Per the Guardian’s Editorial:
In Dublin, a humiliated and desperate government launched what it called the National Recovery Plan 2011-2014. The title was optimistic, the contents apocalyptic. Ireland faces tax rises of ¤5bn and spending cuts of ¤10bn, on top of the already announced cuts of ¤15bn. VAT will hit 24% by 2014. Wages will fall. So will the standards of the country’s already struggling public services and the prospects of any solid return to growth on the scale needed to start paying off the debt.
Scottish banks were bigger and their fall was harder than Irish institutions so it is fair to ask why we aren’t taking some of this same medicine? We are complaining about a 20% VAT rate, measly compared to other European nations out there, many of which in much stronger financial health than Ireland or Scotland. John Swinney announced very small cuts in his draft budget (~2%) and a wage freeze which, set against Ireland’s ‘Recovery Plan’ looks positively spendthrift.
However, should Scotland be looking to Ireland’s National Recovery Plan as a blueprint for taking better control of our situation? Can we really wait a year until an inconvenient little thing like an election is out of the way? We already have one bank heavily indebted to the UK Government and it would have been two had Lloyds not taken on the strain of HBOS, a decision that looks increasingly likely to be reversed in some way by the Independent Commission on Banking.
Scotland taking on two deeply troubled independent banks would be a tremendous challenge and, even for those wistfully and wishfully thinking they would like to see HBOS back on its feet, could prove to be too much to take on.
It would of course be George Osborne’s problem and not the Scottish Government’s but the impact on this ‘region’ of the UK, not to mention the independence argument, would be destabilising. When it comes to stricken banks, ‘bring it on’ is not the typical cry.
So where do we go from here? Well, in many ways Scotland has already fallen between two stools, even before the half-baked Calman measures are implemented. There’s no reason why we shouldn’t be heading down that path already trodden by Greece, Ireland, Portugal and Spain, lifting up the drawbridge and filling the moat as much as possible to keep bankruptcy at bay, no reason except it’s not Scotland that has to balance the books. If the coalition keeps sending us money then we’ll keep spending it. Doesn’t feel like a long-lasting solution though, does it?
And it’s almost too late for fiscal autonomy; the spring cleaning of national budgets is taking place all across the continent but Scotland’s static, inflexible position means that there is no debt for it to clear and a reduced incentive to adopt the same extreme measures that Ireland is the latest country to have to implement.
Scotland can’t raise revenue and it can’t reduce its spending, it’s saddled with a bank that needs Government support with another one potentially close behind and it has a high level of public sector staff. Looking around Europe, we would surely be in the high-risk category of being the next domino if we were on our own. Westminster has embarked on approaches to save its side of the UK with wholesale changes to the NHS, schools and train fares but where is the Scottish equivalent.
That we need a recovery of some sort is not even up for debate, hopefully nowhere near as drastic as Ireland’s, but where is the Plan? Scotland is not “humiliated and desperate” like Ireland is described in the Guardian’s article, but are we vulnerable and complacent?
#1 by Indy on November 25, 2010 - 2:08 pm
I think there are three points here
1. Ireland is an awful warning for what could happen in the UK – they cut too deep, too fast. The same could happen here. The UK is not too big to fail.
2. It’s not actually the Irish economy that is at fault, it’s the banking system and underlying that the fact that allowing the financial markets to rule everything is insane – the Irish should learn from that and we should also go back to basics and re-learn why unfettered capitalism is A Bad Thing.
3. Even so, I heard an Irish commentator on Good Morning Scotland being asked about how he felt about Ireland having to be “bailed out” by Brussels and he made a comment that it was awful but we Scots should not be so smug as our economy has to get bailed out by London every single day of the year, That is not actually true of course – but it’s a useful reminder that, in the eyes of most of the rest of the world, Scotland is still a worse economic basket case than Ireland to the point where it is institutionally dependent on handouts from London. That is also the point of view of Labour, the Lib Dems and the Tories and let’s not forget it.
#2 by Jeff on November 25, 2010 - 2:23 pm
1. Agree
2. Agree
3. Agree less so (the other solution of course to these half measures is just to shut down the Scottish Parliament entirely) but nonetheless I do find myself agreeing more and more with your general point that Scotland should step up to the plate and be a European equal.
You should do BBC Question Time Indy…
#3 by Allan on November 25, 2010 - 7:34 pm
1) Agree, yet in the run up to the election many people in the blogosphere (mostly the right wing bloggers down south) were questioning why we weren’t following Ireland’s lead. Problem is that no-one is sucessfuly arguing for less cuts, which will preserve the little liquidity we have in the economy.
2) Agree. My own post this week points the finger at Brown (for “light touch regulation”) who’s actions gave the green light for unchecked risks being taken. Having said that, lets not forget the lesson of RBS who fell because they (and every Scottish politician) willed a transaction to take place with the assumption that key debt reports had been read. Goodwin did not even bother to wait, otherwise he would have taken the same action as Barclay’s.
3) In the eyes of the world, Scotland is a part of England. Jeez you only had to hear the reaction to Meghrahi’s release to get an idea of what the Americans think our place in the world is. Again, there’s no one really who is eloquantly puting the truth out there, that we are subsidising the rest of the UK (oil revenue’s included – well they are ours anyway).
#4 by James on November 25, 2010 - 8:13 pm
On #2 there, that’s not really every Scottish politician, honestly.
#5 by Daniel on November 25, 2010 - 2:52 pm
Where is the incentive for the Scottish Government to try and revolutionise healthcare etc. In many ways we could be seen to be in quite an enviable position, able to observe the English reforms to the NHS and so on and copy them should they be successful!
#6 by Alister on November 25, 2010 - 3:32 pm
Why should Scotland take over responsibility for these two banks? They are or were private banks. The biggest problem facing Ireland is the threat of insolvency rising from guaranteeing all its banks’ liabilities. Iceland for example did not do this and is now recovering quite well. Even the IMF has praised Iceland in its recent report and noted how “private sector bankruptcies have led to a marked decline in external debt.” The IMF even praised Iceland for preserving its valued Nordic social welfare model. (This via Paul Krugman’s blog.)
#7 by Spoonsy on November 25, 2010 - 3:52 pm
Indy, Jeff.
Um…. are you actually arguing that following Ireland into a financial wasteland in exchange for Independence would be…. a good thing?
Really? REALLY?
And yes, unfettered capitalism is indeed a BAD THING. Problem is, like democracy, it’s just happens to be less bad than all the other systems we’re tried.
#8 by Jeff on November 25, 2010 - 11:53 pm
With a robust solution for RBS and, if necessary, the HBOS part of Lloyds in the bag, I am personally confident that Scotland can more than pay its way as an independent nation.
Mostly the question comes down to national identity rather than whether you’ll make a profit or a loss out of it. And if a person’s main concern is the latter, then they need not be worried as Scotland has run at a surplus for a number of years now with very prudent assumptions.
#9 by Indy on November 25, 2010 - 4:01 pm
Spoonsy the UK is not really any better placed than Ireland long term. Look at the stats.
But does that mean that the UK should not be independent?
If so, who would you suggest takes over the government?
Germany perhaps? They seem to be doing rather better.
#10 by neil craig on November 25, 2010 - 4:17 pm
A good comparison & the obvious answer is that we are part of the UK & the cost of the bail out has been borne by the UK. It is also possible that an independent Scotland would have refused to bail out the banks – had Ireland done thaty they would now be fine. Such alternates are infinite & depend on how competent we assume a government would have been.
The big difference between our budget & their’s I noticed was that they have insisted, inthe teeth of German complaints, in keeping their low corporation tax whereas not only are we generally opposed to entreprise & have raised business taxes slightly but we have thrown away the tax lowering powers which even Alex Salmond has implicity confirmed would have improved our economy if used.
I tend to think the question of “independence” (a slippery concept at best when, like Ireland, we are in the EU) is much less important than whether we have a government that is committed to success & vaguely competent. Despote the bulls*** it seems that none of the existing parties have either.
#11 by Dubbieside on November 25, 2010 - 6:02 pm
Dont you just love the unionists with their Scottish banks.
Were did all the billions of pounds of taxes from these privately owned banks go year after year? They went to Westminster, so it is ok for Westminster to collect all the tax money when times are good, but should bear no responsibility when the very lax banking regulation regime that Westminster put in place went belly up.
When times were good with the economy, remember no more boom or bust, the Scottish pocket money stayed the same, no boom for us, but when times are bad “we are all in this together”
Interesting point, how is Scotland saddled with a bank that needs government support. Westminster is saddled with a bank that they decided to support.
Neil Craig
What tax raising powers have we thrown away? When were we able to change a Westminster statute, and when did we do it?
#12 by cynicalHighlander on November 25, 2010 - 6:03 pm
Are you guys fishermen as this is second red herring!
Scottish banks?
Corporate entities owned by shareholders from around the globe who paid there taxes into Westminster. They are not Scottish banks as the only Scottish independent bank is Airdrie and when did Halifax move north I missed that geographical change.
This makes the rest of the post a story with no backing, sorry.
#13 by Jeff on November 25, 2010 - 11:50 pm
Fair enough CH, it was a bit woolly in that regard. I can’t remember the exact statistic but there is a remarkably high number of people in Edinburgh working for RBS and I daresay there are plenty working at HBOS. Two have such a high ratio of the private sector workforce in a capital city relying on two institutions that rely in turn so heavily on the state has obvious downsides, irrespective of where the shareholders reside. Worst comes to the worst, the banks fail, the Government (be it UK or Scottish) lets them and thousands upon thousands lose their jobs in a very tightly concentrated area that doesn’t have its problems to seek.
You are right to challenge the “Scottish banks” and I am perhaps trading in one too many hypotheticals (I don’t honestly expect HBOS to be demerged for example), but the banks are ‘Scottish’ in the sense that a very large proportion of Scots work for them. ABN Amro went from having 110,000 employees to 32,000. Do you think the many Dutch people who lost their jobs fretted over whether the bank was Dutch, European, Scottish or British when they were clearing out their drawers?
The shareholders, regrettably, have little to do with much of this.
#14 by cynicalHighlander on November 26, 2010 - 10:00 pm
Those jobs ‘saved’ jeff are only temporary as the gambling banks have been allowed to hold there defecits off balance to give the impression that the first bailouts have sorted things! That is why Cameron has offered the Irish £7 billion as our banks hold about 10 times that of there off balance debts to delay the next bank bailouts this side of the Irish sea.
As governments are willing to indebt their residents to benefit these gamblig banks then unemployment will go off the scale and poverty will rise at an alarming rate.
Merkel’s Dilemma; Eurozone Borrowing Costs Hit Record; Expect Sovereign Defaults
A chilling look at the future
#15 by fitalass on November 25, 2010 - 6:09 pm
Thought provoking article.
Ireland couldn’t set its own interest rates, and those in the Euro remained far too low to allow them to even correct their overheating property market.
Their banking system is a mess and they cannot afford the liabilities. There has been a silent run on their banks for weeks now, we just didn’t see the big money men lining up in a queue outside the doors. But they are exporting and their economy was recovering. Ireland’s problems are not about cutting to deep and too fast, you only have to look at Greece to realise that.
If anything, we do look positively spendthrift. But three years in now, we do have to start looking at tackling the deficit before we can even start to address our ever increasing debt burden in the UK. And cutting that deficit over five years looks to be very sensible, and it has certainly soothed the markets thus far. Doing nothing was not option, and at some point we had to start addressing our underlying problems.
#16 by DougtheDug on November 25, 2010 - 7:16 pm
The first thing to say about this post is why is Scotland being compared to Ireland? A much better comparison in terms of natural resources and population is Norway. You know, that country across the North Sea which gained independence in 1905 and is now very rich.
There’s also the standard, “what about the Banks question”. Why should Scotland take the hit for a lax financial regime in Britain which encouraged speculation and never looked at any of the dodgy loans that the Bankers indulged themselves with and they aren’t any Scottish Banks anymore. Halifax Building Society and Bank of Scotland merged a long time ago and if HBOS still exitss it is now owned by Lloyds. RBS is owned by the British Government so the British Government has got a lot more invested in seeing both survive than most. There’s also the question of why are countries bankrupting themselves to save private companies. If Ireland had let all the debt-ridden banks go to the wall it wouldn’t be in half as much trouble as it is now.
You’e got to be kidding about comparing John Swinney’s budget to the Irish budget. John Swinney was aportioning a block grant while the Irish budget was about running a country. How do you propose that the Scottish Government enacts legislation on tax changes, social security benefits and on the minimum wage?
There’s also the problem that you don’t appear to understand how the Scottish block grant is calculated. All cuts in English public sector spending are reflected as proportional cuts in Scotland’s block grant. Scotland suffers the same cuts as England just with the option to share out the reduced pot in a slightly different fashion. If Cameron’s got an austerity plan then we end up with an austerity block grant.
Where is the plan? Well Salmond, Swinney and all the rest of the Scottish Parliament can plan all the like but they run a block grant funded regional council when it comes to finance which is financially dependent on the amount of spend or lack of spend in England.
If you want an austerity plan for Scotland you’re going to have to Scottish independence because that’s the only way you’re going to implement it.
P.S. Going back to Norway, you’ve forgotten our oil in your doom and gloom scenario of the Scottish economy.
#17 by Jeff on November 25, 2010 - 11:41 pm
Doug, I think we’re coming at this one from two totally separate angles.
The premise of my post is that Ireland is bringing in a tight austerity plan, Scotland’s latest draft budget is very generous in comparison so is it worthwhile to stop and consider why Scotland isn’t treading a similar path to our similarly-sized and similarly-minded close neighbours.
You are coming at it from the angle of finding the best comparator and best model for an independent Scotland. A valid discussion but not necessarily the one I was planning on here. I can assure you I wasn’t trying to be as obtuse as simply saying ‘Celtic Tiger bad therefore Scottish Tiger bad too’.
I was quite happy for the piece to be shot down, as I thought it would, but ‘compare Scotland to Norway instead!’ doesn’t quite count, for me. Infact, I do wonder if your charge of ‘doom-and-gloom’ has anything to do with my charge of a Scottish complacency….?
#18 by Andrew BOD on November 25, 2010 - 8:48 pm
Jeff
I get the spirit of what you’re trying to say, but the comparison is ill-thought out. Comparing apples and pears just won’t work.
On the subject of the banks, I firmly believe that if were Scotland independent in let’s say 2007, RBS and HBOS would have immediately moved HQ’s to England. HBOS may have even ‘de-merged’, who knows. Essentially though, if 90% of your ‘domestic’ customers are based in another country, you would move base.
Scotland and Ireland do have one thing in common: they have a group of politicians who are more passionate about tripping their opponents up than serving the people who elected them.
#19 by Jeff on November 25, 2010 - 11:58 pm
I agree I may be comparing apples with oranges but I still think it’s worth considering why Scotland is going to be amongst the last of the European states to bring out a budget that deals directly with the post-recession stage. Can we really go into 2011/12 with, as Swinney is largely proposing, business as usual? I suppose we can if George Osborne is picking up the bill but that, in turn, leads onto a whole raft of questions that we seem to be collectively slipping behind the curve with. That, for me, is where I think a collective Scottish complacency sets in.
When did Scotland decide Calman proposals were the answer? A plan hatched to make sure independence didn’t become popular just doesn’t seem enough somehow.
I’m not convinced that RBS would move base if Scotland were independent. It is proud of its heritage and even when it was riding the world (or thought it was) it invested in a long term HQ in Gogarburn at the bespoke base at the Gyle.
We’re speculating on a future that looks unlikely though so I guess it’s just a gut feeling on either side, which is fine of course.
#20 by Malc on November 26, 2010 - 12:35 pm
Apples and oranges or apples and pears?
#21 by DougtheDug on November 26, 2010 - 12:42 am
Jeff:
“I still think it’s worth considering why Scotland is going to be amongst the last of the European states to bring out a budget that deals directly with the post-recession stage.”
A little clue, it’s because Scotland is not a European state. If you want to do valid comparisons then what you should do is compare Scotland’s budget to the budgets of the German Länder or Italy’s Regioni d’Italia not to the budgets of independent countries though Scotland has not the powers of either these regional governments.
The reason Scotland, “isn’t treading a similar path to our similarly-sized and similarly-minded close neighbours.” is because they’re bringing in national budgets and Scotland is working out how to divide up its government funded block grant. Scotland is currently a local government region of the UK. I don’t understand why you are comparing Scotland’s budget to the budgets of independent states rather than comparing its budget to regional government budgets in other countries.
I’m a little puzzled why you believe your use of of the independent state of Ireland as comparator for Scotland is any more valid than using the independent state of Norway as a comparator. Taking into account of course in the comparison that Scotland is currently a centrally funded region of the UK not an independent state.
#22 by Indy on November 26, 2010 - 9:14 am
“The premise of my post is that Ireland is bringing in a tight austerity plan, Scotland’s latest draft budget is very generous in comparison so is it worthwhile to stop and consider why Scotland isn’t treading a similar path to our similarly-sized and similarly-minded close neighbours.”
The reason is simple: Ireland’s plan hasn’t worked.
#23 by James on November 26, 2010 - 9:50 am
What’s more, it is a cuts budget in Scotland: the Tory government handed over significantly less money and the Cabinet Secretary decided to hand the austerity on. Sorry Jeff, don’t accept your premise here!
#24 by neil craig on November 26, 2010 - 10:50 am
Dybbieside I assume you have been visiting another planet over the last couple of weeks. You may not know it but there has been a certain amount of fuss about the SNP throwing away the Tartan Tax option without telling anybody (& I suspect without knowing it).
Doug the comparison with Norway is not that close. The Norwegicns gave been able to cut hundreds of km of tunnels which has revolutionised their infrastructure, a major gactor in economic success. They have been able to do yhis because they can cut tunnels at £5 million per km. Under the useless gobshites running Scotland a 3 km tunnel would cost £6,600 million, otherwise we could do the same.
#25 by Indy on November 26, 2010 - 10:57 am
Or, more accurately, the Cabinet Secretary decided not to make ordinary working class people pay the price for Labour & Tory mismanagement of the economy.
#26 by CassiusClaymore on November 26, 2010 - 11:25 am
Jeff
Simple answer – we need not have the same austerity regime as Ireland, because Scotland runs a surplus (see GERS).
CC
#27 by dubbieside on November 26, 2010 - 12:19 pm
Neil Craig
I asked a fairly simple question, can you tell me when the SNP government overturned the Westminster right to manage the tax system in Scotland? When did it happen? what was the vote? is it off the statute book for all time?
If you mean the so called tartan tax, the one the last Labour/Lib Dem coalition let the maintenance contract lapse on without telling anyone, that is still on the statute books and is still in the same state of lack fitness for purpose as it always was.
Any party who wins in May 2011 can still resurrect this provided they pay HMRC £12million. What a vote winner “vote for us and we will pay £12mil so we can tax you even more”
#28 by Malc on November 26, 2010 - 12:34 pm
Guys… can we PLEASE move on from SVR?! We’ve had three threads full of it!
#29 by cynicalHighlander on November 26, 2010 - 9:37 pm
Type your comment here
Concur but there are some who are stuck in a rut the problem when our media is so poor in real journalism. Excuse me for giving neil etc.
Iain Macwhirter Now and Then
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