BUDGETS always throw up a host of questions that can’t be easily answered in time for paper deadlines or the Six O’Clock News – not least of all when looked at from a Scottish perspective.
In Edinburgh, the biggest announcement of Chancellor Rachel Reeves’s maiden Budget was the money that would be coming to the Scottish Government.
The figure, calculated by the Barnett formula and sometimes referred to as “Barnett consequentials”, came out at £3.4 billion – a record settlement.
What’s the problem?
While the headline sum speaks for itself, there is concern that it might not be the full story.
The cash for the Scottish Government is derived from money spent by the UK Government, which can then be spent north of the Border as ministers see fit.
At the Budget on Wednesday, Reeves (above) committed to spending increases, so more money for Scotland.
But she also announced new tax rises, crucially in the form of increased National Insurance contributions for employers.
This theoretically puts pressure on the Scottish Government as an employer. More than 20% of all workers in Scotland work in the public sector. That means that, ultimately, the Scottish Government pays for the employer share of their National Insurance contributions.
Where does the confusion come from?
In the immediate aftermath of the Budget on Wednesday afternoon, Scotland’s Finance Secretary Shona Robison raised concerns about whether the £3.4bn was the total sum from the UK Government, including what she said would be £500 million to cover the Scottish public sector’s increased National Insurance contributions.
Strathclyde University’s Fraser of Allander Institute later said its understanding was that the £3.4bn did not include the £500m and that it would come on top of the former figure to offset the higher tax burden on the state as an employer.
But on Thursday morning, the Chancellor threw a spanner in the works. Asked on the BBC’s Good Morning Scotland on the potential new burden of an extra £500m tax burden on the Scottish state, Reeves said the £3.4bn figure “takes into account all of those pressures”.
If that’s the case, the Scottish Government will need to find half a billion pounds in its lump sum to pay for those higher National Insurance contributions.
And time is of the essence to get answers on what is actually going on. Robison told the same programme the Scottish Government needed “urgent clarity” on whether the £500m figure was included in the £3.4bn sum or would be coming additionally.
The Scottish Government has until December 4 to draw up its own Budget. If the National Insurance contributions aren’t included, that £3.4bn looks more like £2.9bn.
What's the solution?
Meanwhile, it seems Treasury officials are working on the details behind the scenes – but not in discussion with their Scottish counter parts.
A Treasury spokesperson said the department was “working through the implications and resulting Barnett consequentials for the Scottish Government’s budget” when asked if the £3.4bn figure included the higher National Insurance costs.
But a Scottish Government source said: “We understand there is a separate process looking at that. If hypothetically nothing was done, then we’d have to find that approximately £500m from our own fund.
“Key point is we need this clarity quick as we are publishing our Budget soon.”
As the Scottish Finance Secretary remarked on Wednesday: "As ever, the devil is in the detail".
