Economic and Fiscal Forecasts for Scotland, Edinburgh, 28 January 2021Add to Lightbox Download
Pictured: Chair Dame Susan Rice DBE
The Scottish Fiscal Commission says today that managing the Scottish public finances will be very difficult again in the coming financial year. Their latest economic and fiscal forecasts also show the effects of COVID will be felt for a long time.
The Scottish Government is implementing public health measures to control COVID and at the same time introducing policies to reduce the ensuing economic harm to people and businesses. The funding available to the Scottish Government continues to change: additional COVID funding rose from £3.5 billion in April to £8.6 billion in December. It is now clear the pandemic will continue into the next financial year and the UK Budget in March is likely to include additional UK spending on COVID. More funding later in the financial year remains a possibility. Any further increases in UK Government spending on COVID in devolved areas, such as health, in 2021 will feed through to the Scottish Government.
All of this makes it harder for the Scottish Government to balance its budget. Increases in funding are welcome and important, but the later they happen in the budget year, the harder it is for the Scottish Government to spend them effectively.
The Commission forecasts the latest lockdown will reduce economic activity in the first quarter of 2021 by 5 per cent. The effect on GDP is expected to be less than in the first lockdown because more sectors of the economy, like construction and manufacturing, are staying open.
The OBR’s November 2020 forecasts were made before the current lockdown was announced and so took a more optimistic view of the UK economy than the Commission’s forecasts for Scotland published today. As a result the criteria for a “Scotland-specific economic shock” are met, giving the Scottish Government additional borrowing powers for the next three years.
The Commission expects that as the vaccination roll-out continues and public health restrictions are lif
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- Economic and Fiscal Forecasts for Scotland, Edinburgh, 28 January 2021