23 November 2010

Budgeting for difficult times

In these difficult economic times, many families have faced the challenge of restructuring their household budgets to cope with a reduction in finances. Difficult choices must be faced up to and sacrifices made to make sure that money is available for essential things.

In many ways, the process of setting the Scottish Budget for next year has been similar in nature. Faced with a budget that will fall by £1.3 billion in cash terms next year - or £1.8 billion in real terms - as a result of Westminster’s spending decisions, hard decisions have had to be made.

Without the full fiscal powers of a normal independent country, the Scottish Government has no choice but to accept the reduced finances handed to it and budget accordingly. Where other Governments can borrow, alter the full range of taxes used in their territory and balance their economy to meet their needs, Scotland is forced to confront these spending cuts with one hand tied behind its back.

Yet despite this, the SNP Government has faced up to the difficult choices it has had to make and produced a budget that puts the priorities of people across Scotland first. The Scottish Government recognises there is a social contract with people in Scotland who are enduring difficult financial times, and we are determined to do what we can to assist them.

Funding has been put in place for local authorities to continue to deliver a freeze in the council tax, ensuring that family incomes are not put under further pressure as a result of increased taxation. The abolition of prescription charges will go ahead in April as planned, ending the unfair tax on ill health and reaffirming the principle that the NHS should be free at the point of delivery. Additionally, the Scottish Government will work with local councils to ensure the provision of free personal care for the elderly continues.

These decisions are positive and I believe are the right ones, despite these difficult times. However, we have no choice but to cut Government expenditure and as a result the decision has also been taken that public sector pay should be frozen at current levels for everyone earning over £21,000 in order to protect jobs and try to ensure that no compulsory redundancies are necessary. Furthermore Scottish Government departments and agencies will be asked to find significant savings in order to balance the budget.

Yet what is key from this budget is the need to ensure that economic growth in Scotland continues. With the limited financial powers the Scottish Government has, infrastructure spending is perhaps the key way in which the Scottish Government can boost the economy and encourage that growth. That is why the decision was taken to transfer £100 million from revenue to capital expenditure and ensure that key projects go ahead.

This will be particularly welcome for people in Banff & Buchan given that both the AWPR and a replacement prison in Peterhead will proceed as a result of decisions made in this budget. This is good news for people in the area and acts as a further demonstration that the SNP Government understands the needs of the North East.

These are difficult times and as a result this budget has forced difficult choices on the Scottish Government. Yet within the scope available to us, I believe the right decisions have been taken to encourage economic growth and maintain the social contract that exists between this Government and hard pressed households across Scotland. This is a sensible budget for the circumstances we face.

Stewart Stevenson
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