Scottish government cuts?

Thu 28 May 2015

I was writing a blog post on education when I noticed something rather odd about the Scottish government's budget for 2015-16. In the overview I found on the Scottish government's website it states that the budget has been cut "as a result of the UK government's austerity programme". Fair enough, that accords with what I've read elsewhere, and would seem plausible to anyone who's paid any attention to what's been going on in Scotland and the UK. But then I spotted the graph below elsewhere on the Scottish government's website - ignore the colours, look at the total amounts for each year:

Source A screenshot of an interactive graph illustrating the Scottish Budget 2015-16 from the Scottish government website (follow this link to see what the colours mean). Figures are inflation-corrected to be in real terms at 2014-15 prices.

In apparent contradiction to what I'd read, this graph shows a real terms spending rise in 2015-16. So who to believe, the Scottish government, or, err... the Scottish government? Let's find out.

The exact words

The Scottish Budget Bill for 2015-16 was passed in February 2015 and the key document on which it is based is the Draft Budget. An overview is given in Chapter 1, and near the start is this:

Over the course of 2010-11 to 2015-16, the Scottish Fiscal DEL budget has been cut by around 10 per cent in real terms with the Capital Fiscal DEL budget facing a particularly challenging real terms reduction of around 26 per cent as a result of the UK government's austerity programme.

This statement is correct, but notice it refers only to the DEL part of Scottish government expenditure. DEL stands for Departmental Expenditure Limit and it's the part of the budget that's planned ahead of time during a spending review that occurs every three years. As I've discussed before in more detail, the rest of the expenditure is called Annual Managed Expenditure (AME) and unlike DEL it is demand-led and so is harder to plan for ahead of time.

And here's the problem. Usually you'd find that the total expenditure figure is discussed in the overview of a budget. In the jargon this is called Total Managed Expenditure (TME) and TME is equal to DEL plus AME. The UK budget document leads with TME and in fact the very first chart in it is for TME, i.e. all UK expenditure. Only in later chapters does it discuss the DEL/AME split. So why does the Scottish budget give prominence to DEL?

Perhaps mention of TME has been dropped to emphasise the cuts driven by Westminster? Sure enough, when I check back to older Scottish budgets prior to the coalition cuts from 2010 I find that TME was mentioned in the overview, such as this one. The 2015-16 budget does give AME and TME figures but they're tucked away in later chapters and Annexes E and G, and there's no mention of them in the strategic context introduction.

Scotland's Total Managed Expenditure

Here's the data from Annex G on the Total Managed Expenditure in real terms at 2014-15 prices along with its year-on-year change [EDIT 18/8/15: Fraser Whyte pointed out that these real-terms data are not explicitly given in Annex G but can be found in the accompanying spreadheet.]:

  2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
TME 36,263 37,249 36,916 35,437 35,136 34,393 35,417 36,853
% change 2.65% -0.90% -4.17% -0.86% -2.16% 2.89% 3.90%

This table matches the data displayed in the graph above. As you can see, although Scotland did experience the coalition cuts from 2010, the last two budgeted years show real terms increases in TME.

Local government cuts

Look again at the graph above, and notice the brown section at the bottom of each column. This is the amount given to local government (i.e. Scottish councils) by the central Scottish government. You can see that from 2009-10 onwards there have been a series of cuts.

According to this spreadsheet on the Scottish government's website, from a peak of £13.1bn in 2009-10, the local government allocation has fallen to £10.6bn in 2014-15 and is budgeted at this level for 2015-16 also. These figures are all in 2014-15 prices, i.e. adjusted for inflation.

So, in real terms, although the total Scottish government's total expenditure is now above what it was in 2008, there has been a £2.5bn real terms cut in what it gives to local government. About £1bn of this occurred from 2013-14 when police and fire services were brought under central control, but that still leaves a real terms cut of around £1.5bn. In addition to this, the 2015-16 budget enforces a council tax freeze for the eighth year in a row, i.e. the tax councils collect from their residents has been decreasing in real terms for eight years.

Political comment

If I take a step back from all the detail above, I see a clear picture in which powers are being increasingly centralised in the Scottish government. I certainly do not agree with the austerity cuts being implemented by the UK's Conservative government, but the Scottish SNP government are hypocritical for making misleading statements about it in their budget whilst forcing substantial cuts on councils in Scotland.