Civil society is key to tackling public spending deficit
Stephen Maxwell, TfN
AS presented by some of Scotland’s regular media commentators the UK’s current budget deficit speUs the end of the modest experiment in extending social democracy pursued by successive Scottish governments since the creation of the Scottish Parliament just eleven years ago.
Some write regretfully in the tone of a requiescat, but the free market zealots among them can hardly contain their glee at the prospect of a bonfire of such Scottish vanities as free social care, free school lunches, free bridge crossings, free bus travel for pensioners and free university tuition.
Contrary to the claims of the media Savonarolas the current budget deficit was not created by the runaway profligacy of Scottish devolved government. Prior to the banking bailout Scotland’s level of public spending as a proportion of national income was in the middle of the OECD rankings.
Comparisons of regional spending within the United Kingdom certainly show Scotland in the upper half of public spending as a share of "regional" income but only because Scotland’s North Sea oil and gas output is excluded from her regional income by Treasury convention. With that added Scotland is just 1.2 per cent above the UK average.
Scotland has of course enjoyed the benefits of the three to four per cent annual growth in UK public spending provided by UK Labour Governments between 2001 and 2007, and there is at least as much scope in Scotland as in the rest of the United Kingdom to argue about how wisely the increased resources have been applied. But the attacks on Scotland’s devolved governments for spending the money allocated to them by Westminster on their devolved social responsibilities seem overcooked.
After all the Scottish Parliament was set up by Westminster as primarily a spending authority with only minor powers over taxation and economic development. If Scotland’s predilection for additional welfare expenditure is profligate how to describe the billions of pounds spent on a strategically useless nuclear deterrent, a disastrous and counterproductive war in Iraq, failed IT systems for England’s NHS and the now aborted national ID database, the hyper profits enjoyed by the early PFI ventures and other Whitehall follies?
The UK’s structural deficit, that is the deficit of public spending over tax income leaving out the effects of the economic cycle, is estimated at about half of the total deficit, or around £70bn in 201O/1l. That is one of the largest in the OECD.
But as the product of the balance between spending and tax revenue the deficit is sensitive to the structure of the tax system, and over the last three decades the UK’s personal and capital taxes have become notably less progressive. Nor is it purely a negative factor. In times of recession, particularly global recession, it sustains the level of economic activity by funding public services in the process providing some protection to the most vulnerable members of society.
Scotland shares the financing costs of the UK’s structural deficit and its benefits. Now it has to share the social and economic costs of the coalition Government’s reckless rush to cut the deficit, costs which may yet include a second dip recession. Given the government’s balance between service cuts and tax increases for reducing the deficit we know that the lowest income groups will feel the most pain even if a second recession is avoided.
The voluntary sector is right to use the crisis to press its case that it can provide better value for money in many service areas than the public or private sector. But it should be careful to distinguish its claims from those who are using the double failure of banks and banking regulation to cut the responsibilities of the state. The biggest injury of the recession and the spending cuts will be a further increase in the already gross inequalities we endure with all the social damage and economic loss they entail.
If that challenge is to be taken up as Scotland emerges from recession it will only be through a combination of an active social democratic state and an empowered and engaged civil society.