Big numbers can be hard to comprehend. Explaining to my five-year-old recently that lava is at least 700 degrees Celsius (ta, universetoday.com), it was all we could do to stare blankly at each other, trying to grasp what that could possibly be like. “Hot enough to melt the rock of Arthur’s Seat,” I managed, which sent her eyebrows skywards.
Is that how Rishi Sunak feels when he looks at his spreadsheets about this economic crisis? And the economists at the Office of Budget Responsibility? And Kate Forbes? Do they have to step out into the street sometimes, gasping for air, just to reassure themselves that the comforting humdrum of normal life continues?
Borrowing is set to reach nearly £400 billion this year. National debt is set to reach £2.27trillion. Tax rises required by 2025 to stop debt rising relative to GDP: £46bn. Shrinkage of the economy: 11.3 per cent. Magnitude of contraction: the greatest in 300 years.
The spending review this week was the first time that the Government had put a figure on the size of its borrowing and in doing so, it spelled out the new economic and political context we will all be living with for many years to come. This story will overshadow all others. “Unpopular decisions”, the bane of politicians’ lives, are inevitable – eventually – to balance the books, and that goes not just for the Tories in Downing Street but for the SNP in Scotland.
This new reality requires, not just a repackaging of old ideas about an independent Scotland, but a new approach. The offer of last time – promising lots of goodies and an intrinsically fairer society – was tacitly underpinned by oil money. Those oil revenues would not in fact have materialised, we now know.
This time, in the absence of that income stream, with a stubborn deficit between revenues raised and spent in Scotland, and now a share of this colossal debt to manage, the SNP has work to do to come up with an economic case for independence that is both convincing and enticing, and can withstand the white heat of a referendum debate.
Kate Forbes has opposed the public sector pay freeze announced by the Chancellor. OK. It has been argued that a strictly temporary pay freeze is not unreasonable given the better wages and job security public sector workers have enjoyed during this crisis compared to their third sector and private sector counterparts.
But you can understand Ms Forbes’ desire not to derail the planned improvements in public sector pay, which has been playing catch-up in recent years following prolonged austerity (the Tories’ greatest sin was to continue those policies far longer than was justifiable). Decent pay is critical to staff retention in jobs like teaching. She also makes the entirely reasonable point that now is the time to be investing in the economic recovery (interest rates being so low), boosting pay so people spend more.
She must be keen to avoid a repeat of UK Government mistakes after 2010 when austerity acted as a drag on growth.
At some point, however, Ms Forbes and her colleagues will have to decide what book-balancing measures they are prepared to support, otherwise their credibility will start to slide like a landslip at the Rest and Be Thankful.
Having taken such a strong stance against austerity (rightly, in my view), that leaves tax rises. The Institute for Fiscal Studies makes clear that tax hikes will probably be necessary in the mid 2020s.
Is the SNP willing to say whose should be raised and by how much? The choices here aren’t straightforward. Business taxes are usually politically easier than personal tax hikes, but given the battering the private sector has taken, they will be harder to sell this time.
The Scottish Government has introduced a more progressive income tax system but given the marginally higher rates of taxes already being paid by some Scots compared to elsewhere in the UK, there may be reluctance to increase the disparity.
But someone, somewhere will have to contribute more. It will not be enough endlessly to demand that the UK Government borrows more because, as the IFS makes clear, even with interest rates at a historic low the borrowing will eventually become unsustainable.
These are fraught questions but no government on these islands can avoid facing them if they want voters to take them seriously.
Helpfully for the Scottish Government, the Chancellor and Prime Minister are bodyswerving these issues at present too, refusing to be drawn on how they will tackle the debt, though Mr Sunak seemed to hint he may do so in spring’s budget.
Boris Johnson and his ministers are nothing if not willing wingmen to the SNP, and to underline the point, Rishi Sunak did his bit to portray the UK Government as callous ideologues by announcing the intention to slash the aid budget. He dutifully set up the ball for a finish by Nicola Sturgeon, who thundered that the cut was “deplorable”.
She is absolutely right. The £4bn reduction, retreating from a Tory manifesto commitment, came just a week after Boris Johnson announced a £16.5bn four-year splurge on defence. It was a clear salute to the Tory right, an ideological choice which will lead not just to a loss of standing for the UK abroad but, in Oxfam’s estimation, to tens of thousands of preventable deaths.
And Brexit? Well, what can you say? Mr Sunak offered no reassurance whatsoever about a deal. While paying out billions to keep businesses running during the pandemic, the Government at the same time is building concrete roadblocks to doing business.
With a government like that at Westminster, inconsistencies and gaps in the Scottish Government’s economic approach are barely noticeable.
Kate Forbes has accused the UK Government of cutting Scotland’s capital budget by 5% (though it has also increased the block grant by £2.4bn in 2021/22). This was a fairly typical spat, reflecting Scotland’s current interdependency with the UK.
But one day soon, the SNP hopes to convince voters to join them on a journey into independent statehood. Voters chastened by the last referendum experience will be looking for more honesty this time round and signs that the leadership are willing to face up to hard choices.
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