Public sector has to absorb UK tax cost - Forbes

Scotland's public sector will have to "absorb" a shortfall in funding to cover a UK government tax rise, Deputy First Minister Kate Forbes has said.

The SNP minister signalled the NHS, councils and other public bodies would have to make cuts unless the Treasury offered more cash to offset a UK-wide hike in employers' National Insurance contributions.

The Scottish government says it is facing a shortfall of more than £200m to cover extra costs for public sector staff.

The Treasury says it is providing a record budget to Holyrood and it is up to SNP ministers how to spend it.

Forbes told BBC Scotland News: "We know that there will be a shortfall in covering National Insurance contributions for the public sector.

"At the moment the public sector will have to absorb that.

"In the same way that we can't invent money to cover this we ultimately have to balance our budget and we balance our budget by ensuring that we cover all costs.

"And there will be an expectation on all parts of the public sector, just as there is in the private sector, to ensure that they cover their tax liabilities."

The Scottish government estimates the increase in employers' National Insurance contributions will cost about £550m for public sector workers, rising to £750m when indirect employees such as those in childcare, higher education or social care are included.

Holyrood ministers have been told to expect about £300m in compensation from the Treasury. It has based this figure on the Barnett formula – designed to give devolved nations a proportionate share of spending in England.

Finance Secretary Robison described that total as "unacceptable" and "very low" based on the Scottish government's projections using the same formula.

The rate of employer National Insurance contributions is increasing in April from 13.8% to 15%. The threshold at which employers have to start paying the contributions are also being lowered from £9,100 to £5,000.

About 600,000 people are employed in Scotland's public sector, making up 22% of the total workforce – compared to about 17% in the UK as a whole.

Scotland's public sector is also relatively better paid than the UK workforce.

The Scottish government has not set aside funds in its Budget - which is due to pass next month - to cover the expected shortfall in compensation, with Holyrood's finance committee questioning how ministers intend to deal with it.

A warning of potential cuts from Forbes comes as public sector workers appeal for more funding and urgent reform.

The British Medical Association Scotland recently said that the NHS would struggle to make it through another year without urgent reforms, while Scotland's public finance watchdog warned councils faced a "challenging future, with significant financial risks and uncertainties".

The finance committee raised further concerns about the government over "extended delays in publishing key strategic financial documents".

SNP MSP and committee convener Kenneth Gibson said: "This is indicative of a wider problem where vital medium and longer-term financial planning within the Scottish government is lacking."

The cross-party group also called for greater transparency about public sector pay after ministers had to use emergency measures in the current financial year to fund higher than predicted pay deals.

Forbes called for the UK government to provide long-term clarity on its spending plans.

She told BBC Scotland News: "It's very difficult as you'll understand to set a multi-year budget when you don't have clarity on the multi-year budget you might get from the UK government."

A Treasury spokesperson said the Scottish government receives more than 20% extra funding per person than equivalent UK government spending.

They added: "It is for the Scottish government to allocate this across its own public sector and meet the priorities of people in Scotland.

"It will also receive additional Barnett funding on top of this record £47.7bn settlement as part of support provided in relation to changes to employer National Insurance."

Scottish Conservative finance spokesperson Craig Hoy said the committee had delivered a "damning assessment of the SNP's Budget preparations".