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13 September 2016, 14:14
Some public services in Scotland could face budget cuts of almost a fifth over the next four years, according to independent forecasters.
The University of Strathclyde's Fraser of Allander Institute said the Scottish Government could see its overall resource budget fall by as much as £1.6 billion by 2020/21 under the ``worst case scenario''.
Even under more optimistic scenarios, the Scottish budget is still projected to fall in real terms.
With major commitments on health and childcare, other areas such as local government could bear the brunt of the shortfall, its report found.
Unprotected budgets could face an average cut of up to 17% over the next four years, with funding for councils slashed by as much as #1 billion by 2020/21, according to the institute.
The report sets out a range of scenarios for Scotland's budget over the next four years, and the options available to the Finance Secretary Derek Mackay ahead of his first budget.
It found that even before the uncertainty caused by Brexit, the Scottish Government's budget was forecast to fall by just over 3% in real terms by 2020/21 as result of the UK Government's ongoing fiscal consolidation.
The Scottish budget has faced "unprecedented cuts'' since 2010, the report states, including a 5% cut to the resource budget since 2010/11.
Under a "worst case scenario'' for the block grant and revenues from Scotland's new tax powers, the Scottish Government may have to prepare for cuts of up to 6% - or up to £1.6 billion - over the course of the parliamentary term.
Such a cut over the next four years would represent more than the Scottish Government's entire Finance and Economy, Fair Work, Skills and Training, Culture and External Affairs and Rural Affairs, Food and Environment portfolios combined, the report found.
Mr Mackay said the findings backed up Scottish Government calls for an end to UK Government austerity.
The Scottish Conservatives said that with new revenue-raising powers being delivered to Holyrood, "the buck stops'' with the SNP administration.
Professor Graeme Roy, director of the Fraser of Allander Institute, said "a tough re-prioritisation'' in other areas would be required if the Government is to deliver its pledges on health, childcare and policing.
"As an area of unprotected spend, the grant to local government could be cut by around £1 billion on a like-for-like basis by 2020/21,'' he said.
He added: "Brexit uncertainty, a weakening UK fiscal position, ongoing UK welfare reform, and a fragile Scottish economy, means that the devolution of powers over tax and social security could not have come at a more challenging time.''
Mr Mackay said: "The UK Government's austerity means we are already facing a 10% real terms cut to our budget over the 10 years to 2020 - now the chaos caused by Brexit threatens to make those cuts even harder.
"This report adds to pressure on the UK Government to maintain membership of the single market to support our businesses and to minimise the damage Brexit will do to the economy.''
He added: "The Chancellor must stimulate the economy not compound austerity and end the indecision by backing the single market.''
Tory finance spokesman Murdo Fraser said: "This report is clear - the buck now stops at Bute House.
"We've had nearly a decade of the SNP promising the world, while blaming Westminster wherever possible.
"New tax powers mean that's no longer an option for the Nationalists.
"If the Scottish Government has sensible policies, Scotland's budget will benefit.''
Both Labour and the Liberal Democrats said their plans to raise income tax rates would address the funding gap.
Scottish Labour deputy leader Alex Rowley said: "It is simply not good enough for the Nationalists to blame Westminster for this.
"Sweeping new powers are being devolved to the Scottish Parliament.
"Faced with the choice between hundreds of millions of pounds of cuts to schools and vital services or using the power of the Scottish Parliament to invest in the future, Labour would use the powers and invest in our country's future.''
Scottish Lib Dem leader Willie Rennie said: "The Scottish Liberal Democrats want a penny on income tax for a transformative investment in education.
"That will guarantee a strong economic future as a high-skill and high-wage economy.''