Denial is a River in Scotland

27 June 2013

Aye, the old ones are the best. You might think that George Osborne’s decision to  leave the Scottish block grant more-or-less untouched in yesterday’s spending review would be a cause for chuffedness north of the border. You’d think wrong.

Osborne announced a 1.9% reduction in real-terms funds made available to the Scottish government. Alex Salmond’s ministry will have to make do with £25.7 billion. All hail the Barnett formula since Mr Osborne’s decision to protect health spending ensures that the funds available to Scotland are similarly guaranteed, minimising the ability to cut the block grant even if that were deemed economically – or, rather, politically – wise. Since many English departmental budgets – justice, local government, environment etc – must endure budget cuts of more than 10% it’s evident that Scotland is treated differently.

As I say, that’s plainly a consequence of budget rules and political calculation. London has little wish to antagonise the Scots in advance of the independence referendum next year. English voters might look at this indulgence and wonder if we really are “all in it together”. Not that Osborne will receive any thanks from north of the border either.

To listen to the SNP you’d think Osborne was starving Scotland. A modern-day rough wooing, if you will. Fiddlesticks on stilts, of course, but there you have it. The SNP often appear to believe in a fantasy world in which money flows as surely and serenely as, well, the river Nile. (This, incidentally, is one reason why fiscal autonomy is a good idea. It injects some reality into Scottish politics.) Joan McAlpine’s column in the Daily Record this week is a typical illustration of the SNP’s  topsy-turvy “thinking”:

In 2010, the UK Government predicted public sector borrowing of £322 billion between 2011 and 2015–2016. Now it is forecast at £539.4bn – a whopping 68 per cent more than predicted.

With the Chancellor due to cut another £11.5bn from public spending this week, things can only get uglier.

And the answer to this? More borrowing, obviously. The SNP’s approach to fiscal discipline makes Ed Balls seem like Sweeney Todd.

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How times have changed. Only three years ago Alex Salmond told The Times that:

It is really important, in my view, to be able to say to people how we can change the circumstances and increase revenue as well as decreasing expenditure. It is my job to come up with some answers, along with others. If you jump up and down nihilistically saying ‘dreadful, dreadful, dreadful, cuts, cuts, cuts’ then I would be failing in my duty to the people.

If that analysis still holds today – though perhaps Mr Salmond would say it does not – then by his own estimation the First Minister is failing in his duty to the people.

In fact Osborne’s strategy appears to be to hold on tight and hope for economic recovery and growth. The cuts to many departmental budgets are real and, in some cases, severe but overall government spending is hardly being decimated. The pace of cuts is, if anything, slowing and much of the consolidation has been punted down the road in the hope that economic growth will have returned by then, ensuring that said consolidation will be easier to bear. This may prove optimistic.

As for Caledonia, the notion that an independent Scotland could currently borrow-to-invest (as the SNP insists it could and would) is sufficiently fanciful it borders on the lunatic. Interest rates for government debt are low at present at least in part because finance ministers have convinced the markets that they are determined to keep borrowing as low as possible. This is, if you like, a game of chicken in which neither side has any great enthusiasm for testing the other. Besides, as Bill Jamieson observes in today’s Scotsman, the era of cheap money may be coming to an end.

It is bold to suppose an independent Scotland would somehow be immune to the budgetary pressures afflicting almost every other country in europe. Look around: from France to Denmark to the Netherlands you find governments struggling to deal with straitened circumstances. Even Sweden has cut welfare spending (and taxes, of course). And most of these countries have lower deficits, and lower levels of government debt, than the UK.

Even if you accept the nationalist argument that an independent Scotland’s finances might, relatively speaking, be better than the UK’s it scarcely follows they would be comfortable. (Not least since it is probable Scotland would, at least initially, be unable to borrow as cheaply as the UK currently can and does).

The UK will make debt interest payments totalling £51bn this year. By 2017-18 that figure is projected to rise to a buttock-clenching £67.8bn. If you assume that an independent Scotland would inherit a per-capita share of UK debt, that would leave Scotland paying approximately £6bn in debt interest payments in the first years of independence. That would be close to 10% of total government spending. Or, to put it another way, debt interest payments would amount to at least 60%  – and possibly more some years – of the revenue from north sea oil.

That doesn’t mean the finances of an independent Scotland cannot be made to work. Merely that they would be tighter than nationalist assumptions might have you believe. And that’s before you consider that the SNP promise increased spending and lower taxes. At the very least, it is difficult – and this is something that John Swinney has, I think, recognised – to see how there’d be much money left to set up the Scottish Oil Fund that’s such an important part of the long-term plan for Scotland.

Again, I don’t believe an independent Scotland would have to be an economic basket-case. But we would not be starting from an ideal set of circumstances either and it seems more likely than not that at least the first few years of independent life would be exceedingly tricky and uncomfortable. Or, to put it in politician-speak, challenging. No wonder many nationalists prefer to believe in Tartan Tooth Fairies.

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  • Jennie Kermode

    Alex Massie’s argument here is somewhat let down by his failure to appreciate what words mean. To decimate is to destroy one in ten. Decimation is _exactly_ what is happening to overall government spending.

  • allymax bruce

    Alex, your article ‘approaches’ important issues, and perspectives, but you don’t get your points across to your readers because your ‘approach’ is juxtaposed to the points you’re ‘trying’ to make, (scare-de-cat). Not everybody is as clever as you, or their thinking sufficiently unabridged from their archetypal cringe. Sometimes, you just need to write like you were writing for the Scotchman, and make your points unequivocal; and simple. Just say that no-one has ever asked where Odious Osborne actually borrows Westminster’s debt from. Just say it is the crooked Zionist banksters, those that we stupidly give our taxes to, and are given austerity cuts back! Just say it’s the same Zionist usury gang of Philistines & Pharisees that Jesus warned of, and traduced; the very same that make it their life’s worth, and absolute endeavour to always own all the finance systems in the world, like the Fed’, the IMF, the ECB, and the BoE. Just make it basic that these Zionist owned & controlled usury gangs are not willing to ‘lend’ to our independent Scotland. That way you will get less cringing comments, and more intelligent answers.
    Oh, btw ,Scotland doesn’t need, nor want money from these Zionist usury gangs of immoral Philistines and Pharisees. Wouldn’t touch their evil money with a barge-pole!
    Scotland wont need tooth fairies, we have God on our side. It is written.

  • allymax bruce

    Another £12 billion cuts from welfare, and that’s on top of the £22 billion from last year. But Westminster politicians & banksters get pay/pensions rises.
    An other £24 billion cuts on gov’ departments, and that’s on top of the spending freeze from last year. But Westminster politicians & banksters get pay/pensions rises.
    Scotland’s ‘pocket money’, cut from £32 billion, to £26 billion from only a couple of years ago. But Westminster borrowing another £130 billion, (which means even more cuts), off the surplus of Scotland’s oil; helps pay for Westminster politicians & banksters pay/pensions rises. Massie, you really don’t like Scots’, and Scotland; do you? Take courage from Lesley Riddoch, and stand up for Scotland; grow a pair!
    Westminster have promised more Austerity cuts for the next 2 years, at least!
    The way things are going, the unemployment benefit for Scotland’s poorest will again be cut, Scotland’s pocket money will keep getting ‘hair-cuts’, and thus, government, (and by default, local authority budgets, spending, & public sector jobs), all face deep, deep cuts.
    Vote Unionist, and loose your benefits, your job, and your integrity of ‘being’ human!

  • dougthedug

    Alex’s in a river in Egypt about Scotland’s right to be a country.

  • CraigStrachan

    The Dee-nial, surely.

  • Bill Kenny

    The Tourettes like response to your article from some of the posts here once again demonstrates the Peter Pan nature of Scottish nationalism. As many Nationalists seem to inhabit a strange world of self pitying victim fantasies where they can ‘never grow up, never grow up, never grow up No Sir!’

    • terregles2

      It seems to beggar belief that any nation should choose to govern itself. What a mad concept it will never catch on.
      How did such a strange fantasy ever attract any votes.

    • Spammo Twatbury

      “Tourettes like”?

      Where have you hallucinated any swear words or abuse, which is what people usually mean when citing Tourette’s Syndrome?

      The only person posting remotely abusive comments here (“self pitying victim fantasies”) is you.

  • terregles2

    The facts of Scottish independence are this. Scotland will become independent and will remain much the same as now in economic terms. Second possibilty Scotland will become independent and be much better off economically when it has control of Scottish resources. Third option is that Scotland will become independent and be worse off economically.

    If the third option is true then that is an even stronger case for independence. I find the idea of living off hard working tax payers in England totally abhorrent and I am surprised that a Tory thinks it is alright to do so.. Why should anyone in Scotland be happy to live off another nation? if Scotland were to be worse off, I would in the interests of fairness still choose independence.
    Mr Massie should be ashamed advocating that Scots should be scroungers and live off our English neighbours. Perhaps Mr Massie is happy to be a leech on the English but some of us have self respect. I don’t believe Scotland will be worse off but I certainly have no wish to live off my English cousins if the reverse is true.

  • dougthedug

    “No wonder many nationalists prefer to believe in Tartan Tooth Fairies.”

    When speaking in generalities it’s always good to give an example or two. Can you give one example of a nationalist who believes in Tartan Tooth Fairies?

    I assume by this you are referring to the “land of milk and honey” that unionists obsess that nationalists believe in.

    • terregles2

      Do the Britnats not keep telling us we are living in the land of milk and honey truly blest by the union.?

  • dougthedug

    “Aye, the old ones are the best. You might think that George Osborne’s decision to leave the Scottish block grant more-or-less untouched in yesterday’s spending review would be a cause for chuffedness north of the border. You’d think wrong.”

    I’m not sure I understand this one Alex. Scotland’s public finances are calculated using the Barnett formula with English spending as a baseline and always have been.

    Are you saying the amount allocated under the Barnett formula has increased relative to English spending or are you havering?

    • Wessex Man

      He’s saying just that, why not look it up yourself rather than making statements without foundation.

      • dougthedug

        I didn’t make a statement I asked a question. The question mark sign at the end is the well hidden clue.

        • Wessex Man

          No you didn’t you asked Mr Massie if he was Havering!!!!

          • Spammo Twatbury

            Um, yes. Asking usually denotes some sort of question.

    • terregles2

      Mr Massie seems to be struggling to find another angle and interesting article to write about Scotland. Denial is a river…..Oh dear.
      Perhaps he may soon enlighten us and share his thoughts and opinion on the McCrone report.
      Better still he might explain to us why London does not want to antagonise the Scots before the independence vote.
      The Scots are subsidised by London yet London wants to keep Scotland. Topsy turvy thinking indeed.
      What on earth is going on?. What is it that Scotland has that unites Miliband and Cameron in wanting to hold on to Scotland.

  • Wessex Man

    Oh dear I predict troubled time ahead for Mr Massie yet again for telling the truth oh woe will it be!

    • Spammo Twatbury

      What an excellent and constructive contribution to the debate. Thanks!

      • Wessex Man

        always aim to please myself!

      • terregles2

        Just another person who thinks that if they keep repeating the mantra that Scotland is a poor country supported by the rest of the United Kingdom it will become true.

        Luckily for us we can now access the true economic figures from sources like the McCrone report and the figures for Scottish exports etc.

        It is hard not to be worn down by the negativity and misinformation that is thrown at the Scottish people on a daily basis by the British media. Thank goodness we now have Wings over Scotland and NewsnetScotland along with Bellacaledonia..

        Ir is hard to understand how any Tory can tell the Scottish people that Cameron wants to keep the Scots in the union because he has Scotland’s welfare at heart. One Scottish Tory MP and that is viewed by many Scots as one too many.

        • Wessex Man

          Really, are you going to tell me that this article that appears in Farmers Guardian, Wednesday 26th June isn’t true?

          Farmers Unions in England, Wales and Northern Ireland have rejected calls by the Scottish Government to redistribute UK Common Agricultural Policy (CAP) funds north of the border.

          Speaking at last week’s Royal Highland Show, Scottish Rural affairs Secretary Richard Lochhead said plans to redistribute funds under the reformed CAP mean Scotland would be entitled to £198/hectars by 2020 compared with the current average of £130/ha. The extra £300m a year this would generate would come from the other three UK regions.

          On Tuesday The NFU joined NFU Cymru and Ulster Farmers Union in rejecting the Scottish Government’s call.

          Following a unanimous vote the NFU Council rejected the policy. NFU deputy president Meurig Raymond said “The CAP bufget for the UK has been cut. This means there is less money available in the future. It beggers beielf that the SNP think it’s justified that somehow Scotland should be exempt from those cuts.” “As farmers organisations representing the interests of active farmers, we believe that the purpose of direct payments is to maintain agricultural capacity and underpin farm business resilence, not to be spead thinly over millions of hectars of unproductive land.”

          NFU Council also gave a ringing endorsement to the recent comments made by the Secretary of State Owen Paterson at the Holyrood Parliament.

          Mr Raymond added “Mr Paterson believes that the fairest way of dividing up the UK pot is to retain the stasus que, We absolutely agree. The Uk’s direct support distribution envelopes should remain as they are, broadly reflective of the agricultural capacity of the area to which it is allocated.”

          He said that Mr Lochhead’s comments had their origins in the high politics of the Scottish Referendum. Our jobs as farming unions is to ensure that decisions are made on objective not opportunistic grounds and that farmers across the rest of the Uk are not left at a disadvantage.

          Speaking at the recent Cereals Event in Lincolnshire, NFU President Peter Kendall expressed concerns that a ‘senior politician in the cabinet’ was doing a deal to redistribute English CAP money to Scotland because of next years referendum vote.

          “Alex Salmond, who is probably the canniest politician we have ever witnessed is looking for £60m to £300m of the Englsih envelope, not pay on vast areas of nothingness but to increase the lowland payments to make sure they remain 60 percent more than lowland in England” said Mr Kendall.

          Responding during a panel discussion, Farming Minister David Heath said. “The idea that we are rolling over in favour of Scotland is one of the great myths. The reality is that we have come to an agreement at the end of the day with devolved adminisrtations on distribution.”

          • Wessex Man

            Bearing in mind how I’ve been accused of lying in the past about the politics around the Scottish Referendum, I decided to enter the entire article in it’s original form so that no one can make similar accusations about me this time.

            The reduction in our (UK) CAP payments is the direct result of Call me Dave’s victory on EU budget discussions earlier in the year, we now have our UK farmers receiving the biggest cuts by a very long way and in France’s one man band’s retaining 100% payments!

            Have a nice day.

          • terregles2

            I have up until now enjoyed exchanging views and listening to opposite ideas and differing points of view.
            With one or two exceptions it is always interesting to listen to what other people throughout the UK are thinking.
            Since reading the post that you very rudely wrote about me in answer to a Kaiser posting I will refrain from further exchanges with yourself.
            I would not like to be accused of ranting and of being anti English as neither of your accusations are true.

            • Wessex Man

              This of course is your choice, until you started demanding to the point of obsession apologies from Nigel Farage about some bloke he had probably never heard of, I thought of you as a reasonable advocate of Scottish Independence, boy how wrong could I have been.

              I will as you will continue to express my opinions on this blog.

  • Peter A Bell

    Alex Massie may not believe an independent Scotland would have to be an economic basket-case. But he’s more than happy if the people of Scotland are sold this tale of woe. His advice to those people appears to be that they should take whatever the British state deigns to bestow upon and be bloody grateful for it.

    • terregles2

      He is so negative it is painful to listen to. Still cannot accept that he says he believes that Scotland is poorer than England and yet he is happy to tell Scots to keep scrounging from the English.
      I thought he was supposed to be a Tory and believe that people should stand on their own two feet.
      He should make up his mind. What does he believe in.?

  • Spammo Twatbury

    Scotland was short-changed to the tune of £4.4bn last year by the UK. We’ve already contributed our share of cuts.

    • terregles2

      The fact that Cameron and Miliband are arguing that Scottish resources are best managed by the Westminster parliament really tells us all we need to know on the economics of the debate.

    • Fergus Pickering

      Of course you have. There. there. The English are just so beastly unfair.

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