The challenges facing the Scottish Government in designing this year’s budget have been significant and multi-faceted. It is probably the most difficult budget since devolution as it seeks to support Scotland’s economic and social recovery from the pandemic, fulfil both the manifesto commitments of a recently re-elected party and the many long-standing policy commitments of a fourth-term government. And all this while trying to make an impact on Scotland’s many persistent social and economic challenges. Kate Forbes, Cabinet Secretary for Finance, introduced her budget as one designed to help tackle the climate emergency, support economic recovery and reduce inequalities.

Given these multiple and urgent pressures, it is vital that this is a budget that supports and enables more and better innovation both in our economy and in how we design, deliver and deploy our public services. If the budget doesn’t help to unlock new solutions to our long-standing challenges it will run the risk of stagnating against the urgent issues of our time.

Despite the big figures put against key policy priorities in the budget, it will be the detail of exactly how the many pledges and funds announced are turned into new ideas or projects that will tell us more. And this is information that will only come out in the coming weeks. There are, nonetheless, key announcements that are worth highlighting in relation to each of Nesta’s innovation missions and the big social challenges we face.

A sustainable future

Pretty much the first line from the Cabinet Secretary’s budget speech noted that this is a budget focused on delivering on the net zero agenda and a just transition.

This was backed by some significant investments for the year ahead, with almost £2bn in total on low-carbon capital investment in infrastructure, environment, decarbonising homes, buildings, transport and industry. This includes:

• £336m for energy efficiency and home heating measures.
• £60m for heat decarbonisation projects.
• £23.5m for a new green jobs fund.
• £225m for Skills Development Scotland to tackle labour shortages, which will be a big and important part of delivering on the just transition agenda and ensuring we have the skills we will need for a low-carbon economy.

However, it is worth noting the latest update to the Scottish Parliament from the Climate Change Committee earlier this week. The progress report called the Scottish Government’s political commitment and policy ambitions to reach net zero by 2045 laudable but said it remains unclear exactly how those pledges and the finances against them will translate into the scale and pace of action urgently required. And as we recently highlighted in our analysis of Scotland’s new Heat in Buildings Strategy, the focus must now be on urgency of action and clarity of process for how we turn welcome policy rhetoric into action on the ground. There is an urgent need to design and pilot projects and interventions that help accelerate decarbonisation across Scotland’s broad range of housing types, look at solutions that rebalance energy prices to reduce the cost of running low-carbon heating options and ensure viable solutions exist across the income spectrum.

A fairer start

Ensuring a fairer and more equitable start for every child in Scotland is a long-standing priority for the Scottish Government and that was reaffirmed in the budget, with significant levels of investment in multiple priority areas:

• The high profile doubling of the Scottish Child Payment (SCP) from April next year, using Scotland’s devolved social security system.
• A £544m investment in Early Learning and Childcare (ELC) across Scotland – representing a 50% increase in funding for ELC versus the previous two years.
• £200m for the Scottish Attainment Challenge (part of the £1bn committed against this over the lifetime of this parliament).
• The first £50m for the Whole Family Wellbeing fund as part of the commitment for Scotland to #KeepThePromise.

While the welcome doubling of the SCP could potentially lift 40,000 children out of poverty by 2023-24, the funding commitment for the wider attainment challenge is relatively small given the scale and complexity of this challenge. As such, recent research from Joseph Rowntree Foundation and Fraser of Allander and the call to increase this investment need to be urgently explored if the Scottish Government is to meet its interim child poverty targets for 2024.

Investing in ELC represents a strong commitment to an area proven to improve outcomes for Scotland’s children. How this translates into ensuring provision is consistently high quality and accessible to those who need it most – alongside issues such as staff development and retention – will be critical to demonstrating the success of this investment. When targeting the poverty related attainment gap, focusing investment and innovative activity in early years can help to ensure that children from Scotland’s most deprived communities are no longer half as likely to meet the expected development level when they start school than peers from more affluent areas.

The recently announced broadening of the Scotland Attainment Challenge may create the opportunity to look at evidencing and scaling what has been proven to work from the original nine attainment challenge local authorities. Combined with the promise of additional forthcoming data and evidence releases this should help identify priority areas for addressing poverty related attainment and the impact of Covid-19 in the months ahead.

A healthier life

Health and Social Care is consistently the single largest portfolio of investment in Scotland’s annual budget and this year was no different with a staggering £18bn being invested in this sprawling set of priorities over the next 12 months.

As such, it can be difficult to see exactly how these massive numbers break down and translate into impact. And in relation to our public health, there are few places where a detailed understanding of investment and impact are required more than in tackling Scotland’s challenges with obesity. Obesity – with staggering costs to health, life expectancy and the economy – is one of the most urgent issues facing Scotland today. Past policies and levels of investment have failed to address or tackle the causes of obesity and rates continue to rise, with Scotland experiencing the worst levels in the UK.

The overall increased funding for health and social care is essential and welcome but, unless we see a specific increase in funding for preventative measures targeted at reducing population level obesity rates, the pressure on health services will continue to rise. Obesity also has a disproportionate effect on more deprived communities. If the Scottish Government, as stated, sees tacking inequalities as a priority, then robust, innovative and wide reaching policies to reduce population levels of obesity must be implemented as an urgent priority.

The urgent need for social innovation

So what does all this mean when taken together? Overall there were big investments made in the budget, alongside a recommitment to some of the most urgent social and economic challenges that we face in Scotland. However, when we think about the importance of tackling the poverty related attainment gap, our longstanding poor public health record or the urgency required to decarbonise our homes and energy use, now is the time to back new and innovative approaches in Scotland.

The budget did not make any major commitments on innovative funding models or new ways of using the resources Scotland has to deliver change and impact against our shared priorities. This feels like a missed opportunity when thinking about the proven role of innovation methods such as Challenge Prizes, blended finance and people powered results to deliver tangible social and economic impact. In addition there appears to be little additional money available to local authorities, who are facing multiple pressures to deliver on existing priorities, and there was no mention of the long-standing call from Scotland’s voluntary sector to move to a multi-year funding model of investment. These are important issues that can help to create a more enabling environment for innovation and risk taking in local service delivery. It is vital that these issues are addressed as part of the Spending Review that ministers have committed to next year.

The hard truth is that more of the same simply won’t cut it. We need to embrace new ways of working if we are going to deliver the scale and pace of change needed against our shared priorities. It remains to be seen if the big figures announced in the budget will translate into new ideas or new ways of working on the ground to deliver this. The devil, as always, will be in the details. At Nesta, we will continue to work with partners across Scotland to combine rigour and creativity in social innovation to help make a real and lasting difference to people’s lives.