DCSIMG

Swinney budget cuts 'to hit key policies'

FLAGSHIP SNP election commitments such as abolishing prescription charges, freezing the council tax and boosting police numbers may have to be abandoned to avoid the need for swingeing public spending cuts, experts warned last night.

As finance secretary John Swinney prepares for one of the most crucial draft budgets in recent years, public finance experts warned the key policies were a massive burden on the public purse.

Meanwhile, the row over public spending intensified last night as union leaders warned Gordon Brown that they will not support cuts.

TUC general secretary Brendan Barber said public spending cuts would provoke "a double-quick, double-dip recession" and could push unemployment above four million.

After months of predictions that Scotland is about to enter a new age of austerity, Mr Swinney will lay down his draft budget in parliament on Thursday.

Yesterday he insisted he could protect front-line services and would not have to implement a 5 per cent cut which senior Scottish Government civil servants were discussing in April.

But he refused to say where savings would come from or give an outright guarantee on health spending.

Instead he again attacked the UK government for a 500 million "cut" in next year's Scottish budget, even though it will still increase by 600m and appealed for unity in taking on the challenges ahead.

"The context of this budget demands that all parties work together to deliver the best possible budget for Scotland," he said.

Public finance expert Professor Arthur Midwinter, recently an adviser to former Labour leader Wendy Alexander, but a long-time adviser to Holyrood's finance committee, said he believes the extent of the spending cuts is exaggerated. He said the real problem in Scotland was over-commitment in spending by the current government.

And he questioned a report by another leading Scottish economist and former Labour party adviser, John McLaren, published last week which suggested the Scottish budget would face a real terms cut of 8.5 per cent, or 2.5 billion, by 2013-14.

Prof Midwinter claimed that freezing the council tax, increasing police numbers by 1,000, providing free school meals and slowly getting rid of prescription charges had not been properly factored in to the budget.

And he pointed to a document recently leaked which showed that Scottish Government spending could exceed income by 1bn.

"Most of the problems in Scotland are over funding uncosted promises such as the council tax freeze, extra police officers or free prescriptions," he said.

"I do not go along with the conventional view that there are going to be severe cuts. It is all very speculative. In reality the budget is growing again this year and 8.5 per cent of efficiency savings would simply exceed what has ever been achieved before."

Mr Swinney called for political "unity" ahead of the budget and has written to opposition parties inviting them to talks.

Scottish Labour's finance spokesman, Andy Kerr, said that he would be happy to work in unity if the SNP was willing to build consensus.

"We should have a shared priority to protect jobs and services," he said.

But he warned that this might mean dropping treasured projects like the drive for independence and the referendum.

"If the SNP are genuinely prepared to seek a consensus then I am happy to sit down and talk to them. We should begin by agreeing that with the public finances so tight, now is not the time to waste 700,000 on a conversation about the constitution."

Scottish Conservative finance spokesman Derek Brownlee warned that the time has now come to focus on where savings can be made and complained that both the Scottish and UK governments had put off difficult decisions for too long.

"The reality all of us have to face now is that we cannot avoid the issue of how spending reductions can be managed any more," he said.

"The UK and Scottish governments have got to stop arguing over this and start the hard work of looking where can pare back spending and minimise the impact on frontline services.

"The bad news is that this year is going to be relatively easy to find savings compared to the years ahead. We have start doing the ground work for those years where the cuts may have to go much deeper."

The Prime Minister is to give his most upbeat assessment of the economy yet this week by claiming that Britain is "on the road to recovery".

But he will also caution that the situation is still "fragile" and "tough choices" need to be made – pleading with unions not to wreck plans for balancing the government's books.

Extracts from Mr Brown's speech to the TUC Congress in Liverpool, due to be delivered tomorrow, were leaked amid growing signs that voters back the Tories' hawkish stance on cutting public spending.

Polls also suggested that most people think David Cameron would get better value for money out of public services than Labour.

But Mr Barber said it was "astonishing" that anyone was suggesting reducing the government's deficit as a top priority.

"Cut the stimulus off and the economy would go into decline again," Mr Barber warned. "Public-spending cuts will provoke a double-quick, double-dip recession.

"Unemployment could well exceed four million and it would take many years before there was any chance of returning to anything like full employment. That would scar for life a whole generation of young people."

A TUC analysis of 25 council areas highlighted West Dunbartonshire as one of the most high-risk areas to a round of public spending cuts in the UK.

It pointed out that a loss of 10 per cent of public sector jobs, the amount the TUC believe are under threat, would see 1,420 people in West Dunbartonshire put on the dole, increasing the number of unemployed by 42 per cent.

But the major parties are also coming under pressure from groups who believe that the amount of spending is far too high and needs to be reined in.

The Taxpayers' Alliance, which last week published proposals to save 50bn a year including freezing the Scottish block grant, claimed yesterday that Gordon Brown had "squandered" 3 trillion – 50,000 for every person living in the UK.

WHERE THE CUTS COULD BE MADE AND THEIR CHANCES OF GOING AHEAD

SCRAPPING ALL PRESCRIPTION CHARGES

Reversing this change would save the Scottish taxpayer 40 million a year and would only affect those who can afford prescriptions.

However, this is also one of the SNP's few achievements in office and one they would be reluctant to drop.

VERDICT: A possibility if the budget is really tight.

FREE PERSONAL CARE TO THE ELDERLY

Is one of the policies that parties in Holyrood are most proud of and see as one of the great boons of devolution. However, it is set to cost 1 billion in the next 20 years (50 million a year) and there are real doubts about its long-term affordability.

VERDICT: Highly unlikely in the short term because of lack of political will and threat of public anger.

PUBLIC SECTOR PAY FREEZE AND END OF PENSION SCHEMES

A pay freeze would save 6.2 billion in the UK, but is likely to mean strikes, and attempts to end final salary pensions will face union opposition. However, the moral argument for the public sector to take a similar hit to those in the private sector is strong.

VERDICT: A possibility, but only if the governments hold their nerves.

PENSION RELIEF FOR THE RICH

This was proposed by TUC General Secretary Brendan Barber and might appeal to the Chancellor Alistair Darling, who has already put down plans to introduce a higher rate of income tax of 50 per cent for top earners.

VERDICT: It will depend on how much Labour wants to please the unions and its core support.

DEFENCE CUTS

There are calls – even from the Tories – to save more than 20 billion by not replacing Trident. Another saving of 5bn might come from not building two new aircraft carriers. Both these options would spell disaster for jobs in the Clyde and Rosyth.

VERDICT: Likely cuts in defence budget, but with commitments in Afghanistan, new projects are under threat.

ID CARDS

This could represent a 6 billion saving in the projected future budget and outside Labour there is almost universal political hostility to the scheme. However, it is the central plank to Labour's homeland security policy and the Westminster government has resisted all efforts to drop it until now.

VERDICT: Likely to be cut by a future Conservative government.

STATE PENSION FREEZE

The Taxpayers Alliance recently suggested that a one-year freeze in the state pension could save 1.4 billion. But with pensioner poverty already a political issue and an increasingly powerful grey vote in elections this option would be politically very dangerous for the 2010 election and possibly beyond.

VERDICT: No chance, would be political suicide

 
 
 

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