Key Points: Scottish Pre-Budget Scrutiny 2026–27
1. Strategic Financial Planning & Fiscal Pressures
- The Committee highlights persistent concerns about the lack of strategic financial planning in the Scottish Government, especially given significant long-term fiscal pressures, notably demographic changes (an ageing population) that will impact public service funding.
- The Scottish Fiscal Commission (SFC) projects a growing gap between funding and resource spending, reaching £2.6 billion by 2029–30. Difficult choices are anticipated in the upcoming budget.
2. Delays to Fiscal Events & Publications
- Repeated delays in publishing key financial documents (MTFS, Scottish Budget, infrastructure plans) have hindered parliamentary scrutiny. The Committee urges both the UK and Scottish Governments to better coordinate fiscal event timings to support effective scrutiny.
3. Medium & Long-Term Outlook
- Health, social care, and social security spending are forecast to rise sharply over the next 50 years, driven by demographic trends. The SFC estimates annual budget gaps averaging -1.5% (2030–50) and -0.9% (2050–75), requiring annual savings of £1 billion (2024–25 prices).
- Capital funding is expected to fall, increasing pressure on infrastructure investment.
4. Strategic Planning Documents (MTFS & FSDP)
- The Scottish Government’s Medium-Term Financial Strategy (MTFS) and Fiscal Sustainability Delivery Plan (FSDP) set out three pillars: public spending, economic growth, and taxation.
- The Committee finds improvements in transparency but criticises the lack of detail and coherence in these documents, calling for clearer cumulative impacts, timetables, and alignment with other strategies.
5. Long-Term & Futures Planning
- The Committee urges greater emphasis on long-term financial planning, referencing Lithuania’s “2050 Vision” as a model for cross-party, society-wide engagement and monitoring.
- Calls for annual parliamentary debates on fiscal sustainability and lessons from international best practice.
6. Public Spending & Prioritisation
- Witnesses note improved transparency in budget documents but call for more clarity on prioritisation and the impact of spending decisions.
- The Committee requests future budgets to clearly show which areas are prioritised or deprioritised, and how spending aligns with government objectives (child poverty, economy, climate, public services).
7. Social Security Spending
- Social security expenditure is rising rapidly, with disability payments projected to quadruple by 2075. The Committee questions the sustainability of this growth and requests evidence on effectiveness and outcomes.
- Calls for a review of the impact of social security assistance on economic activity and updates on recovering historical fraudulent claims.
8. Universality vs Targeting
- The Committee recommends reviewing universal payments and services, considering evidence for more targeted approaches, especially for schemes like the Small Business Bonus Scheme.
- The Public Service Reform Strategy (PSR) aims to reduce annualised corporate costs by £1 billion over five years and cut the public sector workforce by 0.5% annually.
- The Committee calls for detailed plans to achieve these targets, assess impacts on frontline services, and maximise productivity through digitisation and automation.
10. Economic Growth, Skills & Tax Base
- Emphasis on aligning skills development with labour market needs, supporting colleges and universities, and addressing barriers to economic participation (health, disability, ageing).
- Calls for strategies to retain and attract older workers and those with disabilities, and for improved careers advice and flexible funding models.
11. Procurement, Regulation & Productivity
- Recommendations to streamline procurement and regulation for small businesses, and to invest in capital, leadership, and digital infrastructure to boost productivity.
- The Committee seeks more information on support for high-value sectors (e.g., FinTech) and scaling up businesses.
12. Labour Market Data
- Concerns about unreliable labour market data from the ONS, which affects budget planning. The Committee urges the Scottish Government to pursue improvements and explore ‘nowcasting’ for better economic forecasting.
13. Capital Budget & Infrastructure
- Capital spending faces real-terms reductions, with a growing gap between planned investment and available funding. The Committee calls for prioritisation of shovel-ready projects and smoothing of capital budgets over time.
14. Taxation & Fiscal Frameworks
- The Committee supports a strategic approach to tax, including further devolution and reform, but requests cost/benefit analyses and clarity on future plans.
- Endorses an early review of the fiscal framework between UK and Scottish Governments to ensure flexibility and transparency in managing forecast errors.
Recommendations & Calls to Action
- Greater detail and coherence in financial planning documents.
- Annual debates on fiscal sustainability.
- Clear prioritisation in budgets and spending reviews.
- Evidence-based reviews of universal vs targeted spending.
- Robust plans for public service reform, workforce, and efficiency targets.
- Improved labour market data and forecasting.
- Strategic investment in skills, productivity, and infrastructure.
- Transparent tax and fiscal frameworks with regular reviews.
Report on pre-budget scrutiny 2026-27: responding to long-term fiscal pressures | Scottish Parliament
