Nicola Sturgeon faces begging Whitehall for extra funds after £3.5bn overspend

 SNP will have to get support, cut benefits or raise taxes, says IFS

Source - Daily Telegraph 27/05/22

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Nicola Sturgeon will be forced to beg Whitehall for further funding after the SNP pledged to overspend in Scotland by £640 per person, economists have said.

The Scottish Government’s spending review on Tuesday is likely to show a £3.5bn black hole in its budget by 2026–27, according to the Institute for Fiscal Studies (IFS).

David Phillips, the think tank’s associate director, said the SNP is facing some “very tough decisions” unless the UK Government rides to its rescue with extra funding.

He said: “A series of expensive spending commitments on top of underlying spending pressures mean that the Scottish Government faces a multi-billion budget shortfall over the next four years under current forecasts.

“Because it cannot borrow to fund day-to-day spending except in some limited circumstances, next week’s Scottish Spending Review could see the announcement of pretty hefty tax rises or cuts to spending on lower priority services, and even the abandoning of some policy commitments, to bring the budget into balance.”

Alternatively, he said, the Scottish Government could “pin its hopes” on further funding - which is “effectively the gamble” the SNP made in its 2021 election manifesto.

Mr Phillips said that the plan might not be as successful this time.

He said: “While further funding top-ups could be on the way it seems unlikely that the UK government will top up its plans by anything like enough to allow the Scottish Government to pay for all of its policy priorities without some hard choices on tax and/or other areas of spending."

The £3.5bn deficit is the Scottish Government’s central prediction for its deficit over a five-year horizon, but it has projected a range from a £10bn shortfall to a £4bn surplus, which Mr Phillips said “almost certainly overstates the degree of uncertainty”.

In his analysis, he said the figures could shift but a “substantial” funding gap looked likely.

Mr Phillips added: “Difficult choices on Scottish tax and spending over the next few years will eventually have to be faced.

“Political considerations – including those related to the Scottish Government’s desire for another independence referendum – will undoubtedly play a role in whether those choices are made clear next week or not.”

Mr Phillips said the Treasury would have to increase spending by over £40bn to bridge the Scottish Government’s funding gap.