Official Report search · Parliament Workbench

Chamber

Plenary, 16 Dec 2009

16 Dec 2009 · S3 · Plenary

Item of business

Pre-budget Report (Scottish Government Response)

Brownlee, Derek Con South of Scotland Watch on SPTV

No one would pretend that the Irish economy is in a good place just now, but the difference between the Irish Government and the UK Government is that the former is at least trying to tackle the problems rather than simply burying its head in the sand.

We need to consider the pre-budget report in two contexts: the economic context that we are in, and what the report means for the size of the Scottish budget.

First, I will consider the economic context. Labour's recession is already the longest and deepest since the war. The expansion of the G7 to the G8 and now the G20 has not changed the fact that Britain is the only member country still in recession. Far from Britain leading the world out of recession—as Gordon Brown told us it would do, and as Andy Kerr told us it would do in the PBR debate last year—it will be the last major economy to come out of recession.

Bleak as the pre-budget report is, it does not tell half the story. The National Audit Office audits the assumptions that are used in the budget documents. The NAO assessment of likely unemployment is 700,000 higher than that used by the Treasury. If the NAO is correct, the Treasury will have to find an additional £3.5 billion of tax rises or spending cuts just to stand still.

On unemployment, the Secretary of State for Work and Pensions today said:

"we still expect unemployment to increase again in the New Year",

so to suggest that we are out of the woods is complacent, particularly given that the Labour Government wants to increase the tax on jobs even more. It plans further rises in national insurance, which will hit not just everyone who earns more than £20,000 a year but every business, charity, school and hospital in the country.

The pre-budget report assumptions work if we assume not only that the Labour Government's growth figures are correct but that wages will increase by 5.5 per cent per annum in the medium term. That is an heroic assumption, which few people would think credible. The PBR shows that Labour plans to increase taxes in every year from this financial year to 2014-15 but, over that time, will still pay back not a penny of debt. Faced with the largest deficit in British history, the Labour Government's answer is its default one: to spend more money that it does not have.

Astonishingly, Labour plans more debt in the PBR than it did at the time of the budget. It also plans more spending, but not the spending that was demanded by lain Gray, whose call for accelerated capital was rebuffed by the chancellor. lain Gray told us last week that that was because the Treasury could not trust the Scottish Government to spend it wisely. Gordon Brown must be glad that the Treasury has never applied such criteria to his spending.

Labour's spending priority is not capital, it is interest. According to the IFS, between 2011-12 and 2013-14, Labour plans to spend 11.1 per cent more each year on debt interest.

The IFS has helpfully highlighted what is and is not in the PBR. We know that Labour plans to cut capital spending by £13 billion a year and revenue spending by £18 billion a year. We also know that Labour plans to increase taxes by £16 billion a year. However, a further £30 billion a year will have to be found from higher taxes or lower spending on top of what we already know about. Labour has refused to provide details of spending beyond 2010-11. The chancellor said that that is because the situation is uncertain, but it is anything but. Labour's debt mountain means quite simply that billions of pounds will be cut from the Scottish Government's budget for many years to come.

The Scottish Government rather helpfully highlighted today the £1.2 billion of potential spending reductions that can be discerned from the PBR. With 3.2 per cent annual real-terms reductions in the Scottish Government budget by the end of the next parliamentary term, spending would be £3.6 billion lower in real terms.

I want to touch on what another commentator makes of the PBR. He says:

"it is not enough simply to blame the ‘world economic crisis', or evil bankers."

He says that the Government needs to

"acknowledge that Labour in office has made serious misjudgements,"

and that it is

"guilty of damaging complacency in proclaiming ‘No more boom and bust.'"

He also says:

"It is insufficient to rely upon the vacuous and irrelevant proposed Financial Deficit Bill. Substance is what is needed and this is no time for deliberate vagueness."

Search Hansard contributions

Plenary, 16 Dec 2009

In the same item of business