Gavin McCrone: Sorry, there's no economic gain without pain

Such a big swing shows the electorate is largely undecided. As Allan Massie recently said (The Scotsman, 20 April), this illustrates the decline of tribalism in politics; although there are still Labour supporters who would never dream of voting Tory and vice-versa, they are fewer than they used to be. Many more people make up their minds as a result of hearing what the politicians have to say and on their judgment of past and prospective performances.

Faced with an economic crisis brought on by irresponsible behaviour in the financial sector and a resulting government fiscal deficit of unprecedented size in peace time, everyone knows that Draconian measures will have to be applied sooner or later to stop the national debt rising. But the electorate can justifiably feel that they are not being told the whole truth about the unpleasant medicine they will be asked to swallow.

An important aspect is that the different remedies proposed by the parties will have a significantly different impact on the finances of the Scottish Government. But, so long as there is an absence of detail, it is difficult for people to know who to vote for.

The government deserves credit for the measures it took, often against opposition from the Tories, to prevent the recession becoming a great deal worse. But it was in charge of the ship when it hit the rocks and failed to see the danger ahead. Moreover, it has been in office for three parliamentary terms, and with Gordon Brown not a popular leader, there will be many who feel it is time for change.

The Chancellor has estimated that 67 billion is needed to correct the damage to the budget and that the measures he has announced, partly in tax increases and partly in expenditure cuts, could achieve 70 per cent of this by 2014-15, but neither the National Institute for Social and Economic Research nor the Institute for Fiscal Studies thinks that is enough.

The Conservatives have continually attacked the government over the deficit and said they would take steps to get it under control more quickly; but have undermined their credibility by saying they would not implement the proposed increase in National Insurance charges in 2011 and by various other tax hand-outs. They claim they can deal with the problem mainly by efficiency savings, while safeguarding essential services such as education and health – something which should strain the public's credulity.

The Liberal Democrats have more fully worked out proposals, identifying specific tax changes and public expenditure cuts that go beyond those of the other two parties. They would not ring-fence popular programmes such as education and health, believing they, too, could be improved in efficiency. They would not repeal the 2011 increase in National Insurance charges, but, unlike the other parties, propose a more radical reform in the tax system than for many years to help the poorer sections of society. But the overall fiscal effect of the tax changes, apart from the National Insurance increase, seems fairly neutral, so even they would probably have to do more.

What is one to make of all this? It seems clear the major difference is that, in the absence of raising National Insurance, the Conservatives would have to rely much more heavily on cutting public expenditure than the other two parties would.

This would, through the operation of the Barnett formula, impose a much bigger squeeze on the Scottish Government's budget than the proposals of the other two parties.

Experience as chief economic adviser to the Secretary of State for Scotland during the Draconian cuts of the Callaghan government following the 1976 IMF crisis and of the Thatcher government in the 1980s makes me extremely sceptical about the claims being made for efficiency savings.

Of course, some savings can always be made in large organisations like the public service. But such savings, while necessary, are never easy to secure and are usually disappointing in what is achieved. A reduction in the quality of some services would seem to be unavoidable. I therefore do not accept that this could be done without pain, and the electorate should therefore know what is intended.

If some services, such as schools and health or defence and overseas aid, are to be protected, cuts elsewhere, such as in social security, would have to be very deep indeed.

Increased taxes are likely to be inevitable, even with the Conservatives. The government seemed to have scored an own goal by proposing the increased National Insurance charge, leaving itself open to the accusation that it is a tax on jobs. Any increased tax or cut in public expenditure will, of course, reduce jobs by removing spending from the economy. This is why it is so important that whatever measures are chosen should not be implemented until the recovery in the economy is properly established, probably in 2011. But in my view, the government would have been wiser to propose a VAT increase for next year, as the Treasury apparently advocated, rather than National Insurance.

Steps could have been taken to counteract the impact on the least well-off in society. It would have encouraged private expenditure to be brought forward, helping to strengthen the recovery, and the Conservatives, who argued that last year's temporary cut in VAT had no effect, could hardly then argue that an increase would be disastrous.

The truth is that the British public want a good standard of public services, but are reluctant to face the increase in tax necessary to pay for this. That is why the present government had a deficit in its budget before the recession struck.

As the population ages, increasing the number of pensioners, and as advances in health care further raise the cost of the NHS, whichever party or parties form the next government are going to have to face important choices that the electorate have so far not been asked to consider.

Gavin McCrone was formerly chief economist at the Scottish Office.