BLOG: Finance Committee Inquiry – Pre-budget scrutiny 2027-28: the affordability and sustainability of Scotland’s tax and spending plans
As Scotland’s Parliament takes the first recess of its new term, attention is already turning to the work awaiting MSPs which will shape Scotland’s fiscal and legislative agenda for the year ahead.
When Parliament returns in September, the Scottish Government will present its first Programme for Government. The First Minister will use it to set out the Government’s legislative programme for the coming year.
September will also see Holyrood committees begin their pre-Budget scrutiny.
The Finance and Public Administration Committee plays a key role in scrutinising the Government’s spending plans and ensuring the Budget is fiscally sustainable.
This provides an important opportunity for the business community to influence parliamentary thinking ahead of the Budget process.
Several documents will play their part in informing the Committee’s evaluation of the affordability and sustainability of Scotland’s tax and spending plans.
The Medium-Term Financial Strategy sets out the Government’s assessment of Scotland’s fiscal outlook. It highlights the growing pressures on public spending and the need for difficult choices to keep the public finances on a sustainable footing.
The accompanying Fiscal Sustainability Delivery Plan outlines how ministers intend to improve financial sustainability through public service reform.
Those commitments were then reflected in the Scottish Spending Review which established multi-year spending plans across government portfolios.
The committee is likely to examine progress against some of the commitments within these strategies, including the ambition to deliver £1.5 billion of public sector efficiencies over three years.
Members will also be looking for evidence that the Government is shifting resources further towards preventative spending. This means investing earlier to reduce future demand for public services, rather than relying solely on short-term savings to balance the Budget.
Taken together, these documents make up the foundation of the committee’s scrutiny.
Against that backdrop, the committee’s work will inevitably focus on the central challenges facing the public finances, both this year and over the longer term.
With the appointment of Ivan McKee as Cabinet Secretary for Public Reform and manifesto commitments to modernise service delivery, reduce bureaucracy, integrate services and cut down the number of public bodies, the Committee is likely to examine whether these reforms are being delivered at sufficient pace to improve the sustainability of Scotland’s public finances.
The Scottish Government says it does not intend to increase income tax rates or add further bands and plans to simplify the system. Ministers have hinted that this could involve changes which some interpret as future tax reductions, but they have stopped short of making an explicit commitment to cut income tax.
Considering that income tax is the most significant revenue lever, that suggests the scope for increasing revenues may be limited. This places greater emphasis on spending decisions unless additional funding emerges through the UK fiscal settlement.
As the Fraser of Allander Institute has argued, some of the debate around the scale of Scotland’s fiscal challenge has been overstated. Nevertheless, there remains a significant gap between the Government’s spending commitments, including public sector pay, and the resources currently available. Closing that gap will require difficult choices.
The choices made over the coming months will not only determine how public money is allocated, but also send an important signal about the Scottish Government’s priorities and ambitions for the economy.
A sustainable fiscal position ultimately depends on a stronger economy. Choices that encourage investment, support business growth and improve productivity are just as important as decisions on public spending.
Businesses are experiencing the consequences of today’s economic, spending, tax choices every day. Their experience should help inform the Committee’s work.
SCC is therefore gathering views from Chambers and businesses to inform our response to the Finance and Public Administration Committee’s call for views.
Your insights will help ensure the voice of business is heard in the debate ahead of the 2027-28 Scottish Budget.
Complete the short survey below to have your say.
