Today’s labour market figures put things into a bit of perspective for Scotland’s MSPs today as they heard John Swinney’s last budget before the Scottish Parliamentary elections next year. Unemployment in Scotland continues to grow – in the three months to September 21,000 more Scots lost their jobs, a rise of 0.5% and paints a gloomy forecast before public sector cuts really come home to bite.
This budget is without question the most important since devolution – the Comprehensive Spending Review has given a framework for substantial cuts in the block grant and a severe reduction in Scotland’s funds for capital expenditure. John Swinney somehow has to manage expectations, protect frontline public services and position Scotland on the road to economic recovery – no easy task ahead of an election year. Consensus in the parliament is critical if this budget is to pass.
Today’s statement was the start of the process, but it is where the hard work starts. John Swinney has been trying hard to mend relationships with Scotland’s local authorities following his pressure to extend the council tax freeze for 2011/12. Cosla has been on the warpath recently as local authorities struggle to maintain services amid these spending constraints. Many, including Edinburgh, have already said that a significant number of staff will be lost. Although Cosla’s leadership has agreed a new contract with the Scottish Government, Swinney has to wait for this to be approved by each of Scotland’s 32 local authorities before it becomes binding. If this doesn’t happen it could become very destabilising into the New Year.
The main political parties have been calling for a longer term spending commitments rather than a traditional year-long budget – this due to the CSR which gives a three-year framework for UK departments. Iain Gray has already publicly stated that John Swinney’s tenure has been a waste of four years, severely criticising the SNP’s record on capital infrastructure.
Swinney has some good advisers around him – Joseph Stiglitz, the Nobel Prize winner, has recommended switching revenue spending to fund capital projects in order to keep the economy turning. In his statement he referenced the advice given to him by the Beveridge Review and the newly formed commission to address future public services by Campbell Christie.
So what was the basis for the statement? This year’s budget has been guided by three principles; enabling economic recovery, protecting and reforming public services and maximising Scotland’s transition into a low carbon economy. A further 3% efficiency savings for all departments will be the target for 2011/12.
The leaked decision on a public sector pay freeze featured prominently. John Swinney was also keen to outline the government’s record on achieving public sector efficiencies, outperforming Whitehall departments. These will be offset by the government’s promise to deliver a living wage of £7.15 as well as the Health Secretary’s decision to remove consultant distinction awards in the NHS.
An increase in business rates was outlined for Scotland’s larger retail and out-of-town properties in Scotland, although there were no extra details on what this increase will be. It will set out in an order to parliament shortly.
Swinney stated that the government would protect existing capital investment projects over new ones in order to protect road building. The Finance Secretary promised to transfer £100 million from this year’s budget to support essential capital projects as well as a programme of infrastructure investment worth £2.5 billion in health, education and strategic transport projects.
A priority has been to protect jobs in the public and private sectors. The budget will ring-fence 34,500 training opportunities in 2011-12 and will fund a near £400 million housing and regeneration budget which will contribute to building 6,000 new affordable homes. Money has also been allocated to improve broadband infrastructure.
Overall, the Finance Secretary’s statement was conciliatory in tone and he called upon the parliament to achieve consensus in order to deliver a sustainable economic future for Scotland. He said Scotland has an opportunity to ‘follow a different path’ to Westminster but challenged the parliament to ensure that it takes more responsibility for Scotland’s future financial decisions – a nod towards the Scotland Bill that is due for publication next month.
Andy Kerr gave a short response accusing the Swinney of putting party before country but did not say anything significant on the proposals outlined. The Conservatives welcomed the public sector pay freeze and urged public sector reform and increased efficiencies. Jeremy Purvis noted the Liberal Democrats concerns on business rates, while Patrick Harvie, the convener of the Greens, who could be critical in getting the budget through, attacked the Finance Secretary for implementing Tory cuts in a country which didn’t vote for them.
The Budget will now move into Committee stage for scrutiny before the Parliament votes early next year. This is where the negotiations really start.