George Kerevan: Concensus on budget deficit has failed to emerge from Holyrood

Published on Wednesday 4 August 2010 12:09

RECENTLY I had the pleasure of debating with Wendy Alexander MSP, former leader of the Labour Party in Scotland, on BBC Newsnight. The subject was government spending. We did not have a meeting of minds.

Wendy was busy beating up the SNP Government for not getting a move on with completing the M8 motorway: "This vital piece of infrastructure could provide much-needed construction jobs, and help counteract the Salmond slump." Etc, etc. I have great respect for Wendy Alexander, who is one of the best brains at Holyrood. I actually agree with her on finishing the M8.

However, given that the outgoing Labour government had just whacked off half of Scotland's capital spending budget, it seemed to me that demanding more cash was a red herring. Nay, it borders on populism of a kind I don't normally associate with Wendy.

Of course, she could reply that I am being partisan, as a former SNP candidate. She could say that all is fair in love and politics, under our Westminster-inspired adversarial system. Surely oppositions are there to oppose.

True, but only to a point. The Achilles' heel of democracy is that there is a temptation for some parties to play the populist card in order to get power, regardless of the long term consequences to society. One reason I am a Scottish Nationalist is that I think small nations generally - not always - act as an antidote to such populism because folk are more used to cooperating.

This counts double when a national emergency threatens. In Ireland political divisions were buried at the end of the 1980s, when the country nearly went bankrupt. Fortunately, the two main parties accepted the need for financial reform, as did the unions and business. A national consensus on economic growth led to the start of the Irish miracle. Ireland's recent troubles have a lot to do with the erosion of that compact.

Here is my point: the consensus that should have emerged by now among the Scottish parties, to tackle the looming budget crisis, has failed to materialise. Holyrood is failing its first real test if even sensible opposition MSPs such as Wendy Alexander are burying their heads in the political sand. Instead, we are getting juvenile posturing.

Some will point the finger at the minority SNP Government. It is possible to argue that the Finance Secretary, John Swinney, should have started cutting earlier, knowing what was in the wind - though that would have taken demand out of the economy at the wrong time.

But Swinney is in a classic dilemma. Labour, the main opposition, has only one seat fewer than the SNP and thinks it can regain power next May by blaming the SNP for any cuts.

I am not nave enough to expect Labour to blink first. But Labour's rhetoric gives no indication it even notices there is an economic problem. For proof, look at the video on the website of Iain Gray, the party's Scottish leader.

Against the shimmering background of the Forth, Mr Gray lays out his election stance with a straight face: "I promise to protect our frontline services in our schools, in our hospitals, and in our police, from Tory cuts and SNP cuts." And that's it, folks. Not a word about how Iain would find the 3.7bn that Westminster is cutting from the Scottish budget.

Swinney, on the other hand, has done his best to create the political conditions for some kind of national budget strategy. Setting up the Independent Budget Review (IBR), far from being a cop-out, was an inspired way of putting tough spending options into the public domain. What he needs to do now is use the IBR report to seek a national consensus on public spending and a related growth strategy - the essence of how small nations should do politics. In other words, turn the crisis into an opportunity.

I don't mean a deal done behind closed doors with the other Holyrood parties. I mean a signed Programme for National Recovery (PNR), on the Irish model, involving the unions, business and other social partners. Such an agreement has the advantage not only of mobilising the whole nation for recovery. It is the best way of forcing Westminster to listen to Scotland.

Swinney's difficulty is that by already seeming to ring-fence specific areas of spending, he has encouraged others (eg the unions) to demand similar protection. Clearly, that precludes meaningful negotiations.

One option is to put everything on the table. In fact, a careful reading of Swinney's pronouncements on the budget shows he is more flexible than many understand. NHS Scotland, for instance, is already delivering savings in the region of 200m this year.

I suspect the public is more aware of the necessity to make budget reforms than Labour realises. However, a PNR-type agreement can't all be about pain. Achieving agreement on a public sector wage freeze, say, requires a quid pro quo in terms of economic growth strategy or the social wage.

How could this be financed? There is always the nuclear option inherent in the current devolution settlement - the power to raise income tax by up to 3p on the standard rate. Raising income tax by 1p, say, to protect spending on health, education or infrastructure might be something the unions would look at. (I would dearly love to see how Iain Gray would react to the idea.)

Beyond May there lies the question of who forms the next Holyrood administration. After the General Election, the SNP offered Labour the option of a grand "progressive" coalition to keep out the Tories. Labour refused, preferring to lick its wounds and play dog in the manger. Would Mr Gray also refuse if the same offer was made? Almost certainly.

Therein lies the clue to Labour's current insular attitude. Internally divided and having run out of fresh ideas, it is content to mouth platitudes and blame others. That is not progressive leadership, Mr Gray, it is rank populism.