MSPs criticise ministers for lack of key focus on 'affordability'

It also gives a damning verdict on ministerial work on public service reform programme noting there is "no overall strategic purpose with limited oversight and direction from government."

The committee's report comes amid concerns over how the Scottish Government is going to fund councils to compensate for next year's council tax freeze, announced by Humza Yousaf to the SNP conference last month.

Its findings are a blow to the government led by MrYousaf as the seven-strong committee includes three SNP MSPs, including the convener Kenneth Gibson.

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The pledge was announced along with a raft of other major spending commitments including an extra £300m for the NHS to reduce waiting lists for treatment.

On spending priorities, MSPs noted ministers' aims to ensure future budgets are balanced while raising concerns over how this was to be achieved.

The report states: "We note the statement in the Scottish Government’s May 2023 that 'tough and decisive action must be taken to ensure the sustainability of public finances and that future budgets can be balanced'.

SNP MSP Kenneth Gibson, convener of Holyrood's finance and public administration committee.  Photo Getty.

"However, we are concerned that affordability does not appear to be a key factor in Scottish Government decision-making. We ask that detail of spending announcements is in future provided to Parliament."

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It also raised the alarm over long term financial planning by the Scottish Government.

The MSPs warn: "In January this year, the committee reported that we were not convinced that the Scottish Government was carrying out enough strategic long-term financial planning to ensure fiscal sustainability and that it appeared to be 'firefighting on a number of fronts. We have little evidence to suggest a shift away from a short-term approach to financial planning."

Mr Yousaf's announcement on the council tax freeze was met with alarm by local authorities with the Scottish Government pledging that they would meet their costs.

Some councils have already said they were planning to put up council tax next April by 10%.
The Fraser of Allander economic institute has estimated that fully funding the freeze would be about £417 million with the Scottish Government already facing a predicted £600 million black hole in its budget, which will be set in December.

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Mr Yousaf's announcement on the council tax freeze marked a U-turn on Scottish Government proposals to raise council tax by between 7.5% and 22.5% to enable councils to raise more revenue. There will be no increase as a result of the new plans.

The First Minister also told his party's conference that an extra £300m would be given to the NHS over the next three years to cut waiting lists and £100 million for arts and culture funding over the next five years.

Aides estimated that the total package would cost £1 billion but said that no decisions had been made about how to pay for it.

During the SNP leadership campaign, Mr Yousaf campaigned on a platform of "progressive taxation" to raise more money for public services.

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However, it's unclear if he will push ahead with his plans for further income tax reforms.

The committee's report comes as the Scottish Government prepares to publish its budget next month.

Finance and public administration committee convener Kenneth Gibson MSP said: “As the Scottish Budget approaches, we’ve seen little evidence to suggest a shift away from the Scottish Government’s short-term approach towards financial planning, an approach hampered by reliance on one year UK financial settlements.

“We therefore strongly recommend that the Scottish Government produces a full response to the Scottish Fiscal Commission’s sustainability report, setting out the actions it will take to address the longer-term challenges ahead.

“We are also concerned that the UK Government’s decision not to inflation proof capital funding available to Scottish Ministers will mean a 16% reduction in 2028-29 compared to this financial year, at a time when governments need to invest in infrastructure to stimulate economic growth.

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“The creation of a Scottish Government advisory group on taxation is welcome. Given the financial challenges ahead, it is imperative that their work to create a clear taxation strategy for Scotland proceeds at pace.”

On the government’s public service reform programme, Mr Gibson said: “We are concerned that the focus of the government’s reform programme has changed multiple times since May 2022, as have the timescales for publishing further detail on what it will entail.

“Given the financial challenges facing the Scottish Budget, this represents a missed opportunity to be further along the path to delivering more effective and sustainable public services.

“The recommendations in our report aim to bring much-needed impetus, focus and direction to the Scottish Government’s reform programme.”

On income tax, SNP and Green ministers have already introduced five different bands and individuals earning about £28,000 pay more tax in Scotland than they would in England or Wales.
Shortly after becoming first minister Mr Yousaf told the Scottish Trades Union Congress annual conference in Dundee that he planned to “go even further” with “progressive taxation”.

He said he was “very interested” in creating a new income tax band of 44% for people earning between £75,000 and £125,140 with assessments differing on how much money the change would raise.

The proposal for a new 44p band was made by the congress, which said it would raise £200 million of additional revenue for the government.

Separate research by the think tank IPPR Scotland recently estimated that a 45p rate for earnings between £58,825 and £125,140 would raise more than £250 million.

However, research from the independent Fraser of Allander economic institute estimated that the plans would raise £56 million and £161 million next year respectively. 

A Scottish Government spokesman said: “The Scottish Government fully recognises that we face one of the most challenging financial situations since devolution, with the Covid pandemic, the war in Ukraine, and high inflation putting significant pressure on households, the economy and public finances.

“As we set out in the Medium-Term Financial Strategy, we will do all we can within our powers to ensure public finances are on a sustainable path. 

“The Scottish Government will carefully consider the Finance and Public Administration Committee’s report and provide a full response to the committee after the Scottish Budget is published on 19 December.”