Key points from our Scotland’s Budget Report 2019

Today we published our 4th annual Scotland’s Budget Report.

The latest report shows that the Scottish Government’s resource budget in the past three years has evolved more healthily than was anticipated at the start of the parliamentary term in 2016, due to both UK government spending increases and Scottish government tax decisions.

Following announcements of further spending increases this year – and via the Barnett Formula – the outlook for Scotland’s resource block grant from Westminster has improved even further this year and next.  Real terms increases of around 2% per annum are anticipated for the next two years, the first time period of consistent real terms increases since the start of the ‘austerity’ period.

But two issues, both relating to devolved income tax, will offset some of this increase:

1. The block grant in each of the next two years will be reduced to take account of the fact that outturn Scottish income tax revenues in 2017/18 and 2018/19 turned out to be lower than forecast. The Scottish Government will be required to repay £200m in 2020/21 and potentially as much as £600m in 2021/22.

2. On the basis of the latest official forecasts, Scottish income tax revenues are on track to disappoint relative to the rest of the UK.

As a result, despite the block grant from Westminster growing by 2.1% in 2020/21, the resources available to the Scottish Government may still only grow by less than 1% in real terms.

All this comes at a time of heightened political and economic uncertainty. Financial responsibility for £3.5bn of social security spending will transfer to the Scottish budget in April 2020, bringing new pressures and risks.

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November 12, 2019

Commentary perspectives – Highlights from service re-design in healthcare

This blog includes highlights and key points from the article Service re-design in healthcare: the impact of innovative methods to compare costs and benefits (Anderson et.al, 2019).

The article was written by Robyn Millar, Gillian H. Anderson (corresponding author) Robert Van Der Meer and Alec Morton – all at the Department of Management Science, University of Strathclyde Business School

In the face of growing cost pressures, policy makers are looking for cost effective ways to meet the increasing healthcare needs of the population and improve the service to patients[1].

The collaborative study between the University of Strathclyde, The Scottish Government and NHS Scotland seeks to demonstrate the cost effectiveness of an innovative ‘virtual’ patient pathway – and, more generally, supported capacity building in service redesign and improvement across the Scottish health service.

To the authors knowledge, this is the first time that discrete event simulation has been used in an action research approach to develop bottom-up micro costing models to evaluate the kind of virtual clinic approach that is rapidly gaining acceptance in NHS Scotland and beyond[2].Continue reading

November 6, 2019

Today’s Fraser of Allander Economic Commentary in 10 bullet points

Today we published our latest Economic Commentary – for a quick summary of its findings please see this quick video. The full Commentary can be found here.

  1. Uncertainty continues to act as a drag on Scotland’s economic performance

Scotland’s annual growth rate has slipped once again to just 0.7%. UK growth – whilst faster than in Scotland – is also well below trend at 1.2%

Consumer confidence and risk appetite amongst businesses remains weak.

Business investment in the UK has now been negative in 5 of the past 6 quarters.

Shortly before our June Commentary, figures for Scotland showed economic activity in Q1 of 2019 rising at its fastest rate in almost five years.

At that time, we cautioned that such figures were likely to be impacted by firms stockpiling in the run-up to the first Brexit deadline of 31st March.

Consistent with this, the latest figures now show that the economy contracted by 0.3% in Q2.

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October 23, 2019

FAI Commentary: Scotland’s Climate Emergency

One of the frustrations with the ongoing Brexit burach is that important debates about the future of our economy have been crowded out.

As we have highlighted in previous Commentaries, Scotland faces a number of significant structural challenges. Our population will age significantly, whilst – for many – the world of work will change radically as existing tasks are increasingly automated.

But there are also opportunities, with new markets opening up and technology helping to support improvements in living standards.

One area that has captured the public attention has been climate change. Across the world, we have seen a renewed desire from governments to step up their response to the environmental challenge.Continue reading

Fraser of Allander Economic Commentary Published today

Moving towards a deal, but long-term challenges just about to start, says our latest  report  

  •  Make or break for UK’s exit from EU in coming days
  • Uncertainty to remain for foreseeable future

The impact of Brexit uncertainty has cost the Scottish economy around £3 billion – relative to where it would have been – according to new research from the Fraser of Allander Institute.

In our latest Economic Commentary, we highlight how growth has remained sluggish over the past year with firms putting off investment as they await the outcome of the negotiations over the UK’s exit from the EU.

We also point out that whilst it is possible that the UK’s exit from the EU will be finally ratified in the coming hours, days or weeks, this will not mark the end of the challenges facing Scottish businesses.

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