Leaders: Jury out on SNP’s case for viable economy

Finance Secretary John Swinney. Picture: PA
Finance Secretary John Swinney. Picture: PA
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THE annual publication of the Scottish Government’s GERS report, Government Expenditure and Revenue Scotland – detailing the state of the nation’s finances – has something of a ritualistic feel to it.

Every year, it is an occasion for a flurry of unionist v nationalist point-scoring, where no statistic is left unspun. This year, however, there has been the added interest of a leaked document from the heart of the Scottish Government that reveals a rather more unvarnished truth than is usually the case.

SNP ministers yesterday insisted that the document presented by the Better Together campaign as a “top secret Cabinet memo” was in fact an old draft that should not be taken too seriously. What they cannot explain away so easily is the picture the memo paints of an independent Scotland that would have to cope with wild and unpredictable fluctuations in its income as a result of oil price volatility.

Nor can SNP ministers wish away the document’s numbers on the estimated £600 million cost of setting up a Scottish tax service; nor the judgment that more cash for public sector services is unlikely; nor the demographic reality that Scotland’s relatively older population will put added pressure on state pensions; nor the acknowledgement that an independent Scotland would have its fiscal scope curtailed by the constraints of operating within a sterling zone.

Taken as a whole, the leaked memo is in fact a candid and intelligent summary of many of the obstacles that stand between Scotland today and an independent country capable of the kind of aspirational public spending trumpeted by the Yes Scotland campaign. It shows that finance secretary John Swinney, for whom the report was prepared, is all too aware of the financial realities of independence.

That is not to say there are not positives for nationalists in yesterday’s GERS report. Mr Swinney made much of figures showing that Scotland’s level of debt in 2011-12 was less than that of the UK as a whole. He was right to point out that this relatively healthier position would have allowed Scotland to invest more in the kind of infrastructure spending that would help us emerge quicker from recession.

But the impact of such a positive finding for the Yes Scotland camp is immediately diminished by the leaked document’s conclusion that by 2016-17, the UK would have a healthier balance sheet than Scotland. According to SNP plans, that would be the first year of Scottish independence.

In the past, the debate over GERS had little resonance beyond political anoraks, and nationalists and unionists seemed content to walk away with a score draw. Now, however, the Yes camp needs to demonstrate Scotland’s position is structurally healthier than the UK, in order to free up the money it has earmarked for more generous public spending come independence. Did it do so yesterday? The jury is out.

Timely action to curb pay-day loan firms

IF EVER there was a moment for the Office of Fair Trading to flex is muscles, this is it. OFT officials yesterday sent a stark warning to the UK’s top 50 pay-day loan companies that unless they started adhering to strict regulations within 12 weeks, they would be shut down.

This is a most welcome step in the face of what seems to be a widespread and wilful flouting of rules intended to protect people who find themselves in precarious financial predicaments.

What the OFT appears to have uncovered are practices that instead of offering the hard-up a short-term way around a temporary liquidity problem, in fact lock them into an unforgiving spiral of debt, with eye-watering interest rates.

What is extraordinary about the OFT report is the clear assertion that it has not just one or two rogue traders in its sights but an entire industry, which seems to have acted without moral compass.

A key recommendation is to call for an inquiry by the Competition Commission, in a clear signal that the OFT is unhappy with relationships between the firms in this sector. The OFT is to be congratulated. Its actions on pay-day loans provide an answer – albeit perhaps a tardy one – to the charge that regulators have seen themselves as too busy reforming the big financial institutions to bother themselves with relatively small fry such as pay-day loan companies.

Pay-day loans in this country amount to an extraordinary sum of £2 billion a year. Behind that statistic are a lot of desperate people in need of protection from the worst kind of cynical financial exploitation. This is one business that needs to be cleaned up for good.