• STV
  • MySTV

Spending cuts 'may be required' to plug budget shortfall

The finance secretary has warned MSPs as the Treasury prepares to reduce the Scottish block grant.

Derek Mackay: A warning has been issued.
Derek Mackay: A warning has been issued. Ken Jack - Corbis/Corbis via Getty Images

Public spending cuts may be needed to help deal with a possible Scottish budget shortfall of more than £1bn, the finance secretary has warned MSPs.

Derek Mackay said he "may have to look at spending" as the Treasury prepares to reduce the Scottish block grant over the next three financial years.

Experts at the Scottish Fiscal Commission have already warned that ministers may need to either increase taxes or cut public spending as a consequence of income tax reconciliations.

MSPs on Holyrood's Finance Committee pressed Mr Mackay on how the Scottish Government will cope with the looming funding shortfall.

Reductions to the Scottish budget are forecast to grow from £229m in 2020-21 to £608m the following year, before falling back to £188m in 2022-23 - with Labour MSP James Kelly telling the finance secretary: "The problem is really stark."

As the Scottish Government is limited in the amount it can borrow and the amount of reserve funds it can utilise, Tory MSP Adam Tomkins said minsters would either need to make cuts to spending or hike taxes.

He told Mr Mackay: "You have a £1bn black hole in your budget, the Fiscal Commission say there isn't enough in the Scottish reserves, there isn't enough in your borrowing powers to cope with that."

The finance secretary accepted his powers are limited, saying: "The forecast reconciliation at £608m does indeed go beyond any deployment of draw-down of reserves or the borrowing power that we have, even if we maxed both it would be true to say that doesn't reach £608m."

He argued this highlights the "inadequacy" of ministers' powers, with Scottish Government resource borrowing capped at £300m a year, while only a maximum of £250m a year can be removed from cash reserves.

Mr Mackay insisted he would take a "prudent, fiscally responsible approach" to dealing with the "substantial reconciliations" - although he added the situation is not helped by "Brexit uncertainty".

With Scotland's total block grant for the three years still to be determined, the Finance Secretary said that would play an important part in managing the situation.

He told the committee: "As we look at the potential reconciliations, the tools we have to manage that will include what available resources are there at the time, bearing in mind that although we have the availability to draw down from the reserve and we have the borrowing powers, actually it will still be the case that the majority of funding comes from the block grant.

"So the block grant... is still significant to Scotland's budget."

But he also stated: "Yes we may have to look at spending as well, of course, but that will be as well as all the other determinants that set the Scottish budget."

Download: The STV News app is Scotland's favourite and is available for iPhone from the App store and for Android from Google Play. Download it today and continue to enjoy STV News wherever you are.

One account. All of STV.

This field is required. That doesn't look like a valid e-mail format, please check. That e-mail's already in our system. Please try again.
ShowHide
Forgot password?
This field is required. This must be at least 6 characters long. Did you enter your details correctly?
If you've forgotten your details then use the 'Forgot password?' link.
Need to reset your password?

We'll send a link to reset your password to

We've sent you details on how to reset your password

Please check your email and follow the instructions.

Forgotten your email address?

Have you forgotten the email address that you previously joined with? Don't worry, by emailing enquiries@stv.tv we can help.

One account. All of STV.

This field is required. Please enter at least 2 characters
This field is required. Please enter at least 2 characters
This must be at least 6 characters long.
ShowHide
This field is required. This must be at least 6 characters long.
You must be over 16 to join STV.
This field is required. This doesn't appear to be a valid date
We need this to check that you live in an STV region.
This field is required. This doesn't appear to be a valid postcode
Would you like us to email you about our great shows and services from time to time?
We'll only send emails we think you'll like (see example) based on information you have supplied and shows you have watched on STV Player. For details on emails and advertising, see our STV & You page.
Would you like to receive emails from the Scottish Children's Lottery about draws, instant games and competitions?
We support the Scottish Children's Lottery (SCL), which is managed by our colleagues at STV ELM Ltd. You can find out more about the SCL on its website, including its Privacy Policy.

By continuing you agree to our Terms of Use, and understand our Privacy and Cookie Policies.

Upload Profile Picture

Please make sure your image is under 2mb in size and a valid JPG, PNG or GIF.

Are you sure?

Unfortunately, you'll be unable to access our premium content. We’ll be sorry to see you go, but if you change your mind you can rejoin us at any time.

Please verify your STV account

Please verify your STV account using the email we sent you. If you have lost the email, we can send you another one, just click the button below.

Thanks

We've sent you a new verification email.
Please check your email and follow the instructions to verify your account.

Welcome to STV
Thanks for joining us.

Oops!

Sorry, you must be at least 12 years old to place a vote for your Real Hero.

Please review our Voting Terms of Use for more information.

Oops!

Sorry! It seems that you are using a browser that is incompatible with our voting service.

To register your vote please copy the below URL in to your regular mobile browser. We recommend Google Chrome, or Safari.

http://shows.stv.tv/real-heroes/voting

Oops!

Sorry, you seem to have already voted in this category.

Thanks for voting

Now share your vote with friends on your social network

Share on twitter Share on facebook

Cast your vote

Please register or sign in to continue.

Cast your vote

This field is required. This doesn't appear to be a valid date

Cast your vote

Please fill out this form to cast your vote. As you are under 16 years old you will not create an STV account. Why do we need these details?

This field is required. Please enter at least 2 characters
This field is required. Please enter at least 2 characters
This field is required. That doesn't look like a valid e-mail format, please check.
Location This field is required.
Parental Consent This field is required.

That's you. All that's left is to click the 'Submit Vote' button below. By doing so, you confirm that you and your parent or guardian have read and accept our Voting Terms of Use, Privacy Policy and Cookie policy, and that the details you have entered are correct. We'll look after them as carefully as if they were our own.