The Scottish Government's financial position in 2022-23, as established by its 2022-23 Budget, is a consequence of a series of decisions, both within the budget and earlier, including the Financial Framework Agreement between the Scottish Government and the UK Government.
On 7th September, the Scottish Government reported to Parliament that it was making £560m of savings to fund public sector pay offers that cost £700m. It is understood that the local government pay deal, in which the Unison/Unite/GMB pay claim was met, necessitated the provision of government resources from outwith the Scottish Government's local government portfolio.
The Scottish Budget 2022-23 gave significant support to business which means less revenue available for public investment in 2022-23:
“For businesses, we will continue to offer the lowest Non-Domestic Rates poundage in the UK, as well as ongoing rates relief for the retail, hospitality and leisure sectors, at 50% relief for the first three months of 2022-23, capped at £27,500 per ratepayer."
Furthermore, the 2022-23 Budget stated:
Maintains our generous non-COVID-19 non-domestic rates relief package, which is forecast to save ratepayers around £745 million and help businesses get back on their feet. This includes the Small Business Bonus Scheme, which takes over 111,000 properties out of rates altogether and is the most generous relief of its type in the UK."
In 2020, the Scottish Government spent over £270m in supporting businesses with the 'Small Business Bonus Scheme' (SBBS) yet the Scottish Government sponsored evaluation published by the Fraser of Allander Institute in March 2022 stated: "We find no empirical evidence that identifies the SBBS as supporting enhanced business outcomes…"
The income tax system is a more progressive tax system than the UK's, in that lower-paid workers are taxed less in Scotland than in the rest of the UK, whilst higher paid workers are taxed more. The 2022-23 Budget stated:
“Furthermore, the majority [54%] of taxpayers will continue to pay less Income Tax in 2022-23 than they would if they lived elsewhere in the UK."
Putting aside the UK-wide adverse effects that the UK Government’s recent "fiscal event" may have, the Scottish Government has acknowledged that it is likely to receive £540m over the next three years due to the changes in income tax and Stamp Duty.