Posted missing in fantasy election politics – real numbers

Posted missing in fantasy election politics – real numbers

by Bill Jamieson
article from Wednesday 1, April, 2015

ALMOST EVERY DAY brings fresh SNP declarations on “fighting austerity” and “resisting Tory cuts”. Pious pledges to combat income and wealth inequality then follow dodgy Scottish government statistics on how wealth is unfairly concentrated in a few hands.  

The SNP conference comprised a long litany of spending pledges, down to the reaffirmation of the party’s commitment to free school meals for every P1-3 child in Scotland, “saving at least £330 per year for each eligible child.”

Who but a heartless ogre would curtail such benefits or reduce welfare benefits, or not hire more nurses or end food poverty or maintain the range of “free” universal benefits?

And who would jibe at more money for capital spending projects, or road and rail improvements, or better schools and above all, more housing?

But who are the real heartless ogres here? How about those promising to deliver all these things in the election campaign while every reliable statistic points to huge constraints on council budgets and on Scottish Government revenues for as far ahead as we can see? 

The SNP campaigns for full fiscal autonomy and “more powers” for the Scottish parliament as if the mere recitation of these demands will itself deliver the wherewithal to finance those spending pledges. 

So what are the figures that back up this programme? What is the reality that lies behind these promises? What are the facts that give credence to these bold commitments to ever more spending, ever more capital projects and a release from the yoke of fiscal austerity? 

What we do know for sure is that Scotland’s local authorities not only have no money to spare but are also more deeply in debt than at any time previously. 

A report by Scotland’s spending watchdog reveals the extent of local authority debt run up to get round the council tax freeze. The figures, published recently, revealed that councils have a total debt of £14.8 billion, with 82 per cent of this total (£12.1 billion) as a result of borrowing. The report, from Audit Scotland, reveals that 17 councils out of 32 have increased their borrowing levels over the last ten years. 

Back in December, the Office for Budget Responsibility set out key numbers on Scotland’s finances. It didn’t take long to see how we were heading for a major problem, and with no evident solution. 

According to the figures, the Scottish Government enjoyed a total revenue in 2013-14 of £53.9 billion – well up from £48.9 billion in 2009-10. But we spent far more – £66.4 billion in 2013-14, up from £63.5 billion in 2009-10.

That left us £12.4 billion in the red. 

The good news is that this is down from a deficit of £14.3 billion the previous year. And as a percentage of GDP – the measure favoured by economists that enables comparison with other countries – the deficit has come down from 10.4 per cent to 8.1 per cent. 

That, however, is not the end of the story. 

How telling – but how damning for the current state of political debate in Scotland – that so little mention has been made of the latest update on the state of Scotland’s public finances. 

We need look no further than the independent Institute of Fiscal Studies for a succinct but sobering summation of where we are headed. 

It was no surprise when the Office for Budget Responsibility downgraded forecasts for North Sea revenues for the next five years in its Economic and Fiscal Outlook published alongside the Budget on March 18.  In part, this reflected the direct impact of the fall in oil prices which have been the subject of much discussion in recent months. But other forecasting changes – like reductions in oil and gas production forecasts – and the announcement of cuts to tax rates on profits from the North Sea, have also contributed to reductions in forecast revenues. 

And according to the IFS, this means, if anything, the reductions in forecast revenue are even more dramatic than was anticipated.

The OBR now forecasts North Sea revenues to average around £700 million a year between 2015–16 and 2019–20, rather than the £2.6 billion a year it anticipated just a few months ago – and the figure of £5 billion plus touted by the SNP during the independence referendum campaign.

This has caused the IFS to revisit projections for Scotland’s net fiscal balance based on the OBR’s December 2014 forecasts for revenues. How much of a difference do the new forecasts make to these projections? The IFS table shows the original and updated forecasts for both Scotland and the UK as a whole:

 

 

 

 

 

 

 

 

 

 

Under the IFS’s earlier projections based on the OBR’s December 2014 forecasts, Scotland would have been looking at a deficit of around 8.0 per cent of GDP in 2015-16. 

However, using the same methodology, the OBR’s March 2015 forecasts imply Scotland’s North Sea revenues will fall to around £0.6 billion in 2015–16. This would mean Scotland’s budget deficit would be 8.6 per cent of GDP in 2015-16. As the table shows, this would be more than double the projected budget deficit for the UK overall of four per cent for 2015-16.  

And in cash terms this is equivalent to a gap of £7.6 billion.

Little wonder that the Scottish Conservatives demanded that the Scottish Government finally publish figures on the impact of full fiscal autonomy – and what it would mean for Scotland’s finances.  They want the SNP to publish its analysis on full fiscal autonomy, as well as updated oil and gas projections. 

Scottish Conservative finance spokesman Gavin Brown MSP said: 

“The public deserve to know the full impact of what fiscal autonomy would mean for Scotland. In the run up to the general election it’s important that the public know the full facts on public spending – the SNP have ducked this for far too long.” 

Seldom, truly, have we gone into an election campaign with pledges of a spending nirvana ahead based on pure fiction and voters being offered an utterly misleading prospectus. 

We surely deserve better than this. 

 

 

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