise support.”