Budget 2011: The view from the devolved nations

Ed Jacobs reviews the economic situation in the devolved nations and how the budget could feed into it.

George Osborne

Left Foot Forward’s Devolution Correspondent Ed Jacobs looks ahead to what the devolved nations will be looking to get out of the budget on Wednesday


Addressing Scottish Labour’s spring conference in Glasgow over the weekend, Ed Miliband set George Osborne two key test for the budget – that it supports families facing ever increasing costs of living, and that it supports the economic recovery. Nowhere will these tests be as relevant as they are in Scotland.

Whilst figures published recently suggest an improving picture in respect of unemployment north of the border it remains above the UK average, and there is a sense that the worst effects of the cuts imposed on Scotland, as a result of the spending review, are yet to be felt.

Speaking to his party’s conference, Scottish Labour leader Iain Gray reminded delegates:

“Surely the greatest indictment of the SNP administration is this. Labour left them a Scotland where unemployment was lower that the rest of Britain. The SNP leave a Scotland where unemployment is higher than the rest of Britain.”

Whilst writing for Scotland on Sunday, finance secretary John Swinney warned:

“The UK Government must not put Scottish growth and jobs at risk. Every measure in the budget must pass that test. Will it deliver growth? Will it help Scots back into work?”

Meanwhile, Scotland will be watching in anticipation what the chancellor has to say on fuel prices, given the crippling effects rising petrol prices are having on Scotland’s large rural economy. Already, Lib Dem Chief Secretary to the Treasury Danny Alexander has announced the Government’s intention to take 5p of a litre of fuel for island communities, but many Scots will be hoping the chancellor goes further.

As Andy Wilcox, Scottish policy convenor for the Federation of Small Businesses has explained:

“Scotland is suffering disproportionately due to the spiralling cost at the pumps. FSB members are determined to create and sustain jobs, grow the economy and sustain employment, but every penny spent at the pumps is money not getting spent elsewhere in the economy.

“Reversing the planned 1p rise and cutting VAT on fuel duty in the budget next week will be welcome steps.”


Across Wales, many will be looking at what the chancellor has to say to support growth and encourage investment.

Following the government’s decision not to extend the electrification of the Great Western Line to Swansea, Labour have released figures suggesting that the UK Government’s decisions not to proceed with the Severn Barrage, the defence training academy at St Athan and the Energy Island project on Anglesey together represent a loss of £50.7 billion to the Welsh economy.

Outlining the challenge faced by the coalition, shadow Welsh secretary Peter Hain explained:

“These stark figures show the true extent of the Tory-led Government’s cuts and show just how punitively Wales is being treated.

“Wednesday’s budget is [Welsh secretary] Cheryl Gillan’s biggest test yet. As secretary of state, her job is to stand up for Wales and fight for investment. She has failed at every hurdle over the last ten months.”

Meanwhile, it will be hoped that the Government might have something to say on unspent funding, after Danny Alexander refused a plea by the Assembly Government to release £385 million of unspent funds which should have gone to Wales.

Criticising the decision, Plaid Cymru’s former leader, Dafydd, now Lord, Wigley declared:

“The Treasury seem to have a perverse delight in screwing the Welsh economy in this way and preventing the National Assembly Government from taking the type of policy they should be taking forward that would be of benefit to so many communities in Wales.

“That is an example of the way the Tories and the Lib Dems are handling Wales’ money and it just isn’t acceptable.”

Northern Ireland

Across Northern Ireland, following a divisive budget process at Stormont, all political parties will be united in hoping the chancellor has further details over the BBC’s  reports that Stormont is to be given the powers to reduce its corporation tax to better compete with the south in attracting inward investment.

Northern Ireland secretary, Owen Paterson has already signalled that a consultation paper on the issue will be published shortly, and the budget could well prove the starting point for that review.

Whilst supporting such moves however, the SDLP have warned that a cut in corporation tax must come within the context of a much broader growth strategy, with the party’s enterprise spokesman Alasdair McDonnell explaining:

“We would be much more attractive for FDI (foreign direct investment) if it was clear that we had a strong business and enterprise culture and a clear understanding within our devolved government of the need to generate economic growth. Unfortunately this is not the case as the budget debate demonstrated.

“We urgently need to move the economy to the heart of the political debate and keep it there, instead of interminable wrangles over how to slice and dice the block grant from London. We have got to reduce our over-dependency on the public sector, but in the meantime intelligent use of public spending can be used as a lever to boost vital economic sectors. This is the opportunity that was lost in the (Stormont) budget.”

Northern Ireland will also be keenly focussed on what the chancellor does with its public sector dominated economy, with warnings from PricewatershouseCoopers that public spending cuts are a substantial reason for Northern Ireland’s recovery being impaired.

PwC’s chief economist in Northern Ireland, Dr Esmond Birnie, has warned:

“Northern Ireland has been more dependent on the cross-border overspill of Irish economic prosperity than has previously been realised. And while Ireland and the UK are beginning to recover, a combination of an inward-focused private sector and declining public spending are impacting on the North’s recovery.”

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