Friday, 21 January 2011

SNP sacrifices economic growth to protect "free" services

There were two surprises in yesterday's Daily Telegraph. The first was that the London-based daily published an article on Scottish politics. The second shock was that the article was actually quite good.

Simon Johnson (Scottish Budget "sacrifices growth for benefits") produced an intelligent, well researched and thought provoking piece that questions the SNP's commitment to longer-term economic recovery over short-term electoral priorities.

Johnson examines the Scottish Parliament finance committee's inquiry into the Holyrood government's budget proposals. He reports that concerns have been expressed about SNP ministers protecting popular "free" services, such as concessionary bus travel, the NHS and personal care while slashing the budgets in areas such as enterprise, housing and Higher Education - which encourage economic growth.

The obvious point being made is that the SNP's proclaimed commitment to growing Scotland's economy is paper thin and that Alex Salmond's party's real priority is electoral success in May. While it is hardly surprising for a party in government to want to steer clear of unpopular decisions in the run-up to an election, it is regrettable that the SNP have shirked away from making the tough decisions that Scotland deserves.

By tough decisions I mean the kind of decisions Lib Dems are having to make in government. The kind of decisions that are necessary but do not win votes. Decisions about cutting the deficit in the interests of longer-term economic development rather than for short-term party political benefit.

The UK economy is in a delicate condition. Scotland has fared particularly badly. This is not necessarily Mr Salmond's fault, although if he had been allowed to develop Scotland's economy along the lines of Iceland the catastrophe would have been worse. However, while Salmond will happily shirk liability for the mess and continually blame the coalition in Westminster for Scotland's ills, he's less keen to take on some responsibility for turning Scotland's ailing economic fortunes around.

It's as if the SNP tactic is to take credit for retaining popular services while blaming the UK government for cuts elsewhere. That might win some votes, but hardly constitutes responsible government.

Importantly, according to Johnson, "the committee, including its SNP members, questioned the First Minister’s failure to explain the about-turn in its strategic priorities and whether economic growth will continue to play second fiddle in future." The inference is obvious. Necessary action isn't forthcoming. Instead of investing in Scotland's economic future and standing on a credible plan for improvement, the SNP prefer to prioritise their pet projects and populist rhetoric.

Salmond is a canny operator. I respect his intellect and tactical nous. I don't doubt that he knows how to win votes. However, I'm convinced that he is more than aware of the need for decisive action on the economic front and that a failure to deliver will adversely effect the Scottish economy's potential for growth. Surely he isn't willing to compromise Scotland's future by starving growth-facilitating sectors of funds while ringfencing other budgets?

Even from a nationalist point of view, this makes little sense. What's the point in neglecting an economy whose growth is central to the vision of independence?

The Budget vote, on 9th February is expected to be close. Salmond has intimated that SNP ministers could resign en masse if the Budget proposals are voted down twice - hoping the public will blame opposition parties for the Budget's failure. This would be a tactical error as an early dissolution would require a two-thirds majority that Salmond is unlikely to achieve, thus allowing an interim First Minister (probably Iain Gray) to take up office before the election and open the SNP up to accusations of incompetence and cowardice. Salmond is surely bluffing; I can't see him going for it.

In the lead-up to the budget, politicians have responded to the finance committee's report. SNP MSP Andrew Welsh, the finance committee’s convener,spoke of the “highly significant challenge” for the Scottish government given the £1 billion cut in public spending this year. “We have asked the government to respond to the view of a number of witnesses that the government’s priority is the protection of public services and not economic growth,” he said. Lib Dem finance spokesman Jeremy Purvis added that "the clear point has been made that the Budget doesn’t meet the needs of the economy”.

According to the Telegraph, business leaders are calling for bolder action. David Lonsdale, assistant director of CBI Scotland, wants a “far bolder approach to making savings”. Peter Wood, director of Optimal Economics, suspects that "the commitment to economic growth is more of a slogan than a reality.” And Jo Armstrong, from the Centre for Public Policy for Regions (CPPR), concludes that "it is difficult to see the link between the headline of sustainable economic growth and the current budget allocations".

All this comes in a week during which it has been announced that UK unemployment has increased and now stands at 7.9%. Of particular concern are the statistics for youth unemployment, which now stands at a frightening 20.3%. The statistics for Scotland show a minuscule improvement on the UK figures. The Bank of England signalled its lack of commitment to decreasing joblessness on Tuesday by putting up interest rates - a measure designed to tackle inflation but one which will have the inevitable consequence of higher unemployment. I'm not a Keynesian demagogue, but I think the Bank of England would have been better advised to allow for continued inflation above the government's target of 2% in order to tackle the more pressing problem of unemployment. Clearly the Bank has little concern for the human and social costs of raised unemployment.

Unemployment is a human tragedy and can not be ignored. What is needed is a government willing to take on the responsibility for job creation. The SNP must be willing to step up to the mark. Revealingly, The Herald this week tackled Secretary of State for Scotland Michael Moore and SNP Finance Secretary John Swinney in relation to new statistics regarding the problem of long-term unemployment in Scotland. Moore indicated that the coalition accepts that "tackling the deficit is unavoidable" and is "taking steps [which] are already helping keep long-term interest rates lower and encourage businesses to invest and grow.” At least he has a strategy, even if it isn't one reflected in the Bank of England's recent actions. Contrast this, however, with John Swinney's response: "the UK Government is wrong to threaten the positive signs we are seeing by cutting the Scottish budget by £1.3 billion next year.” Yes, that's it, keep on blaming the Westminster government. That old chestnut usually works for the SNP. It's a bit of a shame that Swinney doesn't want to discuss the SNP's strategies to tackle unemployment.

The political drama will unfold on 9th February, and it's certainly significant that Swinney's Budget has already been criticised by the finance committee and the business community aside from his political opponents. Whatever the political outcome and the inevitable compromises, it's unlikely that the Budget will contain any cohesive plans for job creation or for growing Scotland's economy. That is the SNP's failure, and a betrayal of the Scottish people.

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