Spending review: Scottish public sector pay freeze likely claims top economist

Published on Thursday 21 October 2010 19:04

JOHN Swinney will have to freeze public sector pay and make more efficiency savings if Scotland is to come to terms with the Coalition Government's cuts, one of the country's leading economists said yesterday.

Professor Brian Ashcroft said that the finance secretary would have also have to get a grip on higher education funding saying that some sort of graduate contribution scheme was essential if Scotland was to pay for its universities.

Prof Ashcroft, the policy director of The Fraser of Allander Institute at Strathclyde University, suggested that the SNP administration had so far dodged taking the tough funding decisions outlined in the Crawford Beveridge report published in the summer.

The government-commissioned report by Mr Beveridge, one of Alex Salmond's economic advisers, recommended a series of hard-hitting measures to streamline Scotland's 28.2 billion budget. However, Mr Swinney has already ignored his conclusion that free personal care for the elderly was too expensive to "justify" and has pledged to press ahead with the policy.

And Mr Swinney has promised to go ahead with abolishing prescription charges, despite Mr Beveridge suggesting otherwise.

Likewise, the finance secretary has ruled out changing the ownership of Scottish Water despite the Beveridge report saying that other models should be explored to release capital for other projects.

The finance secretary has also said he remains committed to the government's travel concessionary scheme for the over 60s that will cost over 900 million over the next five years.

Yesterday, Prof Ashcroft said that Mr Swinney had "boxed himself into a difficult position" by going against Mr Beveridge's advice in some key areas.

"They seem to have ruled out large parts of the Beveridge Report and it is difficult to see what's left from the report," Prof Ashcroft said.

The Scottish Government faces a budget cut of almost 3bn over the next four years as a result of George Osborne's Comprehensive Spending Review published earlier this week.

Mr Swinney has already said that there will be public sector pay "restraint", but Prof Ashcroft suggested a freeze was likely.

"A public sector pay freeze is a high probability," Prof Ashcroft said. "You could also cut the wage bill by introducing more flexible working - rather like the approach taken by the private sector where employees go part time or take unpaid holidays."

Prof Ashcroft said that changing Scottish Water's status could raise funds, but acknowledged that there were difficulties.

"Selling off assets might help with the capital budget - the most obvious example is mutualising Scottish Water - that again would raise about 1bn. That would free quite a considerable amount of resources.But there is the issue about whether that is selling off the family silver ie the value of the asset is greater than what they would get for it," Prof Ashcroft said.

Prof Ashcroft said that protecting health spending, as Mr Swinney has promised, would be "problematic", a view shared by local government who fear that their budgets will be squeezed as a result. He added the political parties needed to "bite the bullet" on university funding suggesting that some form of graduate contribution as recommended by Lord Browne, was the way forward.

Prof Ashcroft said the Scottish Government appeared reluctant to take tough decisions with an election looming. "It seems to me that politics is playing a big role in this and that applies to the UK as well."

"Really the Beveridge Report gave them some options, it could have given them some cover. I don't know what Crawford Beveridge thinks of this, but I suspect he is not too happy. We wait to see what will happen with interest and trepidation."

A Scottish Government spokesman said: "This week's GDP figures show that the Scottish economy is recovering, but the Chancellor's spending cuts go far too far, far too fast, and threaten jobs and recovery.

"Pay restraint is clearly part of what will be required, as the IBR reported and as the Cabinet Secretary has made clear on a number of occasions, we have already taken steps to freeze top salaries," he said.