Scotland's public services 'facing funding challenges' for decades to come

Economic experts have warned Scotland is facing public funding challenges for decades to come, with spending on many key areas set to fall by almost 20 per cent.

A new report says the country’s ageing population and rising health costs means more money will be needed to support the NHS, just to allow it to stand still.

The study from the Fraser of Allander Institute calls for an honest debate on the future sustainability of Scotland's budget, and says the status quo is "not an option”.

Its findings prompted renewed calls for Nicola Sturgeon to raise income tax after she said recently that the basic rate would be included in discussions on making Scotland’s tax system more “progressive”.

The think tank’s budget preview said real terms spending on public services other than health could be almost 20 per cent lower in 2020/21 than it was a decade earlier.

It warned that Scottish Government spending commitments on increasing funds for the health service, doubling free childcare provision, protecting the police budget and closing the attainment gap could mean cuts of 9-14 per cent in other portfolios.

It also said that as a result of commitments to free university tuition and personal care and the plan to scrap the one per cent cap on public sector pay, the non-education elements of local government budgets were most likely to suffer.

Prof Graeme Roy, director of the University of Strathclyde-based institute, said: "The Scottish devolved budget faces considerable spending pressures in the years to come.

"In particular, rising health costs and an ageing population mean that commitments to health spending are continuing to squeeze funds for other public services.

"This is a challenge not just for the Scottish Government but for the Parliament and all political parties in Scotland. An open and transparent debate is needed about the sustainability - and options for reform - of Scotland's devolved budget.

"Continuing as before is not an option if Scotland's devolved budget is to be sustainable in the long term."

Last week, MSPs voted to back the principle of raising income tax after the SNP abstained.

Willie Rennie, leader of the Scottish Liberal Democrats, said the report had “nailed” the problems facing the SNP government, adding: “Brexit is causing a fragile economy with rising inflation. This puts funding for public services at risk.

“The challenge to the Chancellor is to protect UK public services in his Budget in November.

“And, in Scotland, the SNP need to make up their mind where they stand on supporting services through taxation. They abstained in the vote last week. This is not good enough as a response.”

Alex Rowley, Scottish Labour’s interim leader, said SNP ministers must “sit up and realise that their approach to tax simply is not working” and make use of Holyrood’s new tax powers to protect services.

A spokesman for the Scottish Government said it was already taking action to begin an “open and transparent debate” on public finances.

He added that it would set out its priorities as part of the draft budget for 2018/19 in December, when Derek Mackay, the Finance Minister, sets out his tax and spending plans.