It’s been a busy week of events and announcements, kicked off by the announcement of a UK-EU trade deal. Some of the details on this are still to be worked out, particularly on areas of a youth ‘experience’ (i.e. mobility) scheme.

The headlines are that UK exporters have significantly reduced the checks required on animals and food products. This is a significant win for the UK economy given our specialism in food production and exporting, although many will (and have) compared the positive economic benefit generated from this change with the negative economic impact which was caused by leaving the EU.

In return, the UK has agreed to align standards on food and agricultural products with the EU, both now and in the future (know as “dynamic alignment”). Fishing was also a giveaway by the UK, with the current access to UK waters by EU fisherman being extended to 2038.

The deal has been described variously as a betrayal, disaster and surrender by some. For some, the dynamic alignment is the problem – if the UK signs up to keep its standards the same as the UK, then the country becomes a rule-taker from the EU, with no seat at the table for deciding on these rules.

For others, their criticism was focussed on the fishing concession. The promised benefits that could have come from Brexit for the fishing industry have not emerged, given the EU has the same access as when we were in the EU. The Scottish Government have been critical of the deal, both because they were not involved in the discussion and because of the outcome for fishers.

It has been pointed out by many that the overall economic contribution of fishing (excluding or including aquaculture) is very small, and this was why it was a price worth paying. This is undoubtedly true, with fishing and aquaculture making up 0.05% of the UK economy and 0.15% of the Scottish economy.

However, the impact of this industry is very localised. 81% of employment in fishing an aquaculture is in Scotland, with a total of 6,000 folk employed directly in fishing and a further 3,000 in aquaculture (BRES, 2023). Zooming in even more, there are more people employed in fishing in Fraserburgh (1,500) than in the whole of England & Wales (1,435). So while the aggregate impact of declines in the fishing industry are very small, they are likely to have impacts on very specific areas of the country.

The Scottish Fishermen’s Federation have come out very strongly against the deal, whereas industry body Salmon Scotland has come out in favour. It is worth pointing out that Salmon is not affected by the quotas given it is a freshwater fish and the vast majority of salmon sold form Scotland is farmed, which means this deal is all upside for salmon producers.

Keir Starmer U-turns – but no details on exactly how

In the commons on Wednesday at PMQs, Keir Starmer announced that they want more pensioners to receive the winter fuel payment.

For those who have been living under a rock, this follows the decision by the UKG in July 2024 to means-test the Winter Fuel Payment (WFP) so that only the poorest pensioners would receive it (only those in receipt of pension credit). The winter fuel payment gives £200 to households with all pensioners under 80, and £300 with at least one over 80.

There have been no details yet of exactly what the U-turn means. At what level of income will this be removed, and how will this be determined? The obvious mechanisms are pension credit recipients (which has now been seen as taking the WFP away from too many pensioners) and perhaps something through the tax system (so, for example, taking it away through the tax system from pensioners paying the higher rate of income tax), which probably wouldn’t take it away from very many pensioners.

In Scotland, Winter Fuel Payment has been devolved and been renamed the Pension Age Winter Heating Payment (PAWHP), so the U-turn made will not directly impact pensioners in Scotland.  Payments will be made to most households with a person above State Pension age. Most of those households with a person aged above State Pension age will receive one payment of £100. Households in which a person above State Pension age is in receipt of a qualifying benefit (primarily Pension Credit), and aged under 80 will receive £203.40; if they are aged 80 or over, they will receive £305.10.

The PAWHP is therefore slightly less generous than the previous WFP to many households who don’t receive qualifying benefits, as those will get £100 instead of either £200 or £300 (depending on the age of those in the household).

While the UKG changing the eligibility doesn’t directly change eligibility for Scottish pensioners, it could mean that more funding is made available through the Block Grant Adjustments, and so indirectly provide funding for an adjustment in approach by the Scottish Government. That is likely to be determined by the details of the actual change, which will have to come in advance of the September qualifying period if it is going to affect payments made to pensioners in England and Wales this winter.

Pay pressures on the horizon

Last week we mentioned the approval of the NHS Agenda for Change pay deals by the main unions, which were significantly in excess of the 3% budgeted for by the Scottish Government in its 2025-26 Budget – including a CPI+1% guarantee for the two years of the agreement, a novel approach that transferred much of the inflation risk to the Scottish Government without an obvious way of mitigating it.

This week, we had news of the outcome of the pay review bodies’ processes at UK Government level. It’s important to note that these do not apply to devolved areas, which means that they don’t directly dictate what pay offers will be in Scotland for the areas of competence of the Scottish Government. Public sector pay is instead conducted through collective bargaining in Scotland.

But with free internal mobility of labour across the UK and highly integrated economies, we often see outcomes from collective bargaining in Scotland that aren’t a million miles away from those in England (or England and Wales in the case of the Home Office and Ministry of Justice-related occupations).

The pay review bodies’ recommendations, broadly accepted by UK ministers, were significantly above 3%. The proposal for NHS Agenda for Change occupations in England is 3.6%, with most other devolved areas coming in at 4% – with resident (formerly junior) doctors getting 5.4%. The Civil Service pay remit too is higher, at 3.25%.

A big question is how this is funded, which has important implications for Scotland. In none of these cases is there a clear increase in the total envelope, with ‘efficiencies’ – i.e. reallocating money from other spending in everyday English – being the basis for the UK Government paying for this. If that proves to be the case, then we shouldn’t expect Barnett consequentials to flow to Scotland from these decisions.

That would mean the Scottish Government would be faced with the dilemma as to how much it can realistically offer on pay within its 2025-26 envelope. It’s worth remembering that the Scottish public sector is larger and has higher pay than the UK average, to the extent that it’s not clear Barnett consequentials would be enough to fund the same percentage increase as in England.

Given that and the 3% pay policy set out in the Budget, one might expect Scottish Government pay offers to be significantly below the headline figures we just saw from the pay review bodies. But with the Agenda for Change deal of 4.25% and teachers having already rejected a 3% offer, one might wonder how likely that is. And if the price of agreement is a higher pay award than budgeted for, it wouldn’t be a shock to see an emergency fiscal statement when the Scottish Parliament reconvenes at the end of the summer.