Tough choices loom­ing on how to fund pub­lic ser­vices

The Herald - - OPINION - TOM GOR­DON

PROMISES, promises. Politi­cians love to make them. They even de­liver some. But in gen­eral the pledges end up com­pet­ing with each other for time, money and en­ergy and many are dis­ap­pointed.

Oth­ers are ir­rec­on­cil­able from the start. Be­fore she headed for the British Ir­ish Coun­cil on the Isle of Man yes­ter­day, Nicola Stur­geon put Brexit firmly in this last cat­e­gory. Theresa May, she said, was head­ing for dis­as­ter by promis­ing too many things to too many fac­tions, and they could never all work out.

Mrs May is not the only one prone to ex­cess prom­ise-mak­ing, of course. A re­port from Fraser of Al­lan­der In­sti­tute this week high­lighted the many promises made by Ms Stur­geon, and her grow­ing dif­fi­culty in keep­ing them.

Its jump-out statis­tic was on health. Day-to-day re­source spend­ing on the NHS was 37% of the Scot­tish bud­get at the start of de­vo­lu­tion 20 years ago. By the end of this par­lia­ment it will be al­most 50%.

This partly re­flects ne­ces­sity – there is ris­ing de­mand from a grow­ing pop­u­la­tion, par­tic­u­larly the el­derly pop­u­la­tion, but also am­bi­tious po­lit­i­cal com­mit­ments to pro­tect health from aus­ter­ity, plus a boost from the re­cent UK bud­get.

The Fraser of Al­lan­der re­port co­in­cided with a re­lated one from Holy­rood’s fi­nance com­mit­tee. MSPS said there was a “de­mo­graphic risk” to the bud­get. Namely, lots of old folk, not enough tax­pay­ers.

This is a fa­mil­iar theme in Scot­tish pol­i­tics. There have been warn­ings about a “de­mo­graphic time­bomb” for years. But the Holy­rood re­port said the fuse had now been lit.

From 2018 on­wards, Scot­land’s work­ing age pop­u­la­tion, the 16- to 64-year-olds whose in­come taxes ac­count for about one-third of the bud­get, will start to fall. Mean­while, Scot­land’s el­derly pop­u­la­tion will ac­cel­er­ate from 2021, faster than in the rest of the UK. The num­ber of over-75s will dou­ble by 2039.

It there­fore makes sense that the health bud­get is ex­pand­ing. But health’s in­sa­tiable con­sump­tion of pub­lic funds has con­se­quences.

It’s not fair to char­ac­terise it as a zero-sum fight with other ser­vices over cash. Spend­ing on em­ploy­ment, ed­u­ca­tion, skills, and al­le­vi­at­ing poverty can lead to long-term im­prove­ments in health and so di­min­ish de­mand. It’s com­pli­cated.

But the fo­cus on health since 2010 has un­de­ni­ably been ac­com­pa­nied by a 9% real terms fall in the sec­ond largest slice of pub­lic spend­ing, lo­cal gov­ern­ment. Ed­u­ca­tion is down 4%, en­vi­ron­men­tal ser­vices 9%, roads and trans­port 14%, cul­ture and li­braries 20%, and plan­ning and de­vel­op­ment a mind-bog­gling 35%.

Nor is health the only pro­tected ser­vice. Be­sides promis­ing to in­crease re­source spend­ing on the NHS by £2bn to £13.5bn by 2021, the Scot­tish Gov­ern­ment has also pledged to main­tain the po­lice bud­get, put an ex­tra £1.5bn into dou­bling nurs­ery care, put hun­dreds of mil­lions more into clos­ing the at­tain­ment gap in schools, and have more gen­er­ous de­volved ben­e­fits. And while it has been quick to trum­pet the promises, it has been near silent about the chal­lenges other ser­vices are fac­ing.

When min­is­ters pub­lished their five-year Fis­cal Out­look ear­lier this year, it im­plied spend­ing on non-pri­or­ity ar­eas would fall by 12% in just three years. The UK Bud­get, with £950m of ex­tra fund­ing un­der the Bar­nett for­mula, has re­duced that to 4%, but it shows the bru­tal squeeze that min­is­ters, sotto voce, were ready to coun­te­nance.

The Fraser of Al­lan­der says it can’t go on. It rec­om­mends “rad­i­cal change”, a phrase guar­an­teed to strike fear into the heart of even the most out­wardly rad­i­cal politi­cian.

One idea, a re­turn of tu­ition fees, is a ra­dioac­tive non-starter. But oth­ers are more prac­ti­cal. Like giv­ing coun­cils the power to set their own taxes. Not just a tourist tax, but a tax on em­ployer car park­ing spa­ces, which has raised rev­enue and cut con­ges­tion in Not­ting­ham.

The think-tank also floats a tax on va­cant land and an over­haul of coun­cil tax, which is in­creas­ingly de­tached from house prices. There hasn’t been a reval­u­a­tion since it was in­tro­duced 27 years ago.

What about a na­tional so­cial care fund to help our age­ing pop­u­la­tion? The Welsh Gov­ern­ment re­cently pub­lished a re­port on the idea. In­di­vid­u­als would pay be­tween 1% and 3% ex­tra in­come tax ac­cord­ing to age and means as an in­sur­ance against so­cial care in old age.

Costs would be spread fairly across the gen­er­a­tions, and the ben­e­fits would be linked to peo­ple’s con­tri­bu­tions, so last-minute re­tirees from out­side the coun­try couldn’t pig­gy­back on it.

“The fact that Wales is hav­ing such a dis­cus­sion, but Scot­land is not, sug­gests that we need to up our game in Scot­land with re­gard to the level and qual­ity of the de­bate,” the Fraser of Al­lan­der says point­edly.

The cur­rent break be­tween elec­tions at Holy­rood was sup­posed to be the time when MSPS were go­ing to take on th­ese big is­sues.

Brexit has un­der­stand­ably got in the way, suck­ing the oxy­gen and adren­a­line from the body politic.

But even Brexit can­not go on for­ever. The de­bate over how to pay for pub­lic ser­vices – what to tax and what to cut – is in­escapable.

As Ms Stur­geon also told the Prime Min­is­ter yes­ter­day: “It is time to be straight with peo­ple.”

Even Brexit can­not go on for­ever. The de­bate over how to pay for pub­lic ser­vices – what to tax and what to cut – is in­escapable

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