SNP faces £2bn shortfall, says expert

16 Aug 07
The Scottish government's budget is heading for a shortfall of up to £2bn, a leading public finance commentator has predicted.

17 August 2007

The Scottish government's budget is heading for a shortfall of up to £2bn, a leading public finance commentator has predicted.

Professor Arthur Midwinter of the Institute of Public Sector Accounting Research at Edinburgh University said 'bogus financial arithmetic' by the Scottish National Party's minority administration had led to unrealistic budget plans.

Addressing a seminar for public sector officials on August 16, he said that the SNP's efficiency assumptions were wholly unrealistic. As a result, he expected the savings delivered to be much lower than predicted.

Midwinter, a former budget adviser to the Scottish Parliament's finance committee, added: 'Moreover, the SNP's plans underestimate the cost of their tax cuts by around £540m over three years. I predict a shortfall of between £1.5bn and £2bn on past practice.'

He explained that the budget shortfall would occur as a result of the likely gap between the SNP's spending commitments and the cash it is likely to have available.

The Treasury planning figure would only deliver around £500m per annum in new resources, compared with £1,250m in recent years, Midwinter said.

He was particularly critical of the administration's efficiency assumptions, saying these covered both cash and time-releasing savings which are intended to allow service outputs to increase at no extra cost. Only cash savings created budgetary headroom, he said.

Midwinter pointed out that the current cash target of £655m over three years, set by the previous Labour-Liberal Democrat administration, had not yet been met. The equivalent figure for the SNP would be £1.2bn. Savings were likely to be much lower.

He believed a rigorous audit of baseline spending was necessary to release resources. Ministers, he said, were 'kidding themselves that this can be achieved through painless efficiency gains'. Savings would need to be made in low priority areas to allow growth in strategic priorities.

Midwinter claimed the SNP's budget plans were unravelling, as the lack of financial rigour in its manifesto commitments were becoming 'problematic in practice'. The process should be reformed to strengthen parliamentary control, he suggested.

He said: 'Until [the SNP] revises its bogus financial arithmetic, it will have difficulty balancing the books, let alone effectively managing the resources under its control.'

PFaug2007

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