The less than festive message from Dover House to Bute House was presaged in the Chancellor’s Pre-Budget Report which removed hope of £350m of accelerated capital from the 2010-11 budget to the Scottish Government.
In Scotland, the annual block grant from the Treasury is due to fall from £29.6bn this year to £29.3bn next year. The slimming regime, however, cannot be put off until next year. As The Herald has reported in our Reshaping Scotland series, that has been recognised by the more fiscally far-seeing councils and other bodies, which are already considering how to reduce costs and share services while causing least impact on essential services.
Even the best endeavours and the cleverest transfer of resources, however, will not be able to avoid the need to make extremely difficult decisions.
Inevitably they will have a political as well as an economic context and that turns the recommendation of the Calman Commission for greater tax-raising powers for the Scottish Parliament from a theoretical discussion into a possibility within a much shorter timespan.
As Mr Murphy puts it: “If the politicians in Scotland want more money to spend and the public are willing to give them it, then they can have it”. It would, however, take a brave, if not foolhardy, Scottish Government to institute a higher rate of tax in Scotland than in the rest of the UK. If it coincided with a cap on public sector pay and many workers in the private sector losing income as a result of reduced hours, it would amount to political suicide.
Nevertheless, polls have tended to show more support for increased taxes among Scots than south of the border, provided the additional money is spent on health and education, so it must remain a possibility for more buoyant economic times.
The commitment by the Labour Government at Westminster to protect spending on education, health and the police, however, means that those areas should be similarly secure in Scotland as a consequence of the Barnett formula, further weakening the immediate case for a higher tax even if it were directed solely to these most popular public services.
In the current financial climate, therefore, the focus must remain squarely on reducing public spending. Mr Murphy’s accusation that public bodies are merely scratching at the surface of reducing waste and duplication may sting those which are preparing for deep cuts, but echoes recent finding of the Auditor General that radical reform across all public services in Scotland is urgently needed.
As the budget is shrinking, the cost of some services, such as free personal care for the elderly, is rising, making it is clear that Scotland needs more than “a bit of a diet”. Re-shaping Scotland for a fat-free future will not be achieved without pain.
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