The Scottish Government is facing a massive £2.1bn budget “black hole” this year, according to bombshell leaked documents.
Civil servants suggested scrapping a planned rise to the lifeline Scottish Child Payment and axing a £50m fund for young people to help balance the books. Departments have also been asked to “model“ two per cent cuts to get a grip on public spending.
A Government spokesperson last night said they remained “committed” to the SCP and the £50m fund.
Labour MSP Daniel Johnson said: “This shocking revelation lays bare the SNP ’s complete economic incompetence and recklessness.
“For fifteen years, the SNP has failed to get a handle on Scotland’s finances and this latest bombshell is nothing less than the death knell for their claims of economic competence. That we are now facing a black hole of over £2bn in our public finances is simply shocking.”
Finance Secretary Kate Forbes recently announced a multi-year spending review that delivered a freeze in key areas. But an internal Government presentation, and obtained by the Record, reveals Ministers are struggling to balance the budget this year due to spiralling spending costs.
The documents estimate that the spending “pressure” in 2022-23 is £1.6bn, with the black hole increasing to £2.1bn if other factors are included. Rising costs include £700m for public sector pay rises based on projected increases of 4 to 5 per cent for staff.
Savings “options” flagged up by civil servants include “stopping” or “delaying” the planned £5 a week increase to the SCP, which is the Government’s flagship policy to combat child poverty.
The SCP puts £20 a week into the pockets of low income families and an extra fiver a week is planned for the end of the year. Rethinking the rise would save £28m, according to the document.
Another idea put to paper is halting the £50m “Promise Fund”, which provides vital support for children and their families.
John Dickie of the Child Poverty Action Group in Scotland said: “The £5 increase to the Scottish child payment will be absolutely vital to keeping families afloat through the cost of living crisis and critical to meeting the Scottish government’s child poverty targets.
“Whatever the pressures on budgets the Scottish government must continue to do the right thing and prioritise our children. The long term costs of not fulfilling the mission to dramatically reduce child poverty really don’t bear thinking about.”
Officials also referred to using £600m generated from the ScotWind offshore wind leasing round, but officials cautioned by saying the cash had been “assumed for future years”. Borrowing more money was also suggested.
The document added: “A number of actions have been agreed by Cabinet to find a route to a balanced budget, given the changing context and deteriorating in-year position.”
Finance chiefs revealed that various “central controls” had been agreed, including pausing significant spending, as well as putting in place greater scrutiny of contract awards and grants. Another agreed control is likely to be the most politically controversial.
The document read: “All portfolios take forward work now to model a two per cent reduction in 2022/23 budgets, with a view to creating the headroom to manage emerging pay deals and other possible pressures.”
The document noted that health is excluded as this portfolio is already modelling “cost reduction measures”.
An insider told this newspaper that the £700m earmarked for pay rises may be an underestimate as trade unions show little sign of accepting 4-5 per cent.
Health Secretary Humza Yousaf last week expressed concern that unions representing NHS staff had rejected the current pay offer.
Johnson blasted: “To contemplate cutting the Promise Fund and postponing the rise in the Scottish Child Payment makes a mockery of this government’s rhetoric on tackling poverty and supporting young people. That some of the poorest and most disadvantaged are set to feel the brunt of SNP economic incompetence is downright shameful.”
Lib Dem MSP Willie Rennie said: “Just one year after the SNP made spending promises to the voters they now are preparing to renege on them. That’s just dishonest.
“It looks like people in need may have to pay the price. That’s just cruel.”
A Scottish Government spokesperson said: “Ministers are committed to increasing the Scottish Child Payment to £25 a week, as well as extending the benefit to all those under 16 by the end of this year, and that commitment remains unchanged.
“The Scottish Government also remains committed to Keeping The Promise by 2030 and the actions set out in the Promise Implementation Plan will improve the lives of children, young people and families in and around the edges of care.
“The current cost of living pressures make the budget challenge even more acute this year, but despite those pressures in the current financial year almost £3 billion has been allocated to a range of support that will help mitigate the impact of the increased cost of living.
“The Resource Spending Review sets out high level financial plans for the period 2023-24 to 2026-27 but does not replace the annual Scottish Budget process which will set out the public sector pay policy for 2023-24.”
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