FACT CHECK: Are the SNP proposing a decade of 'unprecedented austerity'?

“The SNP is proposing a decade of unprecedented austerity” – Labour Leader Richard Leonard on the SNP’s Sustainable Growth Commission report 2019.

DOORSTEP ANSWER

THE Growth Commission report states unequivocally that an independent Scotland “should explicitly reject the austerity model pursued by the UK in recent years” (p43). The main purpose of the report is to explains how to double Scottish economic growth to 3%.

BACKGROUND

RICHARD Leonard has also said of the SNP Growth Commission report: “It is a prospectus based on a hard decade of public spending contraction, and even deeper cuts than those implemented by George Osborne in order to drive down the public sector deficit from 8.3% of GDP to below 3% over the course of a decade or less.”

Again: “Under the SNP prospectus, whether it’s a currency tied to Sterling, or a separate Scottish currency, they are looking towards a further decade of austerity to drive down the gap between public expenditure and revenue from taxation. What we’ve seen from the Philip Hammond era could be amplified if we reach a point of an independent Scotland.”

Leonard’s criticism has been echoed by others. Pamela Nash, chief executive of anti-independence group Scotland in Union, claims: “The SNP is proposing austerity on steroids. The reality of this would be devastating cuts to already-stretched public services such as schools and hospitals.”

READ MORE: FACT CHECK: Are Scots being 'clobbered' by higher tax rates?

WHAT DOES THE GROWTH COMMISSION ACTUALLY SAY?

PUBLISHED in May 2018, the full title of the report is: “Scotland – the new case for optimism. A strategy for inter-generational economic renaissance.” It is available to read here. The Growth Commission report states unequivocally that an independent Scotland “should explicitly reject the austerity model pursued by the UK in recent years” (p43). Throughout the report, the assumption is that economic policy is geared to increasing economic growth.

However, the report accepts that an independent Scotland would start with a fiscal deficit, ie a shortfall in tax revenues compared to spending, as a result of inherited Westminster policy decisions. The report notes that current Scottish tax revenues cover all existing Scottish Government spending plus non-devolved spending on pensions and welfare benefits. The notional, inherited deficit results from other UK Government activities (defence, debt repayments, and other Whitehall departmental programmes). An independent Scotland would not be obliged to follow these spending priorities.

As a starting point, the growth report makes some initial recalculations of what an independent Scotland might spend and assumes a baseline annual deficit in the region of 5.9% of GDP. This includes choices that others might object to. On a more conservative calculation, the base deficit could be 5.5%, relative to a standard, internationally recognised “sustainable” benchmark of 3%. The report focuses on how to transition to this lower 3% figure without sacrificing economic expansion or growth in real public spending. The key passage is: “During the transition period real increases in public spending should be limited to sufficiently less than GDP growth over the business cycle to reduce the deficit to below 3% within 5 to 10 years. At trend [historic] growth and target inflation rates this would mean average annual cash spending increases of above inflation in contrast to the Scottish budget experience under the UK regime of recent years and that scheduled for the remainder of the current [Westminster] planning period” (Box B.12, p92).

In other words, there is a clear statement in the report that the proposed fiscal rule involves real spending increases, not austerity. However, such real spending increases should be constrained by the need to devote some resources to reducing the deficit over 5 to 10 years. Even then, with the expectation of devoting the equivalent of one percentage point of economic growth per annum to reducing the deficit, the real increase in public spending would still be positive – unlike the actual situation since 2008, when the real Scottish Budget was reduced in real terms by Westminster-imposed austerity cuts.

Do Richard Leonard's claims stack up?

READ MORE: FACT CHECK: Has Holyrood failed to use its powers to combat inequality?

To give a worked example: normal average economic growth has been 1.5% and inflation 2%, in Scotland. Under Growth Commission fiscal rules, that would give an annual increase in cash spending in the public sector of 3.5%. One percentage point goes to paying down the inherited deficit, leaving a 2.5% cash increase for everything else. But note that 2.5% cash spend is above the 2% rate of inflation, so real resources in the public sector increase every year (see p96). The report is at pains to explain that the notional 5 to 10 years deficit reduction timetable assumes no increase in average (historic) economic growth rates in Scotland.

However, the report proposes a series of measures in Part A to stimulate extra growth. The section on fiscal rules repeats this recommendation: “A potential transitionary fiscal boost to growth should be considered…” (p97). Recommending economic growth is the very opposite of recommending further austerity, as Mr Leonard should know. Obviously, were Scottish economic growth rates to increase, the rate of real public spending increases would rise. It would also be possible to reduce the period required to bring the notional deficit below 3% to within one parliamentary term.

A REMINDER: LABOUR AND AUSTERITY

WHILE we are on the subject of austerity, in July 2015, the Labour Party agreed to abstain on the crucial second reading of the Tory proposal to cap overall welfare spending. This bill was the key move in imposing austerity. The main provisions involved included a cap in household welfare receipts from £26,000 to £23,000, abolishing legally binding child poverty targets, cuts to child tax credits, cuts to Employment and Support Allowance, and cuts to housing benefit for young people.

Among those abstaining were Ian Murray (candidate for Labour deputy leader), Jess Phillips, Emily Thornberry and Keir Starmer. But 48 Labour rebels joined SNP MPs in opposing the cap – including Jeremy Corbyn, Rebecca Long-Bailey and Richard Burgon.

FACT CHECK RATING 

FALSE ... clearly Richard Leonard is confusing the SNP’s behaviour with that of his own party’s.