NICOLA Sturgeon will be forced to take an axe to council budgets once again if she is to deliver on a string of eye-catching and expensive manifesto commitments, leading economists have warned.
The independent Fraser of Allander Institute, Scotland's leading economic research unit, said flagship SNP promises to boost health spending, protect policing and increase childcare while maintaining totemic policies like free tuition and prescriptions would mean drastic cuts in other areas, with the picture worsened by stark economic consequences of the Brexit vote.
It said town hall budgets could be slashed by as much as £1 billion by 2020/21, despite council bosses having already seen their spending power slashed by over 10 per cent in six years, sparking a furious response from local authorities.
In a comprehensive, 94 page, forecast of the challenges facing the Scottish Government, it was predicted that its budget could drop in real terms by £1.6 billion or six per cent by the end of the decade, an even larger cut than it has experienced since 2010 when George Osborne launched his austerity programme.
Some public services could see their budgets cut by almost a fifth, it was predicted, with the SNP proposing only negligible changes to taxation alongside the new spending commitments.
Professor Graeme Roy, Director of the Institute, said: "The Scottish Government has set out plans to deliver ambitious new policy priorities, including real terms increases in the health budget, a doubling of childcare provision, and protection of the police budget. Delivering on these will, however, require a tough re-prioritisation in other areas.
"As an area of unprotected spend, the grant to local government could be cut by around £1 billion on a like-for-like basis by 2020-21. Without radical reform, cuts to services are likely to become increasingly apparent in the years ahead, providing a controversial backdrop for next year’s local elections."
Derek Mackay, the SNP's finance secretary, called on the UK Government to boost public spending, support continued single market membership and blamed Brexit for putting "Scotland’s economy and our public services at risk."
However, the report stated that Scotland's economy was already "fragile", growing by just 0.6 per cent last year compared to almost 2 per cent UK wide. It was warned that Scotland will do well to match UK economic performance in the near-term and that a short ‘technical recession’ in Scotland – two consecutive quarters of falling output – is possible. A continuation of sluggish economic performance in Scotland compared to the wider UK will place further strain on finances following devolution of new tax and welfare powers.
The Institute said the possibility of a new independence referendum could add to uncertainty but that at present, it is "too early to measure the potential economic implications of different constitutional settlements".
Economist John McLaren, an honorary professor at the University of Glasgow, said: "One of the main things this report brings out is the challenge for local government. As soon as you commit to health and police, which are both big budgets, and you're not going to hammer further and higher education, you're pretty much left with local government."
COSLA, which represents most of Scotland's local authorities said it had spelt out its concerns about the future of council funding to the Government. A spokesman added: "This report very much hits the nail on the head in relation to the difficulties councils are facing."
The breakaway Scottish Local Government Partnership (SLGP), comprising the Labour-run Aberdeen, Glasgow, Renfrewshire and South Lanarkshire Councils, accused the SNP Government of pursuing policies that would hit the most vulnerable.
Jenny Laing, SLGP convener, said: "Be under no illusion, these savage cuts will continue to get worse while decimating communities and impacting on the very poorest in our society. When will the First Minister learn? She said in her manifesto that she would devolve power to councils to allow them to deal with their own issues. Yet now we learn that this promise has been broken."
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