Scotland play the Spanish wonder-kids tonight at Hampden and even though Craig Levein will try to arrange his team (and the Tartan Army sing their hearts out) in order to prevent a one-way thrashing, there is probably no stopping such an onslaught.
That’s fine though, that’s only 90 minutes of embarrassment and more bruises for the Scottish footballing ego. It’s nothing that a dark room and a couple of cans of Tennents Super Strength Lager won’t fix. OK, maybe three cans.
However, there may be a bigger ‘hiding to nothing’ coming Scotland’s way, and I don’t mean in football. What if we set up our nation’s structures to defend ourselves from cuts and those defences give way? What if coalition cuts start to run rings around our nation’s formation? What if we are not equipped to combat the destructive force that will be in front of us over the next half a decade? In short, is Scotland ready for the financial pain that is on its way and, if not, what will happen then?
There is currently a debate being held across the UK assessing whether increasing tuition fees in England & Wales is the correct future for further education. Such a debate would struggle to get off the ground in Scotland where support for universal and free access to university is fairly widespread.
However, how can a Scottish Government, with the best will in the world, deliver a policy of free access for students when its spending allowance does not take this option into account? And how can a Scottish Opposition realistically resist the temptation to exacerbate that difficulty for its own ends?
The obvious solution is a higher tax rate in Scotland to pay for universities centrally rather than through tuition fees but the current constitutional arrangement does not allow for this. There is a similar ideological divergence causing spending problems in benefits, the NHS and defence with no immediate solution to break the logjam.
Further evidence of Scotland not being ready to handle these cuts is the deficit that it holds. I don’t mean a Scottish Government deficit (none such exists as it can neither save nor borrow) and nor do I mean even the considerable Scottish slice of the UK deficit. I mean the £9bn that councils owe and are no doubt attracting onerous interest charges on.
I don’t mean this with disrespect but if the beancounters at HBOS, RBS and the Treasury can get their sums wrong and leave the UK vulnerable and exposed then the same can happen at any of the 32 councils across Scotland. £9bn is a lot of money for a small country of 5million to owe, it is £1,800 per person and it won’t be getting paid anytime soon while councillors focus on bins getting emptied and stocking dilapidated schools with jotters and textbooks.
Another aspect in which Scotland might not be ready for these cuts is just the simple presence of Conservatives back in Government. There is little doubt that the Tory brand remains toxic north of the border so although we should have had years to prepare ourselves for a Prime Minister Cameron, we may collectively be a little startled by it all and still unable to work grudgingly but constructively with the settled will of the Midlands and South of England. The temptation to lash out at anything forthcoming from George Osborne (a temptation albeit mitigated by a fuzzy Lib Dem presence) may count against us rather than for us when the final realisation that protests are not enough to save shrinking budgets. But even still, how do you adapt to spending less when you do not share in the philosophy that has caused that situation?
Scotland’s constitutional arrangement is regrettably similar to Craig Levein’s 4-6-0 and our politician’s approach to attack has been no more imaginative than throwing it up the line to try to win a throw-in. There needs to be a drastic rework of our political game so that, as a nation, our politicians can metaphorically run out onto the turf full of optimism, safe in the knowledge that we have the structures, the defences and the strategies to cope, adapt and succeed in the face of any challenge that comes our way.
These cuts, much like football, aren’t a matter of life and death.
It’s more important than that.
Anyway, first things first, bring it on Spain.
#1 by James on October 12, 2010 - 11:08 pm
I expect Vince Cable’s “principles” to go down three-two as well.
#2 by Alex on October 12, 2010 - 11:21 pm
I am a Scot who has studied at uni level and lived down South for many years, and I am afraid that Scots have the default position that they are the Bride who can chose to jilt the Bridegroom at the altar in terms of independence. However it will soon be the case of the Bridegroom not wanting to come to the altar – and the sooner the better – you are welcome to Big Eck and the Labour Shower!
#3 by nonny mouse on October 13, 2010 - 12:03 am
To our cousins in Scotland,
Please feel free to carry on spending as if the money grows on trees. That way your whole ‘country’ will soon be bankrupt just like your banks were before we bailed them out for you, only don’t expect any help from us when that happens because we got rid of the Scot who caused the problems in the first place.
Please feel free to put up higher rate taxes. That way all the wealth creators, and the jobs and businesses that come with them, will move south of the border to save tax.
Keep up the good work! Don’t give up hope – eventually you are bound to make such a good job of things that you will be able to be independent, just like Iceland and Ireland.
Yours,
The Little Englanders (remember us – we are the ones that subsidise your little ‘country’).
#4 by James on October 13, 2010 - 12:14 am
Thanks for stopping by! Did you find us via Iain Dale by any chance?
#5 by Opinicus on October 13, 2010 - 12:10 am
Have the Scots worked out what the Barnett Formula means when spending is on the way down?
Cuts in Scotland will have to be 20% larger than they are in England. That should be interesting.
Actually you are not right about the ability of the Scots parliament to pay for subsidising fees out of central tax. It can put up income tax by 3p in Scotland to pay for anything it wants.
The workings of the Barnett formula may mean it has to.
Ouch!
#6 by Jeff on October 13, 2010 - 9:45 am
Thanks Opinicus. Fair shout with the 3% variation in tax but the option is so inflexible (both higher and standard rates of tax have to change) that it is not possible. If there was the option to just push up the top rate of tax in Scotland then we could be onto something.
Also, I didn’t realise that Scotland is hit harder when spending decreases. I’m sure you’re right so not fun to think it’ll be worse than expected!
For me, free care for the elderly has to go.
#7 by Paul on October 13, 2010 - 1:03 am
“Such a debate would struggle to get off the ground in Scotland where support for universal and free access to university is fairly widespread.”
Such support may become less widespread when Scotland has to actually pay for it.
#8 by Julie B on October 13, 2010 - 9:18 am
£1,800 per head is just about the amount of extra money per head Scotland has been receiving more than England. Why should England take all the pain in the forthcoming cuts. How can it be right that our children will be left with tens of thousands of pounds of debt when leaving university and yet the taxpayer picks up the bill for Scottish students. Why should our elderly have to sell their homes to receive care when the taxpayer pays for care in Scotland. The list is endless. Frozen council tax, cancer drugs denied to English patients, free dental and eye tests, free hospital parking, free prescriptions of the way and who is paying for all this?????
#9 by Jeff on October 13, 2010 - 9:41 am
Hi Julie,
I guess the Barnett Formula was deemed a fair and equitable way for a devolved Scotland to spend its budget and, while I agree it is outdated and needs replaced, Scotland has ran a surplus for the past 4 or 5 years so the suggestion we are being wasteful and spending “England’s†money is wide of the mark.
Perhaps our smaller budget allows us to focus on what is important and what is not and there is waste down South preventing such policies as free care for elderly, freeze of council tax and free tuition. Obviously the pain is on its way for Scotland and it is going to bite very hard indeed so we’ll see what is left once the axe falls.
I wouldn’t rule out the tax rise mentioned earlier though as there isn’t much Scots would like to see cut.
But in answer to your question of who is paying for Scotland’s policies? Scottish people are.
#10 by James on October 13, 2010 - 10:20 am
It’s not about more money, it’s about ideological preference. The UK Government has much more flexibility because it can borrow as well as tax – although it shouldn’t have borrowed so heavily during the good times.
It’s just that Scottish administrations have prioritised differently. For instance, free personal care for the elderly costs £376m a year. Multiply that by 8.5 for the English population compared to the Scottish population and it’s a bit under £3.2bn.
So, for instance, if successive UK governments hadn’t wanted to subjugate the Iraqis and Afghans, they’d have about £4.5bn more to spend this year, which could, for instance, have paid for some of these benefits in England too.
Personally I’d rather see the elderly looked after than Afghans blown up, but we (well, mostly the English) have elected governments with different preferences.
#11 by Colin on October 15, 2010 - 10:15 am
Your last paragraph is very unfair. The Scots voted more overwhelmingly for the main pro-war party in the last three Westminster elections than the English did.
#12 by Tim on October 13, 2010 - 11:44 am
For far too long too many of us in Scotland have assumed it is our divine right to be given more money than the rest of the UK. However since devolution it is patently obvious that our ‘Governement’ really does not have any idea how to run a pub – let alone part of the UK, and as such we have a permanent Socialist administration – in either SNP OR Labour! – who seem to think the answer is to appease the subsidy junkies so they get re-elected, and so the cycle perpetuates. Bunch of clowns
#13 by Jeff on October 13, 2010 - 12:02 pm
“For far too long too many of us in Scotland have assumed it is our divine right to be given more money than the rest of the UK.”
You’re letting yourself be fooled Tim. Scotland has run at a surplus for the past four years. Scotland spends its own money.
#14 by Ian, Eseex on October 13, 2010 - 12:29 pm
Hello Jeff,
Once again the North Sea oil is used to say that Scotland runs at a surplace. Sorry to put a downer on this but Scotland has as much claim to it as England, Walse and Northern Island. The oil belong to the Shetland Isles. They do not belong to Scotland. So the comment ‘Scotland spends its own money’ is a lie. Scotland spends the Shetland Isle’s money.
A lot of Shetland Islanders believe that the legal status of the Shetlands is that of Crown Dependency as they have never formally been incorporated into the UK. The islands were given to King James III as a guarantee for a marriage dowry by King Christian of Denmark and Norway and were affirmed as a Crown Dependency on a couple of occassions.
Shetland Islanders – and the owner of Forvik, Stuart Hill, particularly – believe this is still the official status of the Shetlands and so Hill has declared independence from the British government and Federal Europe and staked a claim to the seabed and waters in a 200 mile radius around Forvik. Most North Sea oil and gas would, in the event that Shetland became independent, be in Shetlands waters. A large chunk of the rest would be in English waters if an English government asserted our rights to the territorial waters that the British government gave to Scotland under the Continental Shelf Act.
Frredom for The Shetland Isle’s
#15 by Jeff on October 13, 2010 - 12:41 pm
Fair point Ian, but I think “in the event that Shetland became independent” is where it falls down.
Shetlanders don’t seem to mind much that ‘their’ oil is being pumped into Aberdeen.
#16 by cynicalHighlander on October 13, 2010 - 10:37 pm
The old old unionist lies spread about by Westminster politicians with no explanation as to justify there fanciful assumptions. Try looking at maritime law over who owns what on the seabed rather than presenting fairy stories as fact.
#17 by Alasdair on October 13, 2010 - 12:06 pm
From a couple of the comments here it sounds like some folks have a wee chip on their shoulder …
… why is it that the only treatment that folks down south can think of when talking NHS is cancer, there are a huge number of treatments available in Scotland that aren’t available in England. Equally though there are numerous treatments available in England that aren’t available in Scotland.
Also, if the English want these things listed above then they should be fighting for them, not whinging about not having them. Then there’s the whole economics based on the crap they read in the Daily Mail, seriously get a grip.
#18 by Indy on October 13, 2010 - 12:44 pm
Come on Jeff – think through the consequences of what would happen if we scrapped free personal care. Not only would we go back to the days of having hundreds of NHS beds blocked by elderly patients but we would inevitably see more elderly people being taken into residential care because of difficulties with the funding of home care services. It could end up costing more to scrap it than keep it. Free personal care is not a luxury – it’s not something we decided to spend money on just because we happened to have the money and thought oh what can we do with it. The reasons for having free personal care were extremely sound and they remain extremely sound. We have an ageing population, it’s not an issue that can just be magicked away by deciding to cut free personal care.
Comments like Julia M’s just illustrate that people don’t understand what free personal and nursing care is. People in Scotland have to sell their homes to pay for the accomodation costs of residential care just as people in England do. There is no difference in that respect – free personal care does not cover accomodation costs, it covers personal and nursing care. Where there is a difference between Scotland and England is that people in England with savings over £23,000 do not get any assistance with personal or nursing care. In theory once they have spent their savings paying for care they will then qualify for assistance but let’s be honest here, the reality is that very often older people who do not have families to support them do not get cared for, full stop.
James is right, this is about ideological preferences, it is about choices. Do we want to leave old people to lie in their own p*** all day until such time as they are forced to go into residential care – or do we want to pay to ensure that everyone gets looked after properly in their own homes, thus ensuring that they can stay in their own homes for longer? That’s what they want, it is what we want (because it costs the taxpayer less). And if it comes to deciding spending priorities why would spending on free personal and nursing care have a lower priority than any other kind of health spending?
I can think of other areas of spending that could be reduced before I would look at care of the elderly. And I can think of other areas that we ought to be tackling more effectively in order to free up resources. Drug and alcohol abuse for example cost Scotland just under £5 billion each year. Just think of the money we could save – never mind the livers – if we could really start to get on top of that.
#19 by Chris on October 13, 2010 - 1:43 pm
Can we be a little bit more careful when banding around figures for Local Authority debt?
As the link does not work I can’t see the article you cite. However Local Government is not allowed to run a deficit and most authorities maintain a modicum of reserves. So I expect the debt figure your refer to is the Capital Debt.
This Capital Debt is part of the sensible financial managament that spreads the cost of long-term assets over their useful life. So that the council tax payers pay for it as it gets used, rather than having to find all the money up front. It is very similar to a mortgage and indeed most councils hold assets that are far more valuable than the loans that paid for them. So I don’t think this debt can have anything much to do with profligacy.
#20 by Jeff on October 13, 2010 - 2:35 pm
I like to think myself as sufficiently careful with such stories Chris and I got this one from Localgov.uk (link hopefully fixed in the blog post too, thanks for that)
You make fair points but I will be maintaining my concern about councils overstretching themselves, a concern which sits somewhere between pragmatic and pessimistic. Aberdeen Council, lest we forget, was on the brink a few years ago. There’s no reason why a worse situation may not arise in the near future and over-borrowing could well play a part in that.
#21 by cynicalHighlander on October 13, 2010 - 10:41 pm
This was a point without showing what other regions of England with Wales and N.Ireland the figure your quote is irrelevant unless it is massively more than other regions.
#22 by Chris on October 13, 2010 - 4:25 pm
I still can’t get your link to work.
It is illegal for a local authority to set a budget that would bring its reserves into defecit.
The problems in Aberdeen were not problems of solvency (indeed it is next to impossible for a council to become insolvent as it can always compel its citizens to cough up) but problems because its spending commitments were beyond what it was prepared to raise council tax to fund. This would not have created a debt and indeed the fact that Aberdeen couldn’t borrow to solve its problems made its challenge more severe.
Looking at Aberdeen’s latest set of accounts, they have a General fund balance (ie free reserves) of £29m. They also own assets worth £1.934bn, paid for with debts of £0.429bn.
So Aberdeen’s debts are not to do with running up losses, but with long term borrowing for capital assets.
#23 by Chris on October 13, 2010 - 4:33 pm
I have now read your link. The article is woefully misleading and sensationalised. If you had a £30,000 mortgage on a £100,000 house would you be worried? Would you consider yourself in the red?
That is what this article refers to. I can only presume it was written by an intern or a volunteer from the Taxpayers’ Alliance. The debt it refers to is the capital debt that accumulates from the building of schools, roads, sport centres, etc which is paid off as the asset is used. It is NOT to do with running up annual deficits.
#24 by Indy on October 13, 2010 - 4:58 pm
have to agree with Chris there – Aberdeen Council was never really on the brink. There was a mess that had to be sorted out and it was sorted out. Frankly I would trust local authorities to stay within budget more than I trust the UK Government, who are living in cloud cuckoo land as far as I can tell. A lot of their policies have clearly been drawn up on the back of a fag packet, I suspect the same may be true of their sums.
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#25 by Stuart Winton on October 14, 2010 - 8:18 am
Chris, the article linked to looks like an an abridged version of an article in the weekend’s Sunday Post, entitled “Scottish councils face £9 bn debt mountain”.
It said: “…as massive spending cuts loom, there are fears that some may be forced to default on their loans, making them bankrupt.”
In essence I think the article was making the point that with the forthcoming revenue squeeze councils may have difficulty repaying the debts while at the same time trying to meet current spending commitments.
The article listed each council’s debt, which made for interesting reading. For example, Edinburgh and Glasgow owe over £1billion each, while others like Aberdeen and Fife owe half a billion or so.
Meanwhile, Dundee debt amounts to only £61 million. Could there be an off-balance sheet issue here, most obviously PFI/PPP commitments not being included in the debt figure?
#26 by Indy on October 14, 2010 - 10:27 am
Glasgow’s PFI debt is certainly pretty massive,
#27 by Chris on October 14, 2010 - 11:22 am
There is no danger of a UK local authority defaulting in its debts. They would simply have to increase council tax.
Dundee’s capital debts are £307m. see http://www.dundeecity.gov.uk/dundeecity/uploaded_publications/publication_1458.pdf page 43, s38.
Just because it is in the Sunday Post, it doesn’t make it true!
#28 by Jeff on October 14, 2010 - 12:51 pm
While I agree Chris that I may have overstated the likelihood of there being an immediate problem, I disagree that “there is no danger” of a UK local authority defaulting on its debts. Any entity can get into cashflow problems, even if it has a guaranteed source of income.
This £9bn may well be backed by assets and stretched over a reasonably long time so, fair enough, a figure alone doesn’t tell even close to the full story. It’s still a big number though…
#29 by Griff on October 14, 2010 - 3:51 pm
The size of the number is pretty immaterial without context. £30 000 is a big number, and in the context of e.g. a credit card debt it would be pretty scary. In the context of a mortgage it would be considered pretty small.
What would be interesting is to know what the repayments are for councils as a portion of outgoings, and whether there is any flexibility on repayment term. The larger they are, the bigger the cuts the councils will have to make elsewhere.
#30 by Chris on October 14, 2010 - 4:32 pm
Jeff
Of course Local Authorities can get into financial problems. However a local authority can call on all the assets of its residents to pay its debts, indeed it would be obliged to. That is a good enough guarantee if it needed to borrow from the markets to meet a cash flow problem.
However repaying of long terms loans is unlikely to be problematic as the costs are known when the budget is set.
If a local authority kept insufficient reserves it might struggle in the short term if wages increased or council tax collection fell. However given the size of assets they own and their ability to tax in future years to clear any deficit they would be able to clear any unexpected deficit.
I think using ‘default’ is scaremongering. That won’t happen. The real issue is balancing the commitments on council tax and service provision with declining government grant levels.
I think your article fundamentally misses the point. In general Local Authority debt is funding an asset over its life. It is not an overdraft nor a credit card bill due to reckless spending.
There are far too many people ready to tell us that we are irrresponsible. You are inadvertantly giving them misleading evidence.
#31 by Stuart Winton on October 14, 2010 - 5:46 pm
Thanks Chris, looking at the article I suspect the Post asked all the councils for a debt figure, and clearly it’s a matter of some complexity and it’s highly probable that the various LAs didn’t respond on a consistent basis – perhaps Dundee supplied the short term debt figure, or whatever.
#32 by Chris on October 15, 2010 - 10:55 am
The Post almost certainly phoned round the council Press Officers. A more sensible way to do it would be to phone CoSLA or CIPFA who recieve returns from all local authorities. Now even these won’t be completely consistent as each council will do things as they and their auditors see fit. But for something like debt or borrowings it shouldn’t be too difficult.