Emergency measures over budget date uncertainty

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Nicola SturgeonImage source, PA Media
Image caption,
Nicola Sturgeon said the Westminster budget date should be set as soon as possible

The Scottish government is preparing emergency measures to cope with uncertainty surrounding the Westminster budget.

It should have been held on 4 December but was cancelled when Brexit had to be postponed.

Without the budget, Scottish ministers say it will be very hard for Holyrood to agree its financial plans.

Their emergency measures would ensure public services and jobs continue to be funded in Scotland.

However the Treasury said there was nothing to stop the Scottish Parliament setting its own budget and it would provide approximate figures on the block grant.

At First Minister's Questions, Nicola Sturgeon demanded Chancellor Sajid Javid quickly set a date for the budget - and that it should be as soon as possible in the new year.

Image source, Getty Images
Image caption,
Sajid Javid was due to present his Budget Bill earlier this month

She said the Scottish government would publish its budget at the earliest practical opportunity, but without the UK budget "we do not have the necessary clarity".

The first minister also pointed out that the UK budget was cancelled before the election was announced.

Speculation the UK budget will not take place until March is "completely unacceptable", she said.

How is Scotland's budget set?

It is only after a Westminster budget that the Scottish government knows how big the block grant for Scotland will be.

At the same time, the Office for Budget Responsibility (OBR) sets out its forecast for growth, which has a direct effect on the amount of income tax that is likely to be raised.

The Scottish Fiscal Commission sets the assumed growth rate and the level of tax revenue on which Finance Secretary Derek Mackay will base his spending decisions. But the SFC awaits the OBR growth figures before setting out its position.

And with almost all income tax powers devolved to Holyrood, the finance minister chooses to wait for the decisions on income tax rates and thresholds in the rest of the UK before setting the Scottish rate of income tax.

What happens in the mean time?

One concern at St Andrew's House is that local authorities will not be able to set council tax levels without being clear about their budgets, when they are required to balance their books each year.

It is understood ministers have given assurances to voluntary sector organisations that funding will be continued, avoiding the need to start redundancy measures from early in the new year.

However, it is not clear that councils will be able to do the same with the groups they fund directly, some of them providing for vulnerable service users.

If the Westminster budget is delayed until late February or March, as briefed at Westminster, one option being considered in St Andrew's House is the use of a device, described by one government source as "massively inadequate", to use the current year's spending patterns to distribute funds a month at a time.

However there would still be a need to vote through the Scottish income tax rates for next year, and to handle £3bn of new funding for social security benefits which are being devolved from April 2020.

Because only a 10th of that is being spent in the current year on social security, the roll-over of current monthly spending would not apply.

At least one of the benefits for which the funds will be used from April in Scotland is being ended in the rest of the UK.

Approximate figures

A further and significant complication is that the SNP administration does not have a majority at Holyrood, and will need to find support from an opposition party if the budget is to be passed into law.

The other option is to pass a budget which takes a guess at the measures and block grant for Holyrood in Sajid Javid's next budget, and at the growth rate and likely revenue raised directly by the Scottish government.

That could require a further Budget Act during next financial year, once the Westminster and economic growth figures are clearer.

The Treasury said it will provide approximate figures for the block grant ahead of the budget.

A spokesman said: "We're working with the Scottish government as part of an agreed process to provide the information they need to prepare their budge.

"Nothing stops the Scottish Parliament from passing a budget before the UK Budget."