The Scottish Government’s spending has come under heavy scrutiny as Scotland attempts to recover from the Covid-19 pandemic.
The Scottish Conservatives criticised the government, claiming it had underspent nearly half a billion pounds from its budget.
Ferret Fact Service looked at this claim and found it Mostly True.
The Scottish Conservatives claim is based on figures provided by the Scottish Government in a parliamentary report on 17 June, about spending in the Scottish budget for the financial year of 2020-21.
Tom Arthur, junior minister for finance, updated parliament on the outturn against the budget, which refers to the amount of money spent in the financial year compared to how much was allocated in the Scottish budget.
He announced that the Scottish Government had spent £48bn against a total fiscal budget of £48.5bn, and that there was an underspend of £449m.
This equates to around 0.9 per cent of the annual fiscal budget not spent.
How is the Scottish budget decided?
The budget is decided through various calculations and revenue raising methods.
The Barnett formula is used to calculate how much the Scottish Government would be due in funding if Scotland had no devolved powers over taxation and social security.
The formula works by looking at increases and decreases in comparable spending in England compared to the previous year’s budget. The aim is to make sure that if changes are made to public spending in England, equivalent changes (in pounds-per-person) are made in Scotland, Wales and Northern Ireland.
It is then adjusted by removing funding in areas where the Scottish Government now raises money, or has full control over payments, such as social security.
These adjustments are made to the Barnett figure and estimates of tax revenue added, creating an estimated budget for the government to spend that year.
Most of the budget is split between resource spending, which is used for the day-to-day upkeep of services such as the NHS and capital spending, which is used for specific infrastructure and building projects.
A further component is annually managed expenditure (AME), which is for spending which is devolved but annually funded by the UK Government on the basis of demand, such as pensions.
What happens to the unspent cash?
The Scottish Government blamed the underspend on a number of factors. £182m in health funding went unspent because it “would not align with public health spending cycles”. Instead the money is carried forward into the current financial year through the Scotland reserve, which allows the government to keep cash back for future years if it is deemed necessary.
Opposition parties criticised the Scottish Government for underspending during the Covid-19 pandemic, when businesses and individuals were facing added financial pressures.
The Scottish Government also underspent in 2019-20 by £264m, and £449m in 2018-19. Such underspending is common, although this money is not returned. It is carried forward as part of the reserve and can be used in the next year’s budget.
The Scottish Government is required by law to have a balanced budget, meaning its spending must match its available funding each year. This means spending must be carefully managed to ensure there is not a significant overspend.
Ferret Fact Service verdict: Mostly True
The Scottish Conservatives claim that the Scottish Government failed to spend £449m in funding is accurate, and just under one per cent of the total budget was not spent. This level of underspending is fairly common, and can be a result of attempting to achieve a balanced budget. The money will be kept in Scotland’s reserve and can be used in the following year’s budget.
In response to an evidence request, the Scottish Conservatives provided a budget statement by Tom Arthur where the underspend was announced.
Photo thanks to iStock/K Neville
Correction: An earlier version of this fact check said the claimed underspend was “nearly half a million”. This has been corrected to “nearly half a billion”.