Budget 2010: View from Scotland

Continuing our series of reports ahead of the budget, we look at what Scotland, Wales and Norhern Ireland can expect, starting with Scotland.

Continuing our series of reports ahead of the budget, we look at what Scotland, Wales and Norhern Ireland can expect, starting with Scotland

In a report published last month, the University of Strathclyde’s Fraser of Allander Institute Economic Commentary concluded that Scotland faced a “weak recovery”.

With uncertainty over the economic prospects for Scotland, speaking to his party’s spring conference this weekend in Aviemore, SNP first minister Alex Salmond declared that “more Nats mean less cuts”, making clear his opposition to any cuts to the UK’s block grant to Holyrood.

Fleshing this statement out, in his contribution to the conference, finance secretary John Swinney made four key demands of the Chancellors’ budget:

• A guarantee not to revisit the 2010/11 budget and impose any further cuts on Scotland;

A continuation of “targeted fiscal stimulus” though speeded up capital spending, with Scotland gaining a proportionate share of such funds;

• Action on taxes, with a particular focus on supporting the oil and gas industries and recognising the particular impact that increasing petrol prices are having on rural areas of Scotland; and

• Greater clarity over future spending plans for Scotland, providing the Government in Edinburgh with greater certainty to plan its spending proposals.

In light of such concerns, Scotland will be looking to the Chancellor on three key areas:

• On jobs, figures out last week showed that unemployment across Scotland had increased by 16,000 over the past three months, despite overall UK unemployment having decreased. With tax receipts having increased by 3.6% since April 2008, the Scotsman has reported that it is Scottish Labour backbench MPs who have been particularly vocal in their calls for the Job Guarantee Scheme to be extended to older people;

• On taxation powers for Holyrood, at the beginning of the month, Scottish secretary Jim Murphy and chief secretary to the Treasury Liam Byrne announced that a new group at HM Revenue and Customs had been established to take forward proposals in the Calman Commission to grant Holyrood greater tax varying powers. Will Alistair Darling give any indication about when the Scottish parliament is likely gain greater financial autonomy from Westminster under a Labour government? and

Could this be an opportunity to announce a review of the Barnett Formula, used to determine UK spending on the devolved bodies? Its founder, Lord Barnett, has called for it to be reformed, and a House of Lords select committee has supported calls for a new system for funding devolution. This is a subject that has particularly exercised many, with research by the ippr having found 62% of MPs believing that the current system of financing Scotland, Wales and Northern Ireland is unfair.

The budget on Wednesday has further been preceded by news that if the Conservatives win the general election, they would not expect the Scottish Government to begin making cuts for two years. Speaking to the BBC’s Politics Show for Scotland on Sunday, shadow Chancellor George Osborne commented:

“The whole of the United Kingdom has to make savings and Scotland is not immune from that. Because the budget has passed through the Scottish Parliament for 2010-11, we will respect that.”

Responding, a spokesperson for Scottish Finance Secretary, John Swinney said:

They are all clearly feeling the heat over the Scottish government’s demand that there are no more Westminster-imposed cuts in 2010-11. Alistair Darling has dodged the question. Vince Cable suggested that Scotland’s budget would increase even as Nick Clegg talks about £60bn cuts, and, with a typically Tory sting in the tail, George Osborne would impose double the pain the year after.”

Speaking amid rumours of a possible 14% real terms cut to Scotland’s budget over the next few years, Chancellor Alistair Darling told the Daily Record in January:

“We are making these decisions against a background in which Scottish spending has doubled in the last 10 years. There isn’t a family that, when it comes down to it, when they have to, cannot tighten their belts in a sensible way. The fact the Nationalists have abysmally failed to manage their budgets does not mean that more sensible governments in Scotland could not do things far more effectively. But we’ll have that choice in 2011.”

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