‘No silver bullet’ to deal with long-term fiscal gap, MSPs told

There is “no silver bullet” such as pension reforms which will address Scotland’s annual budget shortfall in the long term, MSPs have heard.

A report from the Scottish Fiscal Commission (SFC) last week said Scotland could face an annual budget shortfall of £10 billion within 50 years.

The SFC forecast that “fiscal tightening” at a UK level could see the Scottish annual budget gap (ABG) rise from an average of 1.7% of spending each year to an average of 10.1% each year by 2072-73.

The pressures of managing an aging population and rising costs would occur under any constitutional settlement, the SFC said, with the task currently shared between the UK and Scottish governments.

On Tuesday, SFC chairman Professor Graeme Roy spoke to Holyrood’s Finance Committee about the report, alongside other members of the commission.

Labour MSP Daniel Johnson asked what international comparisons could be made with other countries facing similar pressures.

Prof Roy said there are “interesting events in France at the moment”, where President Emmanuel Macron is facing widespread protests against plans to raise the standard retirement age from 62 to 64.

He said: “The numbers are so big and of such a magnitude there isn’t one automatic silver bullet.

“It isn’t just an extra year on pensions, that can save you some money and it can push things out.

“But it’s a combination of everything, what’s happening in the economy, choices over public services relative to others, what do you do around things like pension age, prevention in healthcare.”

Similarly he said increasing the productivity rate in the economy is also not a “silver bullet”, but the SFC intends to do further work on this issue.

Changes in assumptions about migration levels would not “radically change” the outlook, he said.

Commission member Professor David Ulph said: “Governments in Scotland will have to grasp this nettle in a very important way.”