John McTernan: Hope springs eternal at Holyrood

As THE eurozone stumbles and the US economy stutters, today’s spending review announcement from finance secretary John Swinney grows in importance. Those external circumstances on their own would make growth in the UK difficult. They are significantly exacerbated by the cuts of the coalition government who believe that a collapse in economic demand because of de-leveraging by the private sector, and by families, should be matched by a massive decrease in public sector demand.

This, of course, is the same thinking that gave us the Great Depression. And is why Larry Summers, former US treasury secretary, said last last year that if Chancellor George Osborne is right “everything I know about economics is wrong”. The bellwether of the economy is unemployment which in the UK hit 2.5 million this month, and is heading for 2.75m by the New Year.

The only, tiny bright spot was Scotland which had generated a small net increase in employment. Is that a sign of a real divergence? Can John Swinney lay out an economy strategy that can sustain and grow that difference? Can Scotland defy the coming recession? Luckily, readers of this paper don’t have to wait until the finance secretary gets to his feet later today, because this column has been lucky enough to obtain the latest draft of his speech.

“Presiding Officer.

“Today, we face the most difficult budget choices this parliament has ever had to consider. This is a consequence of the failures of the last Labour government which ran down the public finances – in stark contrast to the prudent, balanced budgets delivered by this administration. But, even more, it is the result of the reductions in spending being forced through by the UK government. Scotland faces a unprecedented cut of £3.3 billion – 11 per cent – over the next three years. Worst of all, there is a catastrophic collapse in the capital available to us – a 36 per cent cut, just when we need it most. Capital is the engine of the economy, the engine of recovery. It is vital to jobs, and restoring it will be a priority.

“Those who have put us in this plight are present in parliament today. The coalition partners. Two parties. One in search of a new name, the other in search of a new alibi. Neither with any chance of escaping the judgment of the Scottish people.

“We have responded by ensuring that every penny of public money is spent well. Last year we set targets for 2 per cent savings, in fact we achieved 3.1 per cent. This year we set even more ambitious targets, and they will be exceeded. But this will not go far enough.

“Presiding Officer, I wish to present a number of measures to parliament today.

“First, I have considered what scope exists to increase capital spending. I have received representations from the Scottish Labour party to make spending on new prisons our priority for capital expenditure. But, there are better and fairer ways to prevent crime on our streets than to criminalise and incarcerate thousands of our young people. Instead I have listened to the STUC and the CBI who want to see increased capital investment focused on the most economically productive areas.

“We acknowledge the constraints that local government operates under, but while they continue to freeze the council tax, they need to maximise their prudential borrowing. Bringing forward as many projects into the next three years as they can.

“However, we understand that this will not be enough. Exceptional times demand exceptional measures. We are a radical reforming government, and we will do whatever is necessary to generate investment. Today, I can announce that we will privatise Scottish Water. Over £2bn will be generated by this. Every penny will be invested in the new housing, roads, schools and hospitals that we need. This is a difficult choice for many in this parliament, I know, but we will not allow the actions of Cameron and Clegg to throw our building workers onto the dole.

“Turning now to public service expenditure. I have already noted that the efficiency savings made across the board are not sufficient in the face of the substantial reductions imposed by the coalition. We remain committed to the values of the public sector, but we now need to introduce choice and competition into their provision. We have seen south of the Border the consequences of free market competition. It leads to privatisation, and profits coming before the interests of pupils or patients. Competition need not always mean handing services over to the private sector.

“Today, we are proposing a revolution. A market of mutualism. Any existing public service provider will be freed to offer services outside their own area. So, Clackmannan could provide payroll and personnel services to Dundee and Aberdeen. Glasgow could take over the social work services of Highland Region – or vice versa. Partnerships with the third sector will play a key role in this revolution. Innovation in provision will drive quality up. Increased scale of delivery will drive unit costs down.

“The public will be free to choose the public sector provider that best suits them, and money will follow them. The arrogant and unresponsive public providers will go out of business. But unlike England, no worker will leave the public sector. And no profit will be extracted from our vital public services. This principle will extend across sectors, and within them.

“So, Edinburgh could take over public health and primary care from the health board, just as the health board will be able to take over social work. In some areas I see a role for Cosla as not just a leader, but as a service delivery agency itself. Shared services, whether back-office or front-line, could be provided with agreement by a new central agency which could be sited in Cosla as a non-profit trading arm.

“There will be a fixed blueprint for how to modernise. Freedom will liberate our public sector leaders and workers. They know best how to transform services. Their energy and imagination will build the future. A public service revolution, made in Scotland.

“Presiding Officer, we have prepared a Budget that builds a better Scotland. I have presented a radical package that defends our values and delivers in the face of savage cuts imposed by the coalition. It deserves the support of all in this parliament.”