Meeting of the Parliament 10 September 2025
That was a U-turn from Mr McKee within 10 seconds. He stood up and said that we would raise the money, but he has changed his mind completely in the course of just a few seconds. Let me move on, because Mr McKee has already taken up half my time with his intervention.
As is revealed in the GERS figures, the union dividend now accounts for £2,600 for every man, woman and child in Scotland. With that level of extra cash to spend on the national health service, education, justice and infrastructure, surely Scottish residents have the right to expect public services that are so much higher in quality than those in the rest of the UK. Patently, that is not their experience, and, in many cases, outcomes in Scotland are poorer than they are in England, where much less money is being spent.
The second publication that should concern us is the latest report from the Scottish Fiscal Commission, which is the independent watchdog that exists to scrutinise Scottish public finances. The SFC has identified an economic performance gap that it estimates will cost the public sector £1.058 billion in the current fiscal year. In practice, that means that we are losing £1 billion in revenue that would otherwise accrue if Scotland’s economy performed at least at the level of the UK average. The consequences of Scotland’s relative economic underperformance are severe. According to the SFC, the Scottish Government faces a projected £851 million negative reconciliation in the financial year 2027-28, exceeding current borrowing limits, due to the slower increase in earnings in Scotland compared with that in the rest of the UK. At present, no one in the Scottish Government has any idea how that can be funded. Even more seriously, extending to the financial year 2029-30, according to the SFC, Scotland faces a projected £4.8 billion fiscal gap that is made up of resource spending of £2.6 billion and capital spend of £2.1 billion.
The simple fact is that spending is growing faster than revenue, fuelled by increases in the public sector pay bill and the growth in welfare spending. Despite pledges from the Scottish National Party to reduce the size of the public sector workforce, the devolved civil service has grown by almost 60 per cent since 2018-19. Increased pay deals will simply add to the burgeoning public sector cost unless the workforce reductions that were promised are delivered. Perhaps the biggest concern is around social protection spending, which has grown by 55 per cent in real terms since 2020-21, crowding out other budgets. As the SFC makes clear, that is simply not affordable.
Whichever party is in government by 2029-30, that black hole has to be filled. So far, the SNP is in complete denial about the scale of the problem, perhaps hoping that, by then, it will be somebody else’s responsibility to fix it or that Westminster will, once again, come to the rescue—although, given the state of the economy and the UK’s finances under Keir Starmer and Rachel Reeves, it is likely to be very disappointed.
So, what do we believe needs to happen? First, we are past the point at which we need to end short-termism in Government spending. We need a full multiyear spending review to identify priorities, make savings and inform needs. Secondly, we need a strategy to cap welfare spending growth, which is currently consuming too large a share of resource spending. Simply put, we have too many people of working age who are in receipt of benefits when they should be part of the workforce. That requires investment in apprenticeships and reskilling, as well as schemes to assist those who are currently far from the workplace to be engaged in meaningful employment.