Ian Swanson: Talk far from cheap in debate on budget

Published on Thursday 23 April 2009 09:45

CHANCELLOR Alistair Darling says it's a Budget to help set Britain on the path to recovery by the end of the year, while Scotland's Finance Secretary John Swinney claims it will cost up to 9000 jobs north of the border.

A financial package in the middle of a recession and billed as the most important Budget for a generation was bound to spark more than the usual level of claim and counter-claim.

Both men are entitled to expect a hearing. Mr Darling, after all, had to endure a barrage of criticism and ridicule last summer for saying the economic challenges were the worst for 60 years – only to be proved right very soon after.

Mr Swinney, an accountant to trade, won widespread respect for his early achievements when the SNP came to power at Holyrood.

While the Chancellor focuses on positive measures he unveiled in yesterday's Budget – including help for pensioners and the car scrappage scheme – the Scottish Government is more concerned about the "efficiency savings" he first announced in the Pre-Budget Report last autumn.

The UK Government says Scotland will receive an extra 104 million under the Barnett formula as a result of Budget increases in spending for UK departments.

But Mr Swinney says once the consequences of UK-wide efficiency savings on Scotland are taken into account, along with the knock-on effect of other changes to UK spending, the result is 497m of cuts in the Scottish budget next year.

He claims that means up to 9000 jobs are in jeopardy.

The UK Government is quick to point out that the Scottish Government budget will still increase by 700m next year – from 34.8 billion to 35.5bn.

But Mr Swinney insists the "efficiency savings" will mean real-terms cuts.

Although the Scottish Government is planning its own "efficiency savings" of two per cent on spending, he argues that's quite a different matter. Holyrood "efficiency savings", he says, are about keeping cash within a department and making the money go further, while Westminster "efficiency savings" mean spending being reduced and the money being handed back to the Treasury.

The Chancellor claims the recovery will be under way by the end of the year, while Mr Swinney says most independent experts believe it will be the middle of next year before things start to get better – and he says that's just when the cuts will begin to bite.

But Budgets are not all about rival financial calculations. Underlying the measures and their presentation are crucial political considerations – not least, the looming general election. The Chancellor knows that this time next year the country is likely to be weeks away from an election which the polls suggest Labour will lose. If the party is to have any chance of a fourth term, there need to be some signs of recovery by then. Equally, the SNP is determined it should not be left to carry the can for spending cuts – especially not next financial year, leading up to the 2011 Holyrood elections.

So ever since Mr Darling announced the 5bn programme of UK-wide "efficiency savings" last November, the Nationalists have been warning Westminster is to impose 500m of cuts on Scotland in 2010-11.

An opinion poll earlier this week gave the Tories a ten-point lead over Labour as the party best placed to manage the economy.

However, the ICM survey for The Guardian also found that when it came to how people would vote in a general election, the Tories were losing ground. Labour support held steady at 30 per cent while the Conservatives were down two points to 40 per cent.

Labour's showing might seem surprising, given the "smeargate" scandal surrounding government special adviser Damian McBride. But perhaps the e-mails proposing scurrilous rumours for a new blog simply confirmed many voters in their negative view of politics and politicians rather than delivering any new shocks.

Labour's unpopularity has been compared to that of John Major in his last days in government – but David Cameron's poll ratings are nowhere near Tony Blair's at that time.

The Tories have yet to clinch the deal with voters and the path of the recession will prove crucial.

There was a flurry of mixed economic news in the hours before Mr Darling got to his feet in the Commons.

Latest unemployment figures showed Britain's jobless total had reached 2.1 million, the highest level since Labour came to power in 1997.

Separate statistics confirmed Scotland was officially in recession after economic output fell for two successive quarters. At the same time, there was a glimpse of revival in consumer confidence.

Retail sales figures showed Scotland had bucked the trend with spending in the shops up 0.5 per cent last month while it fell 1.2 per cent at UK level.

Mortgage lending rose by 16 per cent last month in a sign that activity in the housing market is picking up.

How quickly the economy gets back on track will help decide who is trusted to run it in future.