Andrew Tickell: Scottish Labour don't have fiscal maturity

Analysing the fiscal constraints Shona Robison is now facing as Cabinet Secretary for Finance, the SFC said that “much of the pressure comes from the Scottish Government’s own decisions”.

This line was understandably seized on by Scottish Labour politicians, anxious to counter suggestions that choices made by Rachel Reeves in the Treasury are ­already resulting in a new wave of Labour ­austerity, above and beyond confirmed cuts to ­pensioners’ winter fuel allowance.

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Taken wholly out of context, the phrase is now routinely trotted out by Labour politicians in Westminster and Holyrood as an attack line, usually accompanied by a pungent array of other words including squander, waste, vandalism, incompetence. Heady stuff.

Curiously, you won’t find this quotable phrase in the Commission’s fiscal update published back in August. It goes with the milder formulations that “since our December 2023 publication, the pressure on the Scottish Government’s finances has increased” and that “decisions by the Scottish Government have played a role in these budget pressures”.

Their report also says “there have also been announcements by the new UK ­Government which will affect how much funding the Scottish Government receives, although much of the detail will not be clear until the UK Budget on October 30 2024” – but that hasn’t got quite so much traction.

Having alighted on this encouraging line of political attack, Anas Sarwar told the media: “This is a government that ­always attempts to shift the blame and find excuses instead of taking responsibility.

“The reality is experts have warned for years that this SNP Government’s ­decisions are causing mounting financial ­pressures, and today’s damning Scottish Fiscal ­Commission report has confirmed that. We see the consequences of SNP ­mismanagement, failure and waste daily – in cuts to frontline services and as working people are forced to pay more and get less in return.”

Vintage knockabout stuff – but ­interestingly vacuous, if that isn’t a ­contradiction in terms. Because this reads very much like an opposition statement by an opposition leader who expects to remain in opposition for the foreseeable future. Dig even just a little deeper into the detail of the Fiscal Commission’s analysis, and Sarwar’s lazy analysis falls to bits.

You might think the SFC had published a generic slagging of the Scottish Government’s application of public funds, calling them out as bunglers who’ve irresponsibly tipped public cash down the drain.

But that isn’t what their analysis of current pressures on the Scottish budget actually says. Instead, they make the ­obvious point that all budgetary decisions have consequences. If you decide to prioritise public spending in one area, that has ­opportunity costs in terms of the money available for everyone else.

If you think the SFC’s comments are “damning”, then they are damning about a series of policy choices Sarwar himself called on the Scottish Government to make, and which he’d make himself if he finds himself in the first minister’s office in 19 months’ time.

It is easy to be glib about that if you have no expectation of exercising real political responsibility. But it’s telling to hear someone who says he wants the big job confidently rolling out this kind of patter, as if his future will continue to be consequence-free.

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According to the SFC, what are the key Scottish budget decisions which have contributed to the current pressures on public finances? First up, we have had the public sector pay deals. These have ­resulted in public services in Scotland avoiding the industrial disharmony which has taken place in England and Wales – disharmony that this incoming Labour government make an early priority to resolve.

These are big numbers. Recent ­increases to pay and rations “accounted for more than £25 billion of resource expenditure across the devolved public sector, including local government”. To put that figure in some kind of social context, this is more than half of Holyrood’s whole resource budget.

The initiative to reach a deal has won the Scottish Government positive ­headlines – “Scottish health service staff get UK’s most generous pay deal” – but comes with a significant price tag. Again, pointing out the obvious, the SFC ­explain that “increases in public sector pay ­therefore have a significant effect on the Scottish Government’s spending”.

I doubt the Scottish Labour leader would describe enhancing the salaries of doctors and nurses as “wasteful spending”. Just last month, Sarwar suggested in his Daily Record column that “the SNP creates havoc every year by trying to short-change public sector workers, only to be left scrambling to find the money for pay deals mid-year” – which I think also rates as a demand for more public cash to go into public sector salaries in Scotland out of the Scottish Government budget. We must look for this promised fiscal ­rectitude elsewhere, it seems.

According to the Fiscal Commission, striking pay deals isn’t the only Scottish Government decision to contribute to budget pressures – the SFC also highlights Humza Yousaf’s Council Tax freeze as a significant extra burden.

It cost almost £210 million according to official figures, after threats, menaces and additional funding persuaded all of ­Scotland’s local authorities to sign on. To put this number in context, the ­decision to limit entitlements to Winter Fuel ­Payments is expected to save something in the region of £140 to £160m.

Personally, I thought this was a bad priority for Yousaf’s administration to choose. It smacked of scrabbling around for a conference announcement, ­alighting on a policy throwback to the more ­optimistic early days of the SNP ­administration, without much evidence of serious reflection on who would ­benefit from spending this amount of ­public money in this way. Charges of ­fiscal indiscipline and on-the-hoof budgeting seem thoroughly merited here.

There’s context. Reforming Council Tax is unfinished business. Scotland’s ­political parties have come to see it as a third-rail policy – so charged, so ­potentially ­controversial, so lose-lose that they’d rather tinker superficially with the status quo, leaving us in the absurd position of rating modern property taxes based on the value of the house or flat you live in back on the April 1 1991, and not your income or wealth.

Now, I might not agree with Yousaf’s spending priorities – but Sarwar did. In October 2023, the Scottish Labour leader told the Daily Record that “Labour will always support measures to help reduce people’s bills” and “I back the freeze”. Sarwar caveated this by stressing it had “to be fully funded” – which is also short-hand for the Scottish Government spending more of its money on keeping local tax rates frozen. More of that elusive fiscal discipline at work, presumably.

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When we look at those significant Scottish Government spending decisions which the SFC say are contributing to pressure on public budgets, both were introduced not only with the support of Scottish Labour, but with demands from the party for more money to be spent to achieve the same outcomes. Two out of two.

Unstunningly, the same goes for the third policy area singled out by the SFC for contributing to pressure on government accounts. Social security reforms in Scotland – and the creation of a wholly new framework of devolved benefits – are the third aspect area of the Scottish Government specifically flagged for generating pressures on spending. In 2023/4, we spent £5.3bn extra in Scotland on social security.

Here’s what the SFC had to say: “Our assessment is that the gap between spending on devolved social security and the associated BGA funding is the result of policy choices made by the Scottish Government. These choices include the introduction of new payments such as the Scottish Child Payment not available elsewhere in the UK, and the operational and delivery changes made when Child Disability Payment (CDP) and Adult Disability Payment (ADP) were introduced.”

Needless to say, the only thing Scottish Labour has ever had to say about any of these devolved benefits is that they should all be more generous. Three out of three.

The Government is responsible for the Government’s choices. But if you are positioning yourself as the next first minister of Scotland, if you are attempting to appear substantial and credible, you shouldn’t be allowed to get away with this kind of rhetoric – for your own good.

Any Scottish Labour manifesto will need to find intelligent things to say on public sector pay, and social security, and local government finance.

For perhaps the first time, it’ll have to own the pressure its own decisions will have on Scottish public finances. If the current rhetoric is anything to go by, there’s precious little evidence that ­Sarwar is ready for this responsibility.