The gap in the devolved government’s finances is forecast to widen in subsequent years and is due to factors including elevated inflation, weak economic growth, as well as greater outlays on health, social security, and public sector pay.

In a submission to the Scottish Parliament’s Finance & Public Administration Committee (link below), the SRC says a ‘multi-year plan’ is needed to eliminate the gap and put government finances on a sustainable path, based on a ‘candid review of public spending and new thinking about how public services are provided’.

The SRC argues that a ‘more frugal approach to devolved public spending and a reduction in the cost of government’ should form the bulk of the necessary budgetary action to close the fiscal gap, as this ‘would help militate against the need for tax rises which could stymie economic recovery’.

The retail industry is Scotland’s largest private sector employer, providing almost a quarter of a million jobs and accounting for a fifth of business rates paid. However, Scottish retail is an industry in transition and recent data has shown a dip in retail sales, shopper footfall below pre-pandemic levels, and elevated levels of shop vacancies.

The written submission from the leading industry body notes that several new tax powers and charges have recently been introduced or are in the pipeline including workplace parking levies, changes to council tax, the tourism visitor levy, and charges on drinks containers and disposable coffee cups. The SRC argues that any further changes to Scottish income tax and council tax should take into account the impact on consumer spending and firms’ ability to attract and retain talent. They also want Ministers to accelerate plans to improve the competitiveness of business rates.

David Lonsdale, director of the Scottish Retail Consortium, said: “The Scottish Government faces a forecast £1 billion spending gap in the coming financial year and this is projected to widen in subsequent years. A timely spurt in economic growth would help but seems unlikely in the immediate term.

“Business recognises there are few palatable options for our politicians. However, retailers know all about having to cut their cloth in the face of spiralling costs, having dealt with a tsunami of hikes in commodity and supply chain prices over the past couple of years with various statutory burdens sprinkled on top.

“It matters profoundly that Scottish Ministers succeed in reducing the cost of government otherwise taxes on households and firms might rise and the recovery and economic growth – which is already lacklustre – could be held back.”