By stewartb – a long read

There have been a host of reports and think tank commentaries issued in the short time since the UK chancellor’s Autumn Statement. Almost all have been made, unsurprisingly from a UK – in reality, from an England – perspective.

BBC Scotland did perform its ‘public service’ duty immediately following the Statement. Reporting remarks from the Scottish Government’s finance secretary on its consequential, negative impact on public spending/services in Scotland, BBC Scotland’s Business and Economy Editor provided his own remedy for the Scottish Government:

‘So the way out of this squeeze is to get the economy growing, bringing in more income tax revenue. Jeremy Hunt’s tax cuts are intended to help that, at the expense of public services. Shona Robison has other priorities, but faster growth is the only way to deliver on them.’   All so plausible, all so easy?

We were also given warnings in the same article about tax: ‘Scottish ministers are sensitive to the charge of Scotland being “highly taxed” by comparison with the rest of the UK. So are inward investors. So are high earners that the Scottish government needs to retain or attract into its income tax net.’  So use your main devolved tax at your peril, Scottish Government!

Source: BBC News website (23 November, 2023) Holyrood budget: A ‘worst case scenario’? (https://www.bbc.co.uk/news/uk-scotland-scotland-business-67513270 )

Keep the two key elements in the BBC Scotland remedy in mind – ‘tax revenues’ and ‘growth’ – if you manage to read to the latter part of this long post!

Is mitigating Westminster policies still enough?

The following statement comes from the first UNICEF report into child poverty in relatively wealthy countries published in the year 2000:

“The persistence of child poverty in rich countries undermines both equality of opportunity and commonality of values. It therefore confronts the industrialized world with a test both of its ideals and of its capacity to resolve many of its most intractable social problems.”  UNICEF, 2000.

It has just published its18th report on the same subject.

Source: UNICEF (December 2023) Child Poverty in the Midst of Wealth – Innocenti Report Card 18 (https://www.unicef.org/globalinsight/media/3291/file/UNICEF-Innocenti-Report-Card-18-Child-Poverty-Amidst-Wealth-2023.pdf )

This is an investigation into the status of child poverty in countries that are members of the OECD and/or the EU, and of the progress they have made in reducing child poverty during the past decade. UNICEF claims to present the most up-to-date, comparable picture of child poverty in these countries, including an analysis of trends. It includes an in depth account of the  factors involved in assessing/measuring child poverty. It argues that levels of poverty depend greatly on the effectiveness of government actions. What follows highlights UNICEF’s findings on child poverty in the UK.

Relevance?

Regular readers of TuS know well that reducing child poverty has been a long-held priority of the SNP-led Scottish Government. Actions such as the introduction of the Scottish Child Payment and other means of mitigating negative impacts of Westminster policies have gone some way to address rates of poverty in Scotland, including child poverty. There is much more needing to be done, as critics of the Scottish Government make plain! But we also know well the constrained powers with which this – indeed any – Scottish government must operate with whilst Scotland remains in the Union. 

Given this, it is wholly appropriate when assessing what the Scottish Government has – and has not achieved – in addressing child poverty and what might still be feasible to achieve within the present devolution settlement. In other words, to examine context! What is the present status and what has been the recent trend in child poverty across the UK? How does the UK compare with international peers? In short, have successive SNP governments in Edinburgh been striving to make progress on child poverty reduction within a supportive and enabling UK policy environment established in Westminster? Have Scotland’s hard won, limited achievements been in line with progress made elsewhere across the UK? Or perhaps the reverse?

Profile of the UK

UNICEF’s Report Card 18 ranks countries based on their most recent rates of child income poverty and the proportional change in that rate over a seven-year period (2012–2014 and 2019–2021). The overall rank is based on a statistical average of these two indicators’. It finds that the UK, Türkiye and Colombia are at the bottom of the ranking

Overall, we learn that the percentage of children who live in poverty in 40 countries of the EU and OECD, dropped by c.8 per cent during a period of about seven years. This translates to 6 million fewer children in poverty. However, the rates vary. The report notes that whilst some countries used what was a period of general prosperity to address child poverty, while others ‘let the opportunity pass’. For example in the seven years to 2021: ‘In the United Kingdom, child poverty increased by about 20 per cent.’

• child income poverty rates among many minority ethnic groups (Bangladeshi, Black, Chinese, Mixed, Pakistani and other) are more than twice as high as for children defined as White British
• there were around half a million more children in poverty in the UK in 2019–2021 than seven years earlier
• over the period from 2012 to 2018, in 12 countries child income poverty increased, ranging from 3 per cent in France to more than 20 per cent the United Kingdom, by far the highest increase.

The chart below (Figure 14) shows the change in average child income poverty rates between 2012–2014 and 2019–2021. At the bottom of the chart, the five countries with orange bars saw increases in poverty of more than 10 per cent, of which the highest rise was in the United Kingdom (20 per cent).

UNICEF reports that expenditure patterns in a number of countries showed a disinvestment in family benefits in the years prior to the Covid pandemic. The most notable reductions by far occurred in the UK and Hungary: both reduced their expenditure on child and family benefits relative to the size of their economies and child populations.

So the context in which the Scottish Government has been seeking to reduce child poverty over the past decade is set out starkly in this UNICEF report. Both in absolute terms and by comparison with international peers, the rate of and trend in child poverty in the UK – whose statistics are of course dominated by the scale of England’s population and thus by the actions/inactions of Westminster governments – has deteriorated substantially.

Wider context

If this was the only deteriorating factor, the only negative in the UK context in which Scotland exists but of course it is not! Far from it! Opposition politicians and oppositional media commentators in Scotland tend to focus on just one policy area at a time, whether concerned with revenue, spend or performance. They shy away – for obvious reasons – from a systemic analysis of all the consequences of being held within a failing Union. 

Candid responses by various economic commentators to the recent Autumn Statement from ‘our’ Westminster government help to emphasise the point. And don’t forget the earlier reference to BBC Scotland’s remedy for Scotland – grow the economy and get more in tax receipts.

1) Source: Institute for Government (23 November 2023) The government has abdicated responsibility for public services – Jeremy Hunt’s tax cuts have been funded by further tightening public service budgets: comment.’

‘Our recently published Performance Tracker 2023 … shows that no services are performing better now than before the pandemic,and in 2019 only schools were performing better than in 2010.’ (These are references to public services and their resourcing in England.)

‘The plans pencilled in beyond the end of this spending review period are tighter still. Hunt confirmed that RDEL (i.e. current departmental spend) will rise by 0.9% per year in real terms between 2025/26 and 2027/28 – a plan Labour has committed to. The government has already committed some of that spending to the NHS long term workforce plan, to increasing defence spending, and on foreign aid. …. spending on other services is due to decline by 1.4% in real terms per year between 2024/25 and 2027/28.’  So austerity is coming again and regardless of which of the two big parties` wins majority approval in England!

The IfG notes: ’Public services are struggling under the weight of more than a decade of underinvestment, pandemic backlogs, and inflation.’

And then: ’What was conspicuously absent in the statement was capital investment. Hunt rightly highlighted importance of investment to productivity – but only in reference to the private sector. When it comes to the public sector, he instead confirmed capital budgets would be kept flat in cash terms beyond 2024/25. That means that budgets will fall in real terms, …’ And ‘Productivity improvements are possible but require upfront investment. Any government that does not take that seriously is not serious about improving productivity.’

2) Source: IPPR (22 November 2023) ‘Revealed: Autumn Statement tax cuts benefit London & South East, with the richest fifth of households taking almost half’

‘For every £100 Jeremy Hunt spent on personal tax cuts, £46 will benefit the richest fifth of households. Only £3 of every £100 of tax cuts will go to the worst-off families.’ 

‘IPPR analysis has also uncovered where in the UK will see the biggest gain from reductions in National Insurance. London and the South East of England are the biggest winners with an average annual gain per working age person of £316 and £290 respectively. Those in the North East, Yorkshire and the Humber, and Wales see the smallest benefit, with average gains of £192, £214, and £211 respectively.’ 

“More broadly these tax cuts are accompanied by plans to make deep cuts in public services and investment in the future – an approach that commands very little support from the public and will make it harder, not easier, for the UK economy to grow as it needs to.” 

“The UK sorely needs investment – in schools, homes, hospitals, and in net-zero industries of the future. But the chancellor announced real-terms cuts to public investment, which will hold back economic prosperity, and he chose to cut taxes which will suck money out of public services.”

On Scotland, “The biggest story, however, was the one of a tax giveaway over much needed funding increases for public services. With real-terms cuts set to continue, all departments are going to face a continued squeeze and the risk of a return to austerity – with the Scottish Government not immune to that.  

“All eyes now turn to the Scottish Budget – where the devolution settlement means the Scottish Government simply won’t have the same headroom or options available to it and tough choices will be required.”

3) Source https://www.resolutionfoundation.org/app/uploads/2023/11/A-pre-election-Statement.pdf

‘Despite the tax cutting rhetoric, then, the reality is that the tax burden is rising, with tax receipts as a share of the economy set to reach 37.7 per cent in 2028-29, the highest level in 80 years. This means a rise of 4.5 per cent of GDP between 2019-20 and 2028-29, the equivalent of an extra £4,300 for every household.’

‘When combined with relative protections for the likes of health and defence, this leaves many public services facing implausible spending cuts in the future. Unprotected departments face reductions of 14 per cent in their real per-person day-to-day spending between 2022-23 and 2027-28.’

‘… the visible legacy of decades of underinvestment and new pressures from the net zero transition. But capital investment is now set to decline as a share of GDP by one-third between 2023-24 and 2028-29, when it will reach just 1.8 percent, below even the (widely regarded as inadequate) 2010s average of 2.1 percent. That decline is equivalent to a £20 billion annual reduction in investment. It is hard to think of a more anti-growth policy choice.’

‘UK public investment has remained consistently low and volatile for decades, averaging about half the average of OECD advanced economies.’

‘ … working-age benefits are not set to regain their real pre-pandemic value until April 2025. And when we take the long view, the picture is worse still. We estimate that, on average, the lowest-income households will see their annual after-housing cost income fall by £2,700 in real terms by 2027-28 as a result of benefit cuts made since 2010.’

End Note

The above catalogue is a stark reminder of the reality of  ‘better togetherness’ but even it is incomplete. We could have included references to the damning assessment of structural and deep-seated failings in the UK and its economy published earlier in December by the Resolution Foundation.

Source: Ending Stagnation A New Economic Strategy for Britain (https://economy2030.resolutionfoundation.org/wp-content/uploads/2023/12/Ending-stagnation-final-report.pdf )

‘There are periods when the social contract comes under pressure; when a clear route to a better tomorrow is lacking, the improvements people expect dry up and some groups are left wondering whether the country works for them. Britain, as we outline in this final report of the Economy 2030 Inquiry, is in this undesirable position today.’

And of its depressing description of the UK today: ‘This is the result of an economy defined by a decade and a half of stagnant incomes, and a generation and a half of high inequality, posing risks not only to our prosperity, but to our social fabric and democracy too. This makes the UK a stagnation nation.’  Has Scotland really been ‘better together’ in Union with this?

One could also note the National Audit Office report published on 4 December, 2023 (see ‘The Equipment Plan 2023–2033 – Ministry of Defence’ https://www.nao.org.uk/wp-content/uploads/2023/12/The-Equipment-Plan-20232033.pdf  ).

This tells us this about the MoD’s equipment plan: ’The Plan is unaffordable, with the MoD estimating that forecast costs exceed the available budget by £16.9 billion (6%).’

We learn this is the largest deficit in the Plan since the MoD first published it in 2012 and contrasts with the 2022–2032 Plan. ’Forecast costs have risen by £65.7 billion (27%) compared with the previous Plan, outstripping a budget increase of £46.3 billion (19%)’. It’s important to note that: (i) costs to support the nuclear deterrent exceed budget by £7.9 billion, whilst (ii) the budget for conventional equipment is £9 billion less than forecast costs.

The NAO reports that the MoD is estimating that its funding gap could range between £7.6 billion and £29.8 billion, ‘depending on whether risks or opportunities materialise’. Whilst this funding gap – whatever it turns out to be – may be filled by additional UK government funding, we in Scotland – and the Scottish Government – can only wait to find out how the eventual outturn gets financed and then how it is reflected in the GERS figures.

One could go on and on in similar vein! And one could go on at similar length about international peers – countries not all that different in size and assets from Scotland – who have done so much better!

In all, this is a demonstration of outcomes and impact over which voters in Scotland and their government and parliament in Edinburgh have little or no political or economic agency! And it looks as if we’re destined to ‘spectate’ once again as England elects its next government intent on another dose of the austerity.