‘Reconciliation’ is such a warm and happy word.
It conjures up reunited families, patched-up marriages and even peace-making between nations. That is probably why economists favour the term to describe the adjustment required when a budget outturn falls short of the forecast. ‘Reconciliation’ has a better ring than ‘we got our sums wrong again’.
Scotland’s budget is in for some reconciliation after the Scottish Fiscal Commission projected a shortfall in excess of £1billion over the next three years of spending plans. One of these years, 2021-22, will bear the brunt of the fiscal pain, with the finance secretary forced to close a £600million black hole in the national kitty.
This is double the borrowing limit allowed to remedy a mistaken projection. Only a combination of revenue rises, borrowing and spending cuts can correct course. In plain terms, your taxes are going up again.
Derek Mackay won’t be winning any popularity contests any time soon. He blames austerity and Brexit and both policies have a lot to answer for. But absent both, Scotland would still be facing a shortfall because of lower growth in revenue and population.
Scotland doesn’t have enough high earners for a strong tax base and, perhaps unsurprisingly given the current political fashion for making the country a more expensive place to live and do business, we are not attracting them in sufficient numbers to change that.
Some of the excuse-making at least has the benefit of giving us all a chuckle. How else do you respond to efforts like this, from the SNP government’s medium-term financial strategy:
‘Scotland’s economy grew 1.3 per cent in 2018, continuing a pattern of stronger growth compared to 2015 and 2016. Growth was similar to that of the UK (1.4 per cent). On a per-person basis, however, Scotland’s growth rate outpaced the UK by 0.9 per cent to 0.7 per cent, respectively.’
When the figures show Scottish growth 0.1 per cent behind, it is ‘similar’ to that of the UK; when a more favourable set of numbers puts us 0.2 per cent ahead, that is ‘outpacing’ the national growth rate. Economists were put on this earth to make estate agents look straight.
News of these eye-watering ‘reconciliations’ came in the same week Nicola Sturgeon popped over to Dublin to rattle the independence sabre once more.
She was basking in her European election triumph and said: ‘Suddenly this idea of being a small independent country in the European Union, we only have to look at Ireland to see the benefits of that and many people are having their eyes opened.’
The Nationalists are independence tourists and have trekked around the globe looking for promised lands to sell Scottish voters. A separate Scotland was to be like Ireland, then Iceland, and once both were crippled by recession, the pilgrimage crossed the North Sea to Norway before heading Down Under for a surprise sojourn in New Zealand.
Ireland’s return to favour has more to do with Brexit than economics but, in these times of climate emergency, it is good to see the SNP recycling its fantasies.
Ireland is the kind of ‘normal country’ the SNP yearns for Scotland to become but we don’t need independence for a taste of normalcy. Raiding the piggy bank to make budget reconciliations is what every ‘normal’ country has to do. Some years are fertile, others fallow, but the crops still have to provide. You tax here, cut there and borrow from Peter while leaving Paul with an IOU.
Sturgeon, like her predecessor, retails an independence free from such banal concerns, a normal country with abnormally high prospects of wealth and low risks of difficult choices. It is an illusion, a callous trick played upon those who have the least and would suffer the most from the fiscal realities of a go-it-alone Scotland.
These are the realities Sturgeon almost never acknowledges when scolding her opponents that Scotland could be just as successful as other small European nations. Indeed it could but only by confronting as they do the economic facts of life. Ireland’s GDP grew by three per cent in the first quarter of this year, which allows the Oireachtas to invest in public services. To pay for this, however, Irish workers are hit by a 40 per cent rate of income tax once they start earning just over £31,000.
Even with all this revenue at its disposal, there are things Ireland has decided it can’t afford, such as a National Health Service. While there is universal healthcare, which is free for those of a certain income level, age and disability, two-thirds of the Republic’s population has to ‘co-pay’ every time they see a GP, visit A&E or spend a night in hospital. That is what a normal country looks like and it bears almost no resemblance to the fictional Scotland portrayed by Sturgeon and other advocates of seceding from the UK single market.
We close on an awkward matter. In the midst of the ‘reconciliation’ blame game, Westminster, or at least the Unionist parties, are actually getting off lightly. They do bear culpability. The devolution of income tax was fraught with risk from the start, not least for its tinkering with the block grant mechanism that more often than not benefitted Scotland’s bottom line.
The sum effect of handing control to the Nationalists is that Scots are now taxed higher, subsidised less and left to fund the resulting shortfall. Block-grant adjustments, which deduct the revenue forgone by the Treasury from the annual cash allocation to Holyrood, have distorted pooling-and-sharing into a system of guessing-and-plugging. Scottish budgets will have to rely on projections and hurry to find alternatives when the money doesn’t come through.
Until now, devolution wrought most of its vandalism on our political union, building the Nationalists a parliamentary springboard from which to undermine the United Kingdom. We are beginning to see the impact of devomania on economic solidarity across the country. It’s not just the SNP that has fundamentalists and gradualists; non-nationalist politics is split between implacable devocrats and those who have come to suspect the merits of an ever-expanding devolution industry.
The devocrats have been loudly calling the shots until recently. That, I suspect, is changing. I talk to activists and politicians from across the pro-UK parties and scepticism about the Holyrood project is becoming less and less taboo. Now the sceptics have a billion reasons for their doubts.
Jo Swinson has had an eventful seven days. The Liberal Democrat MP announced her candidacy for the leadership of her party and sent Scotland’s ruling Nationalist cartel into apoplexy.
Swinson pointed out that 80 per cent of school leavers in one town of her East Dunbartonshire constituency went to university, while only four per cent did the same in nearby Govan. Barely had she got the sentence out than the Nationalist attack dogs were off the leash and mauling her for ‘using fake figures’ and making ‘false and patronising claims about children’.
Had the SNP taken the time to check, it would have learned that the four per cent figure came from its own government (though Swinson seems to have overstated the matriculation levels in her backyard).
Observation number one: The SNP has spent more time talking about attainment among children from Govan in the last 72 hours than it has in the last 12 years.
Observation number two: Jo Swinson scares them.
Former universities minister Sam Gyimah has become the 13th Tory MP to launch a leadership bid. His announcement comes after two polls in a row put the Tories under 20 per cent, the most recent an all-time nadir of 17 points. The way things are going, the Tories will soon have more people trying to lead them than they have willing to vote for them.