Whoever forms the next Scottish government will face some “very difficult choices” in trying to deal with a huge overspend, says the official forecasting body.
A gap between income and expenditure is growing and, on current trends, will amount to almost £5 billion by the end of the decade.
Graeme Roy, chair of the independent Scottish Fiscal Commission, says that to bridge this gap the winners in next year’s Holyrood elections will need to consider cuts in public expenditure.
Day-to-day spending commitments could be £2.6bn short, with capital spending is set to exceed funding by £2.1bn.
In a media briefing, Professor Roy said: “The government will not have sufficient funding to meet its spending commitments.”
While higher revenues have led to a £406 million bonus, or reconciliation, in next year’s budget, the situation will quickly reverse. For 2027-28 it is expected that the Scottish Government will lose £851m from its budget.
Prof Roy said: “The new government may face a big hit in the first year. Whoever wins the election in May will face some really difficult choices about balancing the books.
Ministers have already conceded that Scotland’s public sector workforce must be reduced by 0.5% a year for the next five years to help curb spending. Prof Roy says this could amount to 12,000 jobs being cut.
While this might sound “relatively small in the overall context of a very large public sector in Scotland”, this would be “quite a departure of trend”, he said.
There is also likely to be pressure to keep any pay rises to a minimum, with recent awards coming in above the policy limit of 3% for this year.
Scottish Conservative finance and local government spokesman Craig Hoy said: “This is a damning confirmation that the SNP government is living beyond its means and staring at an £850million black hole which it won’t be able to plug with borrowing.
“Nicola Sturgeon, Humza Yousaf and now John Swinney have presided over a huge rise in welfare spending and an enormous surge in the number of civil servants, especially those on the highest salaries.
“They’ve hammered working Scots again and again with tax rises to pay for their financial recklessness but despite this, they have now run out of road.
“They now claim they’ll rein in costs, but it’s clear they have no idea how to do so.
“SNP ministers must now adopt the detailed plans for savings outlined by the Scottish Conservatives, which would cut taxes and wasteful public spending, reduce the public sector to a reasonable size and direct taxpayers’ money to frontline services.”
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