Last week’s Budget replayed many of the usual arguments that follow a Chancellor’s statement, with most of the immediate commentary focused upon the 'winners' and 'losers' from Rishi Sunak’s tax and spend decisions.

Here in Scotland, there were familiar questions too about whether Holyrood’s Budget will rise or fall next year. Of course, the answer is ‘it depends’, giving both governments the opportunity to reinforce their own narratives of ‘record Holyrood funding’ or of more ‘Westminster cuts’.

Annual budget statements are a necessary part of our political process. But they can often draw undue attention to short-term issues, and crowd out more important reflections on the long-term dynamics underpinning our economy and public finances. Indeed, arguably the most interesting aspect of this year’s Budget was the trajectory for living standards and public services over the next decade.

The good news is that the recovery from the pandemic is projected to be quicker than even the most-optimistic economist anticipated just a few months ago. The UK economy is on track, according to the Office for Budget Responsibility (OBR), to return to its pre-pandemic level of output by the end of this year. Perhaps most encouragingly, the long-term scarring from the crisis is now projected to be lower than first thought.

Of course, there remain huge risks to that outlook, from labour market shortages through to disrupted supply chains and new variants of the virus. For many sectors, the costs of the crisis will mean that it will still feel like a downturn for some time to come. New research by my colleague Danny Blanchflower for the US economy notes that the latest consumer data points to increased worry and anxiety levels, indicators that have been successful at predicting previous downturns in the economy.

Look beyond the immediate outlook and the story is even less rosy. The UK’s productivity puzzle looks as though it won’t be solved anytime soon. The OBR’s latest assessment of the cost of Brexit is that it will knock around 4% off our long-term growth potential, more than the long-term hit from the pandemic.

Living standards too, as measured by real household income, have barely shifted since the 2008 financial crisis and show no sign of picking up anytime soon. Indeed, rising inflation is likely to further erode real take-home-pay over the next few months. Living standards will only pick-up over the long-term if we can finally solve that productivity puzzle that has plagued our economy for the last decade.

The Budget didn’t just reveal information about the trajectory for the economy but for the public finances too. Despite government borrowing set to fall sharply over the next few years, public sector net debt – the stock of money the government owes – is projected to still be above 80% of UK GDP by 2027. For those of us old enough to remember, one of Gordon Brown’s famous fiscal rules was that net debt should never rise above 40% of GDP.

Arguably, the most important insight from last week’s Budget was the growing recognition that we have reached a tipping point in how public services are funded in the UK. Across our public sector, from the NHS to local government and the welfare state, pressures on spending are increasing apace. Without change in the way that certain services are delivered, or paid for, the quality of the public goods that we all depend upon will only decline.

This is why, for all the promises of tax cuts before the next election, the freezing of income tax thresholds (which pulls more people into higher tax bands), the hike in national insurance contributions, and the increase in corporation tax rates, have less to do with bringing down the deficit and much more to do with meeting the pressures facing our public services, particularly in health and social care.

But rising demand for public services are not the only fiscal risk that we face. As world leaders gather for COP26 much of the debate will concentrate on the changes needed in our day-to-day lives to lower emissions. But here too there are huge implications for our public finances.

Earlier this year, the OBR set out how much they think it will cost the Government – up to £11bn per annum – to pay for all the infrastructure needed to support net zero. But they also concluded that the costs of doing nothing are that much greater, potentially adding the equivalent of 100% of our GDP to debt by the end of the century. These costs will only rise the longer we delay.

Of course, all these issues resonate here in Scotland, and will no doubt be mirrored when Kate Forbes sets out her Budget plans in December. Scotland’s Finance Minister is likely to be presented with a more optimistic outlook for Scotland’s economy than before, but a similar weak picture on the outlook for living standards.

Over the long-term, Scotland faces similar long-term fiscal risks. Finding a way to address such long-term issues won’t be easy, particularly within short-term political cycles.

In our recent research with the Scottish Parliament’s Independent Research Centre, we found that many MSPs felt that crucial long-term questions, such as climate change and demographic pressures, receive less attention than they deserve in budget debates.

So, what to do about this?

Firstly, the recommendation from the Finance and Constitution Committee’s Legacy Expert Panel earlier this summer of the need for a long-term fiscal sustainability report would be a welcome step forward.

A more robust evidence base setting out the pressures on our public finances will help inform debate and make for better policymaking.

Secondly, we need to think creatively about how we can isolate debates of long-term fiscal sustainability from the political heat of annual budget cycles. Options including a new multi-year cross-party commission on long-term fiscal risks – perhaps involving key representatives from society and business too – are worth exploring. Such a body could have a remit and reporting cycle that straddles parliamentary terms.

COP26 will highlight, arguably clearer than ever before, the risks to our economy and society from climate change. Of this there is no debate. But getting the necessary commitments from political leaders is always trickier.

If a legacy for Scottish policymakers of COP26 could be to agree new efforts to develop consensus on the delivery of genuine reform, not just on the need for change, that ‘Glasgow Agreement’ would be worthy of celebration.

Graeme Roy is professor of economics at the University of Glasgow’s Adam Smith Business School.