Scottish ministers have scrapped a universal winter fuel payment and are preparing deep cuts in other spending after the UK chancellor, Rachel Reeves, warned of a £22bn black hole.
Shona Robison, Scotland’s finance secretary, accused the UK government of preparing for austerity by stealth after she ordered civil servants to rein back on all non-essential spending.
Robison said the decision to axe the £160m winter fuel payment for all pensioners had been forced by Reeves’s announcement that the same benefit was being withdrawn in other parts of the UK.
Reeves said the £22bn hole in her budget had been bequeathed by the former Conservative government, and cuts were unavoidable. Scotland will mirror the move to pay only those on pension credit or other means-tested benefits.
Robison said the fuel payment cut was particularly galling since Scotland was energy-rich, in remarks echoed by Kate Forbes, the deputy first minister.
“You cannot make £22bn of cuts without consequences,” Robison said. “This is going to be a really, really tough year,” she added. She refused to confirm whether it would involve cuts to free school meals or other benefits.
“It really frustrates me, because I know about the levels of fuel poverty, in an energy-rich country, but because of the constraints of devolution and this unexpected cut, we are not able to deliver what we wanted to deliver.”
Robison is preparing a statement at Holyrood to set out other spending cuts and freezes once the Treasury provides updated figures on how the chancellor’s revised budgets will affect Scotland’s allocation from the UK.
She issued a letter to Scottish government officials ordering “emergency controls” on spending, but acknowledged on Wednesday that the spending crisis was in part linked to the latest public sector pay deals, expected to cost up to an extra £500m.
The cuts were confirmed as Robison published official data showing that Scotland’s public spending deficit has grown, despite a £1.7bn increase in tax revenues driven partly by economic growth and higher Scottish income taxes on the better-off.
The government expenditure and revenue Scotland (Gers) data for 2023-24 showed the “fiscal gap” between all the tax raised, including from North Sea oil, and all public spending, including by the UK government, for Scotland was nearly £23bn last year.
That was equal to 10.4% of Scottish GDP and equivalent to a subsidy by other UK taxpayers worth £2,417 per person – the highest rate for several years. Public spending was £20,418 a head in Scotland, compared with £18,001 in the UK as a whole.
The gap between spending and revenues for the UK as a whole was 4.5% of GDP. If North Sea oil and gas receipts were excluded, Scotland’s deficit rose to £26.6bn or 13.2% of GDP.
Robison said Scotland’s higher spending on public services was driven by more generous “social protection”, including the £25 a week child payment, free university tuition and universal free prescriptions. Scotland also offers free bus travel for all over-60s and young people under 22.
She said Scotland had one of the UK’s strongest regional economies and insisted it would generate more revenues if it had greater control over taxes and wider economic powers, since 70% of the taxes raised in Scotland were levied by the Treasury.
The Institute for Fiscal Studies thinktank said the apparent worsening in Scotland’s fiscal position was because of a fall in oil and gas prices globally, which showed Scotland’s finances were heavily dependent on North Sea taxes.
David Phillips, an IFS associate director, said that would matter a great deal if Scotland were independent or had greater fiscal autonomy. “Under current constitutional arrangements, such differences matter little: Scotland’s notional deficit is subsumed within the wider UK’s deficit,” he said.
Kirsty McNeill, the recently appointed Scotland minister for the UK government, and a former executive with Save the Children, said the Gers data “underlined the collective economic strength of the United Kingdom”.
Robison said Reeves had failed to consult Scotland about the £22bn cuts announcement or the end to universal winter fuel payments.
McNeill said, however, that the UK government wanted to collaborate with Scottish ministers. “We have reset relationships with partners across the UK, and want to work closely with the Scottish government to produce better results for people in Scotland,” she said.
