Short term measures not addressing gap in public sector finances

The Scottish Government recorded a £1 billion underspend in 2024/25 but still needs to move away from short-term measures to address a stark forecast gap between its spending plans and funding.

The underspend was supported by over £2 billion of additional funding from the UK Government, meaning a plan to help balance the budget with £460 million of offshore wind leasing revenues was not needed.

Significant pressures remain in achieving financial balance in 2025/26, and many of the necessary savings identified and delivered so far are non-recurring. This continued short-term approach to managing spending is not supporting the fiscal sustainability of the Scottish public sector.

The Scottish Government’s latest Medium Term Financial Strategy projects a combined resource and capital funding gap of £4.7 billion by 2029/30. This is due to policy choices and higher workforce costs. However, the government’s plan to make savings over the next five years lacks detail on how they will be delivered.

Stephen Boyle, Auditor General for Scotland, said:

Although the Scottish Government reported a £1 billion underspend this year, it did so from a combination of additional funding from the UK Government and one-off savings.

A forecast gap of nearly £5 billion remains between what ministers want to spend on public services and the funding available to them.

The Scottish Government needs to prepare more detailed plans setting out how it will close that gap by the end of the decade.