Terry Murden: A much-needed plan for public finances - but will it be fudged?

Published on Wednesday 28 July 2010 22:44

AT LAST, a plan to tackle the public-spending monster that has dominated the Scottish political agenda for too long.

Crawford Beveridge's budget review suggests the gravy train may be brought to a juddering halt and more room will have to made for the private sector to provide a cost-efficient alternative, assuming that it is fit and able to do so.

A number of the recommendations, including an end to several free services, are hardly surprising. Questions were raised about the sutainability of some initiatives, such as concessionary travel, even before the recession and the debt burden put their long-term viability beyond doubt.

Sadly, it has taken a crisis to set the tone for a more balanced economy, something that has been demanded for years but which has been ignored in the pursuit of ever more social programming with little heed for the taxpayer's ability to go on meeting the bill.

Yet we must tread carefully. While it is right to criticise pointless jobs, paper-shuffling managements, excessive consultation and other time-wasting and costly processes, it is important not to throw out the baby with the bath water. Over-zealous cutbacks will impact on the private sector which may not have the capacity to fill the void and, to a significant degree, depends on public sector contracts to survive.

But the private sector is broadly supportive of what Beveridge proposes, especially the need to sacrifice a few sacred cows.

It is a pity these do not include the privatisation of Scottish Water (though it implies that a "change of status" is a possibility), and the merger of Scottish Enterprise with its Highlands cousin, something that should have been undertaken a decade ago. Beveridge asks what we expect of the state and what we can afford. He himself says that some difficult decisions lie ahead. It is stating the obvious, but whether the politicians will be prepared to offer up any ideological commitments for dismemberment will become clearer in the run up to next year's elections.

Despite the depth of the crisis and the fact the parties have to face up to the looming cutbacks, you have to fear for Beveridge's report.

The incumbent government, of course, is in the box seat with John Swinney, commissioner of the inquiry, now expected to cost the recommendations and decide which he can and cannot afford to implement.

I'll wager that there'll be some fudging and postponement of commitments to many of these recommendations, at least until after May next year.

Santander in pole position to crash the big four bank party

SANTANDER has once again shown it is a serious player in the UK banking sector alongside the established big four.

A 10 per cent first-half boost to profits and plans to create 600 jobs are a mere staging post on the road to building a major presence in the UK.

An admirable set of figures from the big winner in the carve up of Dutch bank ABN Amro, it is poised to acquire the 318 branches that Royal Bank of Scotland is being forced to sell and is admitting for the first time that the flotation of its UK assets - which include Abbey National and Alliance & Leicester - is on the cards. The Spanish giant has launched itself into European markets, notably Germany and the UK, and the emerging economies in South America.

It is particularly keen on building a bigger presence in the business banking market and no-one would bet against it winning a significant market share.

The RBS branches are a vital part of that strategy as these were originally part of Williams & Glyn's bank which had a strong presence in the corporate sector. As such, Santander will take these customers with it in the acquisition.

It reckons to have seen a 20 per cent rise in lending to small firms and while this is from a low base it will be reckoning on another big increase in the year ahead.

Floating the UK business will add up to 3 billion to one of the strongest bank balance sheets in Europe and help give it the firepower for its next assault, possibly a move for Clydesdale Bank.