The Institute for Fiscal Studies (IFS) is an economic research institute which specialises in UK taxation and public policy. The SNP might have to ask Whitehall for further funding after they pledged to overspend in Scotland by £640 per person. The IFS has said the Scottish Government’s spending review on Tuesday is likely to show a £3.5billion black hole in its budget by 2026–27.
David Phillips, the think tank’s associate director, said the SNP is facing some “very tough decisions”.
He added that the UK Government might have to provide Scotland with extra funding.
He said: “A series of expensive spending commitments on top of underlying spending pressures mean that the Scottish Government faces a multi-billion budget shortfall over the next four years under current forecasts.
“Because it cannot borrow to fund day-to-day spending except in some limited circumstances.
He said: “While further funding top-ups could be on the way it seems unlikely that the UK Government will top up its plans by anything like enough to allow the Scottish Government to pay for all of its policy priorities without some hard choices on tax and/or other areas of spending.”
The £3.5billion deficit is the Scottish Government’s central prediction for its deficit over a five-year horizon.
However, the Scottish Government has projected a range from a £10billion shortfall to a £4billion surplus, which Mr Phillips said “almost certainly overstates the degree of uncertainty”.
He added that the figures could shift but a “substantial” funding gap looked likely.
Mr Phillips added: “Difficult choices on Scottish tax and spending over the next few years will eventually have to be faced.
“Political considerations including those related to the Scottish Government’s desire for another independence referendum will undoubtedly play a role in whether those choices are made clear next week or not.”