From stewartb

‘What would happen to devolved NHSs if England privatised?”

Whether privatised or not, the key thing will be how much public spending is involved. Of course there may be other knock-on negatives beyond funding that will arise for Scotland from privatisation in England.

Just on finance, here’s my understanding of the general principles that apply.

If a Westminster government – elected and empowered by a majority of voters in England – chooses to spend MORE on a public service that is ‘RESERVED’ then taxpayers (personal, corporate etc.) in Scotland, just as taxpayers elsewhere in the UK, may be called upon to pay more.

If Westminster borrows to cover its increased spend, we in Scotland will contribute to meeting interest payments; we will be allocated a share of the ‘spend’ in the annual GERS data; and not to forget, we will just have to thole the potential negative hit of an ‘opportunity cost’!

The power to do all this comes from the authority of the Union parliament! The majority of taxation is still set on a United Kingdom basis.

If a Westminster government – elected and empowered by a majority of voters in England – chooses to spend LESS on public services that are ‘DEVOLVED’ then through Barnett the Scottish Government may receive less (in the short term, perhaps just no increase in) overall funding from The Treasury, unless there is a compensating increase in Westminster funding in England on other ‘devolved’ matters.

The details on timing of a consequential negative effect is less certain to me. As I understand it, the Barnett formula doesn’t calculate the total value of a devolved government’s block grant: it works out how much the grant should change each year, and adds the change to the previous year’s block grant to come up with the following year’s grant. The Barnett formula is applied to these allocations to come up with the devolved governments’ block grants for the two to three years typically covered by a Spending Review. The formula is applied to changes in the total budgets of departments, not spending on individual projects or programmes.

The point is Westminster chooses: Holyrood waits before having to accept, aka having to ‘suck it up’!

Maintaining or improving ‘devolved’ public services in Scotland – specific ones or overall – may be something that a Scottish Government has a democratic mandate to deliver upon. In the face of longer term reduced funding via Barnett and SG will be faced with having to: (a) fail to deliver on its promises, or (b) raise taxes (absent unlimited borrowing and any money printing powers) from its highly restricted set of tax raising powers. (And it’s a restricted set of tax powers dominated by the most unpopular ones always, anywhere with a voting public, viz. personal taxes.)

The fiscal trap! Without agency – heads we lose, tails we lose!