Scotland is facing the prospect of a public spending black hole equivalent to 11% of the Holyrood budget as the financial “shocks” of Brexit take their toll, the Chartered Institute of Public Finance and Accountancy (Cipfa) warned in a submission to Holyrood’s finance committee, which is examining the effect of Brexit on the Scottish Budget.
Cipfa cite research suggesting that Scotland’s Gross Domestic Product could be reduced by up to £11,200 million by 2030, with a reduction in tax revenues of between £1,700 and £3,700 million annually.
“As an indicator of scale, this is equivalent to a reduction to the SNP Government budget of between 6 and 11%” the submission states. It also highlights the need for a new funding mechanism for farmers and clarity over the devolved administrations’ share of the Brexit ‘divorce’ bill.
Cipfa Scotland has urged Scottish ministers to consider the impact during its budgeting process to ensure the financial resilience of public finances is not undermined, and to look at policy and tax measures that could help overcome the loss of income.
Don Peebles, head of Cipfa Scotland, said:
“Scottish public spending power is vulnerable to the impacts of Brexit. As it is likely that many of the fiscal risks predicted will be realised in future years, the SNP Government must begin to budget for Brexit so that it will be in the best position to sustain any financial shocks.
“Considering the impact of Brexit may be keenly felt in Scotland, it is important that the SNP Government has an influence on the negotiations to ensure any Brexit deal works for its public services.”
Before the EU referendum in June 2016, Scotland expected to receive €5,600 in European funding over the seven-year period from 2014 to 2020.
“Scotland was set to receive 14% of UK funding between 2014 and 2020 compared to its population share of 8.3%. This meant that EU funds are proportionately more important to Scotland than to any other part of the UK,” the submission states.
Kenneth Gibson MSP commented:
“This report further highlights the danger posed by the UK government’s Brexit plans, which threaten jobs, investment and living standards. Leaving the European Single Market and Customs Union threatens 80,000 Scottish jobs over a decade and could cost our economy more than £11,000 million a year by 2030.
“To put these sums in perspective, the £3,700 million that could be lost is six times the annual budget of NHS Ayrshire & Arran.
“The report’s view – supported by many others, including leading business voices – is that the SNP Government should have a direct role in Brexit negotiations. Despite the Tories unwillingness to work with us, the SNP Government will continue to press the UK Government on that issue.”
ENDS
