John Swinney: Westminster eroding our economic powers

Chancellor of the Exchequer George Osborne. Picture: AFP/Getty

Chancellor of the Exchequer George Osborne. Picture: AFP/Getty

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THIS weekend George Osborne and all the Westminster parties should be taking a long hard look in the economic mirror.

Promises that spending would be put back on track have fallen by the wayside, public debt is rising, and the economy across the UK is flatlining.

It’s clear from the analysis of organisations as varied as the IMF, the OECD, Oxfam, the Resolution Foundation and the IFS that the Chancellor’s economic policies are doing more harm than good. But Labour says regardless of the cost to families and the Scottish economy it is committed to sticking with Conservative spending plans.

This is despite the fact that we know growth will not happen in the face of persistent cuts. As the Scottish Government has shown, it is investment in infrastructure, in young people and in supporting living standards that can move the economy in the right direction. Westminster is doing the opposite and that is putting Scotland’s progress at risk.

The hand Scotland will be dealt in Wednesday’s Spending Review will be that of a budget based on Westminster’s priorities. George Osborne is proudly looking to cut £11 billion from next year’s budget and a potential £13bn from the two following years. These cuts will be made with no concern for the impact on Scotland’s needs.

As people weigh up the arguments over independence, the mismanagement of the Scottish economy by a Westminster government we didn’t elect is bound to cause many people to ask if powers over economic policy should be transferred to Scotland. They will want to know if the public finances of an independent Scotland would be sound.

In every one of the last 30 years Scotland has generated more tax per head than the UK as a whole. As a proportion of our national income we spend less money on social protection benefits, including pensions, and our debt as an independent country would be lower than the UK’s. Scotland has strengths in a range of sectors which will help to provide security in an independent Scotland.

But under the current Westminster system it is hard to deliver prosperity against a strategy that suppresses growth and increases inequality. Scotland neither has the power to stop Westminster nor the tools to mitigate all of the damage it is doing. Even in devolved areas, such as health and justice and education, the ideological vandalism of Tory cuts and privatisation takes money out of the Scottish Government budget.

There is a disconnect between the priorities of a Scottish Government elected by the people of Scotland, and a funding settlement determined by a Westminster government. That is an untenable democratic deficit. And, quietly, that deficit has grown.

Since 1999 Scotland’s freedom to allocate spending on Scotland’s priorities has been curbed, constrained and curtailed by creeping Treasury controls. Scotland’s money has been progressively divided into different pots with restricted uses, without any consultation.

In the last year 12 per cent of Scotland’s budget was restricted by Westminster and the Chancellor’s recent budget statement took away £54 million of cash for 2013-14, already allocated by the Scottish Parliament. It was replaced with loan and equity funding for projects outside the public sector that will have to be repaid to HM Treasury.

At the very moment people in Scotland want more responsibility to be held by Holyrood, Westminster parties are taking more and more of our discretion away. Promises of more powers ring decidedly hollow against the on-going encroachment on the powers we are supposed to already have.

And, with the Chancellor’s Spending Review to be announced this week, I expect Westminster will not only impose yet more cuts, it will also raid Scotland’s powers and impose yet more constraints.

Wednesday’s review will demonstrate yet again that there are real costs for individuals, businesses and families across Scotland from Westminster decisions.

With the powers of independence we could build on our firm financial foundations to protect public services, promote those growth sectors where we have comparative advantage and encourage greater cohesion in society which we know is a driver of economic growth. The alternative is a Westminster system that the evidence shows isn’t working for Scotland. «

John Swinney MSP is cabinet secretary for finance, employment and sustainable growth

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