It probably should not come as a surprise that a journalist employed in an organisation with little practice in providing context and perspective when reporting Scotland sometimes reveals a blindspot. Or perhaps engages in unintended irony?
Yesterday BBC Scotland’s Business and Economy Editor wrote an article for the BBC News website under the headline: ’Difficult decisions’ for Kate Forbes. Tucked away in the midst of a lengthy piece I spotted something a bit odd which I share for mild amusement.
Bear with me to get the context! The Editor tells us this: ‘A growing gulf between Holyrood revenue and spending is reaching crunch point, as the finance secretary today sets out plans up to the next election.’ Adding: ’The problem is that being generous, where resources are constrained, comes at a cost to lower priorities.’
And then readers are offered expert insight into the Scottish Government’s challenges. Firstly, we are presented with the choice of how to address the challenges – framed as ‘borrow or tax’. Secondly we’re given this as one version of a response: ’So don’t constrain them’, goes the response – ‘if only Holyrood could borrow more’.
Then, whilst finally ‘revealing’ the reality that surely most of his readers know by now, the Editor asserts something rather odd. Can you spot it?
‘It could (borrow), given the powers or if Scotland were independent, but let’s not pretend borrowing could be an infinite source of income for the Scottish government, that it could be achieved without risk and cost, or there would be no need to make choices. More significant: for now, it’s not allowed to.’
To me this is the odd bit — ‘let’s not pretend borrowing could be an infinite source of income for the Scottish Government’. No sensible, well-run, ‘better togetherish’ independent country could ever be run on borrowing like that …. could it?
Now 1997 to 2021 is not an ‘infinite’ period of time over which borrowing has supported the UK – allowed it to go on ‘pretending’ – but in political terms it might as well be! But if not convinced see the chart below courtesy of Wikipedia. (I believe graphs of UK indebtedness back to the Napoleonic Wars if not before have been compiled!)
Even this BBC Scotland Editor acknowledges elsewhere in the article that the UK is still permitted to keep up the ‘pretence’ that borrowing is indeed an infinite source of income:
’This week’s event (in the Scottish Parliament) is not a budget, so it doesn’t have to be balanced. Nor did Mr Sunak’s £15bn giveaway last week, because he is allowed to borrow most of that.’
‘A fine pretence my good fellow
‘You take pretence, I’ll take ….. independence’
(With apologies to Jerome Kern & Dorothy Fields!)
10 thoughts on “This is a fine pretence!”
In the article, there is, as Stewartb indicates, an understanding of the reality in which the SG has to operate. Of course Douglas Fraser knows this and has always known it. However, he works for the BBC and, despite its protestations of rigour and independence, its staff would not be its staff if they were not aware of where the ‘red’ (or rather ‘red, white and blue’ lines) are drawn.
Some of them – I hope! – must look at the squalor of Westminster and think, “Why am I spouting this pish?”
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Regular followers of Richard Murphy’s blogsite http://www.taxresearch.org.uk will be aware that the terminology and methodology surrounding the UK economy is opaque and misleading. “Borrowing” includes £billions of Quantitative Easing where the UK Gov “borrows” money from its wholly-owned subsidiary The Bank of England i.e. it has borrowed it from itself. It then includes this as part of the UK’s “National Debt” and perennially asks us to tighten our belts in order that this debt can be repaid. By itself to itself? Come on!
The other main component of “borrowing” is where UK Gov has sold Government Bonds to e.g. pension funds, foreign governments super-rich individuals etc as a safe & 100% guaranteed investment. But note that the purchasers will have paid to buy them, yet they’re still part of UK “borrowing” and UK National Debt. In proper consolidated accounts using double entry bookkeeping the debits and credits would cancel each other out – end of.
Unlike that, in devolved Scotland our Gov borrowing powers are severely limited and our Gov’s books have to balance, so we’re screwed if the Barnett Consequentials don’t keep pace with inflation and, with a Tory UK Gov intent on shrinking the State, this is inevitable and perennial. This vice-like external control of Scotland’s economy by Westminster through the currency shows clearly why Scotland cannot continue to use the GBP after independence. An independent Scotland must have its own sovereign currency to give it the flexibility to meet huge challenges like pandemics, wars, global supply-chain interruptions, global price rises etc.
That’s why the Growth Commission’s proposal to use GBP after Indy is madness on stilts. I’ve been advocating indy for over 50 years, but, if the Scottish Gov wins a referendum and still persists in sterlingisation of our currency, I’ll be in a very conflicted position: I want indy for my kids and grandkids, but I don’t want them to go through their lives in an economically-hobbled country at the mercy of another country’s economic and political choices, over which we have zero control or influence. That therefore also applies to adopting the Euro.
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Choices are never easy.
We are where we are and things will change and one of these changes might well be independence and another might be a change in the hegemonic economic paradigm. We will have to thole ‘sterlingisation’ in the early days of what we hope will be a better nation. Then, it is up to us to decide where we are going.
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This has the same ring of “truthiness” as :—
“Scotland has the right of national self-determination”–Iain Macwhirter.
“Scotland is an equal, in a Union of equals”. –Bitter Together.
The oil is running out–next year. (as stated by “experts” for 50 years).
Anything said by Starwars/Cauld-Ham/Drossie et al.
The Brown Commission.
The Middle Ground.
The model of “journalism”, as practiced at Pacific Quay.
This model extends to other media outlets in Scotland.
A more imperial journalistic model is practiced by the London mejah.
And so on……………………….ad infinitum!
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Excellent point in the context of the Scottish Government’s current position – it can only spend by taxing and borrowing. Unfortunately, when considering the UK’ spending power, Kate Forbes has bought into the Thatcher myth that the state has no money of its own – as have all the Scottish opposition parties, plus Keir Starmer and his Blairite acolytes.
As demonstrated most clearly during the pandemic, the UK Government spends money into existence and does not wait for tax receipts or so-called borrowing. This was most recently explained in the UK context in a paper co-authored by Josh Ryan-Collins of UCL’s Institute For Innovation And Public Purpose. He also wrote about the paper in the New Statesman – https://www.newstatesman.com/economy/2022/05/why-british-state-is-magic-money-tree
Here is the bit about borrowing –
“Finally, what is the role of government borrowing? As with taxation, the government does not need to borrow to spend. Prior to the programme of quantitative easing (QE) that began in 2009, bond issuance could be seen as primarily supporting monetary policy. Government spending creates new money and liquidity (reserves) in the banking system, which can affect the central bank’s target interest rate. By issuing bonds, the state withdraws liquidity from the banking system, neutralising this impact. Indeed, the Debt Management Office has in place a “full-funding” rule, which means that any outstanding balances in the Consolidated Fund are cancelled out by debt issuance or selling bonds in to financial markets.”
The so-called debt, as he says here, is like a 100% guaranteed savings account for the wealthy –
“Today, the main function of government debt is to provide the non-bank financial sector with a secure store of value and source of collateral, since government debt instruments are the most desirable, safest interest-bearing assets available, due to the state’s inherent creditworthiness.”
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At present ScottishGov are not allowed to ‘borrow’ a penny. Englishgov borrow and attribute a share of their ‘debt’ to Scotland, and they plonk that debt onto Scotland by a larger % than Scotland’s % the UK population to boot.
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Yep, the usual you won’t manage poor wee Scotland, you will have to borrow tons of cash so best stay shackled to your borrowing to the hilt next door neighbour, instead!
Looking at ‘UK’ debt, borrowing, what DO the English Government do with the moeny from well, everything like taxes, VAT, and er, Scotland’s massive oil wealth that they take for gratis? What are they doing with the money?
Can we see the books?
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Maybe this will be worth a watch next week folks…’Scotonomics’ can be very interesting to follow and watch.
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There does need to be a serious debate about finances for the next five years.
I personally think that the devolution of benefits to Scotland is a trap, “here’s responsibility for £12bn of benefits, and here is £5bn to cover them”
Cue certain groups and individuals commenting on how Scotland is in debt and cannot manage without Westminster.
I would also of the opinion that an actual independence referendum, never mind independence itself is far from certain.
I would say this is where efforts are best concentrated.
Scotland pays all the pension and benefits in Scotland. £15Billion. Scotland raises £66Billion. Gets back £41Billion block grant. £15Billion pays for pensions and benefits. £56Billion. £10Billion Westminster does what it like, total mismanagement.
Illegal wars, tax evasion, Hinkley Point, HS2 etc., Trident. Too much for the military and Westminster governance.
Scotland pays towards London Transport subsidies by UK Gov. £Billions for crossrail. Scottish services are cut.
The Unions refused to allow more train driver recruits. Now there is a shortage.