The Scottish Government’s budget has grown by 14% since it was set in February because of an additional £6 billion in coronavirus funding from the UK Government.
Analysis by the Scottish Fiscal Commission (SFC) found there has been an increase of £3 billion since the summer budget revision was announced to Parliament in May, a total increase of £6 billion since the budget was set in February
Since the start of the pandemic, the UK Government has guaranteed the Scottish Government at least £6.5 billion in consequentials from increased spending to deal with the impact of coronavirus.
The Scottish budget is now £48.5 billion, up from the £42.5 billion in February.
SFC chairwoman Dame Susan Rice said the Scottish Government was getting “significant additional funding” to support the response to the pandemic, but warned the economic impact has created uncertainty for future Scottish budgets.
The SFC’s fiscal update report said: “Recognising the unusual circumstances this year and the need for the Scottish Government to have certainty about the level of funding being received, the UK Government has guaranteed that the Scottish Government will receive a minimum of £6.5 billion of additional funding related to Covid-19.
“This guaranteed level of funding provides the Scottish Government with a degree of certainty as it manages its response to Covid-19 for the remainder of this financial year.”
Dame Susan said: “The Scottish Government is receiving significant additional funding to help it respond to the pandemic but there are still a number of uncertainties ahead.
“The winding down of initial Covid-19 policies, the potential for further disruption and the risks associated with additional lockdowns pose challenges for the economy and for both the UK and Scottish governments.
“Devolved Scottish tax revenues are expected to fall this financial year while social security payments are likely to increase.
“These changes should be largely offset by adjustments in the block grant, reflecting similar changes to UK tax revenues and benefit spending.
“The position should be clearer by the time of the Scottish Budget, expected in December.”
The increases in Scottish and UK spending are funded by UK Government borrowing, according to the SFC, which totalled £150.5 billion in the first four months of the financial year.
The UK’s debt reached 100.5% of GDP by the end of July as a result – an increase of more than 20% since last year.
During the crisis, the Scottish Government has repeatedly called for additional borrowing powers on top of its ability to borrow £300 million to manage variations in resource spending, as well as £450 million for capital spending.
In this year’s budget, Finance Secretary Kate Forbes set out plans to borrow £207 million, which the SFC says is “predominantly to manage the income tax reconciliation from 2017-18”.
Ms Forbes also plans to use the full £450 million of borrowing this year for capital spending.
The report says the Scottish Government is also able to access a further £70 million from Scotland’s resource reserves and £56 million from capital reserves this year.
However, the SFC has warned there is a £555 million reconciliation – an overpayment to the Scottish Government based on predicted tax revenues – that is forecast to reduce next year’s budget.
A Scottish Government spokeswoman: “As the Scottish Fiscal Commission’s report shows the coronavirus pandemic continues to have a profound effect on the fiscal and economic outlook in Scotland.
“We responded swiftly to the challenges of the pandemic and worked hard to protect Scotland’s economy, but we also recognise this is an opportunity to do things differently and crucially to rebuild a stronger, fairer and greener economic future.
“Our focus is on protecting jobs, creating jobs and generating significant economic growth and we are working quickly to achieve this.”