Bill Jamieson: Scotland’s public spending future

SCOTTISH INDEPENDENCE: Scotland faces difficult choices over what public services it would like and what it can actually afford, writes Bill Jamieson

The NHS will be under strain by increase in over-65 population. Picture: Robert Perry

Scare stories have run through the independence referendum like coils of barbed wire. If it isn’t about border posts, it’s about no more EastEnders on TV, massive business flight or slumping oil revenues. Now a classic stand-by has come along: an assault on the NHS and its funding. This never fails to rouse.

Promises of more benefits and dire warnings of their withdrawal are the stuff of politics. They fire our passions and mobilise votes. And they constantly recur, whichever option voters choose – for such is the unavoidable aftermath of the collision between heightened expectations and limited resources.

Whether the outcome is Yes or No, a major preoccupation of politics post-18 September will be on how we can continue to provide public services in Scotland and, in particular, universal service provision. Sooner or later, constitutional politics has to give way to that eternal tussle between what we would like and what we can afford.

We’ve grown used to having more of what we like. Between 2000 and 2010 – the first ten years of devolution – spending on public services in Scotland rose in real terms by 60 per cent. And relative to the rest of the UK, we have fared well. Public spending per head in Scotland in 2012-13 stood at £10,327, compared with £8,676 in England and £8,940 across the UK as a whole. Spending per head on health in Scotland at £2,151 is £181 higher than for the UK overall. And per capita spending on education is £69 higher.

Two developments have now shattered this benign picture. The first is that, despite this substantial public spending, we face growing criticism over standards of personal care and NHS provision, worrying examples of a culture devoid of humanity and the values of service, and criticism of educational standards and outcomes. “More money” is not – and never has been – the definitive answer.

The second is the financial crisis and its aftermath. This has sent public debt through the roof and brought sharp constraints on public spending. Public sector net debt now stands at £1.35 trillion and we have to find the wherewithal for debt interest charges this year alone of £52 billion.

All three UK political parties are committed to further austerity after the general election next year. The Institute for Fiscal Studies has estimated that, by the end of this year, 55 per cent of the planned tightening will have occurred, leaving 45 per cent to the next parliament. Almost all this future fiscal tightening will be through spending cuts rather than tax increases.

Now factor into this Scotland’s changing demographics. The population aged 65 and over is set, on Scottish Government projections to increase by 62 per cent between 2006-7 and 2031. For those aged 85 and over, the population will rise by 144 per cent. This matters, because the need for care is far greater among the over-85 population. Spending in total on health and social care for people aged over 65 is forecast to rise by £3.5bn, or 74 per cent over the same period.

If more money – that is, a continuation of real terms provision on the scale enjoyed since 2000 – cannot be counted on for the foreseeable future, where are savings to be made or which other areas of spending would need to be curtailed?

These are the realities that do not go away on 18 September and, indeed, will snap back very sharply into focus. We face considerable restraints on what we can and what we cannot reasonably expect by way of increased funding for public services in the period ahead.

The challenges for public service provision are thus formidable. But we are not without beacons to help shed light on the path ahead. Outstanding among these is one that has been provided by this week’s man of the moment, Crawford Beveridge, a member of the Scottish Government’s Fiscal Commission and an independence supporter.

Back in 2010 he chaired the Independent Budget Review, an exhaustive, fact-packed 184-page assessment of Scotland’s public service provision. It followed concerns in the Scottish Parliament that the retention of spending on universal benefits meant less flexibility in seeking spending cuts in the rest of the Scottish Government budget.

The review ranged across concessionary travel, free personal and nursing care, prescription charges, eye examinations, free school meals and tuition fees and how savings could be made over the subsequent four years.

It drew on evidence and assessments from a multitude of sources, including a report by Edinburgh University’s distinguished Professor Charles Jeffrey on the provision of universal services for older people, particularly free personal and nursing care and concessionary travel.

“Is it right”, he asked, “that all people over 60 – including wealthy ones – get concessionary bus travel when people who may need transport services more have to pay for demand-responsive transport? Is it right that all income groups should have access on the same terms to free personal nursing care? If it is legitimate to target policies in some areas, like fuel poverty, on to the most disadvantaged, why is it not in other areas?”

Tough questions from the professor. And tough answers from Crawford Beveridge. In political debate in Scotland, even to raise such questions is akin to walking barefoot over broken glass.

The Budget Review set out the costs of each benefit or concession provided and how the cost of universal services could be mitigated, provision more targeted, eligibility criteria tightened, or in some cases charges reintroduced “while honouring our national commitment to provide critical services to those most vulnerable and in need”.

Indeed, the compelling logic of the review was that this commitment could not be sustained unless such changes were made.

Between 2000 and 2010 we grew accustomed to the provision of free or subsidised benefits on a near universal basis – including those who might have had the resources to fund them themselves. “Unfortunately”, the review concluded, “demography and other drivers are expected to continue to stimulate demand and inflate costs to levels which appear to be unsustainable. The issue is not one of desirability, but of affordability.”

A second guiding light in the recent past was provided by the eminent public services analyst Jo Armstrong. Her widely applauded 2007 paper for the David Hume Institute on improving productivity in Scotland’s public services looked at social housing, care services and waste management. Drawing on the experience of Scottish Water, which achieved savings of £453 million while simultaneously improving services, she estimated that savings across the Scottish Government and public services might be possible, amounting to £1.9bn a year.

These reports were not scare stories. And they are not to lie buried and forgotten. Their approach and key concerns are as valid and as pressing as ever. A useful first step would be a refreshment and updating of the figures and projections – whether you swing Yes or No. Constitutional politics does not alter these facts. Indeed, to ignore them would be to deny our politics of any serious meaning.