Tax hikes and spending cuts worth an extra £39 billion every decade for the next 50 years would be needed to prevent ballooning national debt levels, the UK’s fiscal watchdog has warned.
Tax hikes and spending cuts worth an extra £39 billion every decade for the next 50 years would be needed to prevent ballooning national debt levels, the UK’s fiscal watchdog has warned.
The Office for Budget Responsibility’s latest Fiscal Sustainability Report makes for grim reading as it warns over the outlook for government borrowing and debt levels following the recent NHS spending pledge.
Unless the Government takes action, the OBR estimates the main budget deficit would rise from 0.3% in 2022-23 to 8.6% of gross domestic product (GDP) by 2067-68 – a rise equivalent to £176.5 billion a year.
This would mean public sector net debt would jump from 80% of gross domestic product (GDP) in 2022-23 to 282.8% by 2067-68 and continue rising after that, according to the OBR.
The OBR calculates that the Government’s promise to spend £20.5 billion extra on the NHS is alone responsible for pushing up government borrowing forecasts by 1.5% of GDP and net debt by 57.9% of GDP in 2067-68.
Its solution to address the funding gap is a combination of higher taxes and less spending, signalling no end yet for the Government’s austerity drive.
It suggests so-called policy tightening every decade for the next 50 years would be needed to get borrowing under control, predicting this would be needed at a scale of 1.9% of GDP – equivalent to £39 billion each decade.
Around a quarter of this is down to the June NHS announcement, it said.
While the OBR said a one-off hit of 5.2% of GDP – £111 billion in today’s money – in 2023/24 could get public sector debt down to around 40% of GDP in 2067/68, it would start to rise after that date.
The OBR said: “Tightening policy by 1.9% of GDP a decade would see the debt ratio fall more slowly to begin with, but the overall tightening would be large enough to stabilise the debt ratio at around the target level and prevent it from taking off again.”
On the shorter term outlook, the OBR warned that Chancellor Philip Hammond’s target to balance the books by the middle of the next decade was “challenging”.
It said the budget was facing pressure from an ageing population on health, social care and state pensions spending.
“On current policy we would expect the budget deficit to widen significantly over the long term, putting public sector net debt on a rising trajectory as a share of national income. This would not be sustainable,” it said.
But the OBR said the Government would be facing a public finances headache, regardless of the extra NHS funding.
It said: “The big picture of upward pressure from health costs and ageing is common to many advanced economies and would still be seen in the UK even if the Government fully finances the June health announcement.”
Minister for UK Negotiations on Scotland’s Place in Europe, Michael Russell
When Donald Dewar spoke at the opening of the Scottish Parliament – the re-opening as he himself acknowledged – on the 1st of July 1999 he talked of it being :
“a new stage on a journey begun long ago and which has no end.”
Presiding Officer you were there to hear that speech. So was I. So were the First Minster and the Deputy First Minister sitting on this front bench today. So were Tavish Scott and Mike Rumbles, so was Iain Gray and Elaine Smith. 26 members of this present Parliament were, so to speak, in at the beginning, though the beginning was actually a culmination of a long campaign and struggle which was fought, again in Donald Dewar’s words, to achieve “the day when democracy was renewed in Scotland”.
Of course I and all the others on these benches disagreed then with Donald Dewar about the final destination of that journey, just as we disagree on that matter with others here today.
Yet that was not the important thing on that opening day and it is not the important thing today.
The important thing was, and is, to acknowledge the progress that had, and has, been made. To accept that on this journey together in a Parliament of minorities – a journey the Scottish people told us to take and which they voted for by an overwhelming majority – we should find a way to secure tangible gains for our country, no matter our vision of where we wanted to end up.
And that is our duty because this Scottish Parliament belongs to the people of Scotland: not to us as parliamentarians, nor to this Government or any Government. As elected members, we hold this place and our powers in trust: for the generation that voted for it, for this generation, and for the generations to come.
They decide on journey and endpoint, not us.
Presiding Officer, over the past 19 years this Scottish Parliament has, in the greatest part, been good for Scotland.
The powers of this Scottish Parliament have been used by administrations of different political complexions to improve the lives of many – hopefully most – of the people living in Scotland, often in response to some of the most serious challenges they face.
Every one of us in this chamber has played a part in that – from securing free personal care for the elderly to abolishing tuition fees; from establishing world-leading climate change legislation to delivering equal marriage; from putting in place the UK’s first smoking ban to agreeing that for the health of our nation we should introduce minimum unit pricing for alcohol; from eliminating business rates on small enterprises to supporting innovative and profitable renewable energy generation.
We have, and we use, these powers because we enjoy an established system of government called devolution.
It may not be able to secure everything all of us want but devolution put in place in 1999, and strengthened by subsequent agreements with Westminster – has made our system of governance robust enough to withstand expected and unexpected challenge and difficulty. Robust enough to withstand a global financial crash and to resist – at least in part – the misguided and damaging policy of austerity.
Now it is our job to ensure that it is not cast aside because of a Brexit which Scotland did not vote for and which can only be damaging to our country.
Today the challenge of Brexit – or rather the challenge of the proposed power grab by the UK Government under the guise of delivering Brexit – puts our devolved settlement at risk.
The Secretary of State for Scotland – who incidentally also heard Donald Dewar’s opening remarks as a member of this Parliament – dismissively described the issues we are debating today as “dancing on the head of a pin”.
Presiding Officer, it is not dancing on the head of a pin to insist that twenty years of stable devolution that has delivered good things for our fellow citizens be protected.
Nor to demand that the powers we use for the benefit of Scotland, which have been agreed by the people of Scotland.
Now in one view, the vulnerability of the principles of devolution to the UK Government’s approach to Brexit should not surprise us.
That government cannot answer even the most basic of questions on issues such as the Customs Union with just months to go before a Withdrawal Agreement must be signed.
It has dismissed this Parliament’s views on wider Brexit issues such as the Single Market and the triggering of Article 50 and it has acted recklessly towards prosperity, and peace in Northern Ireland.
Presiding Officer, in contrast to the division at Westminster, there has been consensus in this Chamber over the need to protect the Scottish Parliament’s powers.
The Scottish Government has always acknowledged that we must prepare our laws for EU withdrawal.
But we accept that legal preparation for Brexit is required and that that is the purpose of the EU Withdrawal Bill.
The UK Government, for its part, recognizes that it is required to get our consent to the bill. And on that point, this Parliament spoke very powerfully when, in its interim report, the Finance and Constitution Committee in January agreed unanimously that the bill was “incompatible with the devolution settlement in Scotland” and that it could not therefore recommend consent.
Clause 11 was not an accidental clause; – it encapsulates the current UK Government’s view of the type of devolution it wants to see – operating only by the grace and favour of Downing St.
Now to be fair the UK Government, eventually responded to the unanimous view of this Parliament and Welsh Assembly and many others that clause 11 as originally drafted was unacceptable.
So it made changes.
But Presiding Officer, it is still clear, in its new re-formulated clause 11, how the UK Government sees power being exercised on withdrawal from the EU. It is still clear how it views this Parliament.
And that view is unacceptable.
For it would abandon the way in which we have all operated for almost two decades and break the devolution settlement we have.
The UK Government wants to take a power to restrict the competence of this Parliament. And it wants to be able to exercise that power even in the face of an explicit decision by this Parliament that it should not.
This is not about the sovereignty of the Westminster Parliament, or giving effect to the Sewel Convention. This is about the UK Government, not the UK Parliament, for the first time being able to adjust the terms on which devolution operates through delegated legislation; and to be able to do so without the consent, or even against the wishes, of this Parliament.
Presiding Officer, there are existing and effective powers under the original Scotland Act which allow the competence of this Parliament or the Scottish Government to be adjusted.
Importantly, none of them operate in the way set out in the new clause 11.
Every single one of them requires changes to be passed by both the UK Parliament and the Scottish Parliament. Every single one of them requires proper democratic consent to be sought and received. Real consent, not presumed consent, not no means yes, no matter what this chamber says.
A section 30 order, for example, adjusting the list of reserved matters and therefore the boundaries of devolution, requires to be passed by this Parliament. It cannot become law without the consent of the Parliament and the country it affects. There have been thirty orders passed under section 30 since this Parliament was established, all the product of agreement; all consented to in this place and at Westminster, all done so on the basis of parity – even the section 30 for an independence referendum was able to secure support and win the consent of both parliaments
Now of course the UK Government tells us that it would not normally make these regulations without our consent.
But those are not words that appear in the legislation. The legislation is actually drafted on the basis that proceeding with an order – even without consent from this Parliament; even if this Parliament has unanimously voted against it – will be normal.
And it is that legislation to which we are being asked to consent.
Moreover, the actual amendments to Clause 11, now passed by the House of Lords, say that the powers of this Parliament can be constrained for up to seven years, whether the Parliament agrees, whether it does not agree, or whether it makes no decision at all
The purpose of this constraint is, we are told, to enable discussion to take place on the establishment of common UK frameworks in devolved policy areas after Brexit.
But there is no need to impose an unprecedented, unequal and unacceptable new legislative constraint to achieve that end.
Because we agree that there may be the need, in certain areas, to establish such common frameworks.
And in keeping with the spirit and principles of devolution, we agree that those common frameworks should be the product of negotiation and agreement between governments and parliaments, rather than established by imposition.
We also agree that, pending the establishment of common frameworks, both governments should maintain existing EU law regimes across the UK.
Now, the Secretary of State for Scotland has said frameworks should not be imposed. But as the Finance and Constitution committee reported:
“this commitment that common frameworks will not be imposed is contradicted by the ‘consent decision’ mechanism created by the UK Government’s amendments to Clause 11 which would allow the UK Government to proceed with regulations without the consent of the Scottish Parliament.”
The committee made the key point that the devolution settlement can only function effectively if there is mutual trust between all of the UK’s governments; if the substantial political agreement between governments is given effect by political means.
The answer, therefore, is to proceed through reciprocal political commitments.
That was the view of all parties on the committee – except the Conservatives.
Today, in this motion, the Scottish Government is asking Parliament to withhold consent to the Bill as it stands.
This will not be the end of this process – the offer of this Parliament is still on the table.
However, passing this motion means that the EU Withdrawal Bill must be adjusted, either so that it can command the consent of this Parliament, or to reflect the terms of the legislative consent motion.
If the motion is passed today, that will be the will of this Parliament.
What cannot happen, Presiding Officer, is what the UK Government seems to want to happen. They want to ignore the reality of devolution. They want to drown out what this Parliament says.
But, not even they can pretend that no motion has been passed.
Nor can they pretend that this Parliament is failing to face up to its responsibilities to enable the statute book for which it is responsible to be prepared – through passing the Continuity Bill; and through supporting the Government in seeking to secure amendments to the EU Withdrawal Bill so that it could command the consent of the Parliament.
If after tonight’s vote the UK Government move to force on this Parliament an arrangement for restricting devolution that does not have Parliament’s consent they will do so in the full knowledge that they are breaking the twenty year old devolution settlement and operating out with the agreed constitution.
Those are actions that will be noted here and across Europe.
In short, if there is a failure after today’s vote to adapt the bill to devolution. It will be the UK that would be breaking trust, and breaking the rules, not us.
Presiding Officer, Donald Dewar began his speech on the 1st of July by looking at the mace that was in front of him then and is in front of us now. It has inscribed on it the first words of our founding statute – “there shall be a Scottish Parliament”.
Twenty years ago they were words of aspiration; a statement of constitutional intent. Now, they words of constitutional reality; of resolve. There is a Scottish Parliament and its voice must be heard.
Donald Dewar cautioned us in his speech that the Scottish Parliament was “not an end”, it was “a means to greater ends.”
Today we are called on – for the first time – to protect those means by refusing to accept changes to them to which we have not agreed.
To protect those means, so that we can go on achieving the best ends for Scotland we can.
To protect those means because, the people of Scotland themselves chose them – and they chose us to protect them.
Accordingly Presiding Officer, I move the motion in my name.
First Minister Nicola Sturgeon announced new support today to help drive entrepreneurial networks so that budding entrepreneurs can use them to share ideas, experience and seek support, investment and expertise.
A total of £650,000 funding will be provided through Entrepreneurial Scotland – an organisation that aims to inspire and develop Scotland’s people to build the most entrepreneurial society in the world.
The First Minister made the announcement at the Impact Summit, part of first Scotland CAN DO festival, at Barras Art and Design in Glasgow. The event brought together around 400 entrepreneurial leaders, change makers and innovators to share their ideas.
“Scotland is known for its vision as a world-leading entrepreneurial and innovative nation, one in which growth and innovation go hand-in-hand with fair work and delivering in a way which benefits everyone.
“We want Scotland to be a country that is at the forefront of social and technological progress – to invent, design and manufacture the technologies and products of the future – not simply to consume them. And we want to do all of that in a way which benefits all of society.”
Research shows the minimum unit pricing is expected to save 392 lives in the first five years of implementation.
The First Minister said:
“I am extremely proud that the eyes of the world will once again be on Scotland with the introduction of this legislation
Our action is bold and it is brave, and shows once again that we are leading the way in introducing innovative solutions to public health challenges.
It’s no secret that Scotland has a troubled relationship with alcohol. There are, on average, 22 alcohol-specific deaths every week in Scotland, and 697 hospital admissions and behind every one of these statistics is a person, a family, and a community badly affected by alcohol misuse.
Given the clear and proven link between consumption and harm, minimum unit pricing is the most effective and efficient way to tackle the cheap, high strength alcohol that causes so much damage to so many families.”
A tailored migration system for Scotland (Scot Gov Website News)
“Overwhelming case” for Scotland-specific system.
Scotland’s population projections show there is an ‘overwhelming case’ for Scotland to have the power to tailor its own migration policy, External Affairs Secretary Fiona Hyslop has said.
With the number of deaths expected to outweigh the number of births for every year until 2040, action is required to maintain and grow Scotland’s working age population to help support the welcome fact that people are living longer.
A new Scottish Government discussion paper on migration looks in detail at the impact that falling migration levels would have on Scotland’s economy and what a devolved migration policy could look like.
The paper sets out ways in which the Scottish Government could be given a greater say on UK migration policy in support of Scotland’s needs, as well as options for a Scotland-specific migration system, including:
Scottish ministers to set specific criteria to address Scotland’s needs, rather than arbitrary caps on numbers
A new Scottish body could be set up to administer the policy
Devolved powers to make it easier for migrants’ family members, and those of UK citizens, to join them in Scotland.
The discussion paper found that by 2040, lower migration alone would reduce Scotland’s real Gross Domestic Product (GDP) by 4.5% – equivalent to a fall of almost £5 billion a year. The reduction across the rest of the UK would be 3.7%, demonstrating the Scottish economy’s greater reliance on migration.
In a ‘worst case scenario’ where migration is reduced to tens of thousands, the cost to the Scottish economy could be £10 billion per year by 2040.
The paper also identifies specific differences in the migration needs of Scotland and the UK including:
The importance of migration to help grow our working age population
The value of inward migration to rural Scotland, where it helps sustain employment and essential public services in rural communities
A need for migration routes to Scotland that allow for and promote long-term settlement, rather than just short-term work visas, to help support demographic sustainability.
Launching the paper on a visit to Outplay Entertainment, a games company in Dundee with a high ratio of skilled workers from overseas, Ms Hyslop said:
“In the absence of clarity from the UK Government on what migration policy will be post-Brexit, this paper looks in some detail at Scotland’s population needs and how they can be achieved.
“It is clear that the UK Government’s plans to reduce migration would not support Scotland’s economy or our population needs – all of Scotland’s population growth over the next 25 years is projected to come from migration. So this paper sets out what a devolved migration system could look like, and the principles we would follow.
“Inward migration does not just bring economic benefits. By welcoming people to live, work and study in Scotland we can strengthen our society and enrich our lives.
“Migrants contribute to our economy by bringing new skills and fresh approaches. Without their contribution Scotland’s economic growth will suffer. Scotland’s economy is heavily reliant on inward migration – particularly of workers with the skills we particularly need, like those I met today in Dundee.
“This paper demonstrates that it simply does not make sense to set arbitrary targets to reduce net migration, or to end free movement of people by leaving the single market.
“There is now an overwhelmingly strong case for Scotland to have the power to tailor its own migration policy to reflect its own unique circumstances. Indeed, there is a growing consensus that this is the only logical step in the face of UK Government policy which is determined to restrict the number of people who can choose to make Scotland their home.”
Scot Gov Website; Impact on jobs and living standards should be known.
Following the leak of the UK Government’s impact analysis of Brexit the Minister for UK Negotiations on Scotland’s Place in Europe Michael Russell has written to Secretary of State for Exiting the European Union David Davis to say the Scottish Government will release the analysis if it receives it.
Full text of the letter below.
31 January 2018
I refer to the commitment by Robin Walker MP in the House of Commons to making available to Members of Parliament copies of the UK Government’s “EU Exit Analysis, Cross Whitehall Briefing” as described by Buzzfeed on 29 January 2018.
Mr Walker made it clear yesterday afternoon that the UK Government does intend to make this information available to the devolved Administrations, as you did with the previous reports following my representation. I welcome this. Mr Walker further clarified that it would be a matter for the devolved Administrations to ensure that such documents are handled with appropriate confidentiality, but would have no objection in principle to their being shared with Members of the devolved legislatures on the same basis as was previously shared with MPs.
As you are aware the Scottish Government considers that the public have a right to know the impact on jobs and living standards of the UK Government’s decision to pursue the UK’s exit from the EU and therefore that this analysis should be made publicly available. Further, this is not our analysis and we do not see it as our responsibility to make arrangements on confidential handling. I want to be clear that if you send the analysis to us we will make it public.
I am copying this letter to David Lidington, Minister for Cabinet Office and Chancellor of the Duchy of Lancaster; Mark Drakeford, Cabinet Secretary for Finance; and, David Sterling as the head of the Northern Ireland Civil Service.
Scot Gov Website News Article:
Scotland’s NHS, the economy, public sector workers and the low paid will benefit from the Scottish budget, Finance Secretary Derek Mackay said today as he confirmed he had reached an agreement that will see the financial plan passed at all stages by the Scottish Parliament.
The budget takes steps to mitigate UK Government cuts, increases funding for the NHS by £400 million, invests in the expansion of early learning and childcare, delivers on our commitments to broadband, supports the building of 50,000 new homes, backs small businesses and innovation and provides essential funding for our frontline police and fire services.
The Finance Secretary also confirmed he will extend the Scottish Government’s commitments on public sector pay to ensure all public sector employees earning up to £36,500 receive a minimum 3% pay increase – meaning 75% of public sector workers, including NHS staff, will benefit from an inflationary pay rise.
As part of an agreement with the Scottish Green Party, the budget will now include a real terms increase in revenue investment for local authorities with local services benefitting from an additional £159.5 million of resource funding, and following discussions with Shetland and Orkney Island Councils, funding of £10.5 million will be made available to support inter-island ferry services in 2018-19 – with talks continuing on a long term solution.
Investment in Low Carbon infrastructure – which is already increasing from 21% of planned infrastructure investment in 2017-18 to 29% in 2018-19 – will continue to increase in each year of the parliament, with additional support made available this year for home energy efficiency, the exploration of new local rail services and the delivery of marine protected areas.
In addition, Mr Mackay confirmed that, following publication of the Scottish Government’s tax proposals in December, he would take steps to remove an anomaly that meant some higher rate tax payers saw their bills fall while others on slightly lower incomes saw a rise, due in part to changes in the personal allowance.
As a result, while 70% of taxpayers will continue to pay less next year than they currently do, 55% will pay less than they would elsewhere in the UK. All those earning above the new Higher Rate Threshold of £43,430, a 1% increase on the 2017-18 threshold, will see a modest increase in income tax. This distinct income tax policy will raise around £55 million and support an additional £420 million of investment in the Scottish budget.
Confirming the changes during the Stage 1 of the budget debate, Mr Mackay said:
“As a parliament of minorities, we must work across the chamber to find compromise and consensus in order to give support, sustainability and stimulus to our economy and to our public services.
“This budget invests record amounts in our NHS, supports our efforts to improve attainment in our schools, invests in our economy with support for infrastructure, for broadband and for innovation, and supports our ambitions to tackle climate change.
“We are lifting the pay cap with a real terms increase in pay for the majority of public sector workers and we are supporting local services with a real terms increase for day to day spending and for long term investment, with an additional £170 million going into local services, on top of the £10.5 billion already proposed.
“Our changes to tax ensure Scotland has a progressive tax system – with 70% of taxpayers paying less next year than they do currently and 55% paying less than they would across the rest of the UK – while businesses benefit from support for investment.
“The changes I have announced ensure that people in Scotland will benefit from the best deal for taxpayers in the whole of the UK.”
Russell sets out suggestions to new Minister of State. (Scot Gov News)
The UK Government must work more closely with devolved governments as they embark on a second phase of negotiations with the EU in order to achieve best possible outcome, said Minister for UK Negotiations on Scotland’s Place in Europe Michael Russell.
Following economic impact analysis, Scotland’s Place in Europe: People, Jobs and Investment which confirms remaining in the European Single Market and Customs Union would be best post-Brexit. The Scottish Government is calling for clarification and assurances from the UK Government on the meaningful participation of devolved governments in agreeing UK positions, as well as the urgent reconvening of the Joint Ministerial Committee (EU Negotiations).
Full text from Minister of UK Negotiations on Scotland’s Place in Europe Michael Russell to the newly appointed Rt Hon David Lidington MP as Minister of State (Cabinet Office) below.
Further to my letter to you last week, I am writing again to make some specific and urgent requests.
I am sure that you will agree that as the UK embarks on a second phase of negotiations with the EU, it is crucial that the UK Government and the devolved governments work closely together to achieve the best possible outcome.
We understand that the UK Government is to set out its approach to the second phase of negotiations in mid-February. I would be grateful, therefore, if you could share further detail on how the UK Government is reaching agreement on its desired end state relationship with the EU, and when devolved administrations can expect to have an opportunity to participate in and influence the outcome of that discussion.
To better enable our genuine participation, I would also welcome your clarification on the anticipated sequencing for phase two of the negotiations with the EU, including key dates for subject specific discussions. This should be the driver for the prioritisation of discussions, including at the Joint Ministerial Committee (EU Negotiations).
Whilst the Joint Agreement reached by the UK Government and EU in December was a welcome step forward, it is clear that the next phase of these negotiations will be significantly tougher than the first. It is essential that all Governments across the UK are fully involved in preparing for and delivering progress. Therefore there is, as I set out in my letter last week, an urgent need to convene a meeting of the JMC (EN) and agree joint working arrangements going forward. A meeting of the JMC (Plenary) will also be essential in order to take a high level view of this matter.
I remain concerned that as we move forward we have yet to agree mechanisms for joint working between the UK Government and Devolved Administrations which fully reflect the type of engagement and involvement envisaged in the terms of reference of the JMC (EN) and in subsequent meetings. I also see a serious risk that the important activity to agree joint working arrangements going forward will not be complete until after the UK has established its position on the end state relationship. That would not be acceptable. We did of course reach a positive agreement at the meeting of the JMC (EN) on 12 December 2017 that there should be greater involvement and engagement of the devolved administrations in phase two of the negotiations.
I, therefore, hope that agreement on the detail of this can be rapidly reached and endorsed by the next meeting of the JMC (EN), so that such engagement can commence.
I will be in London on 29 and 30 January and would welcome discussion with you to progress these matters with urgency.
I am copying this letter to the Secretary of State for Exiting the EU, David Davis, the Secretary of State for Scotland, David Mundell, the Cabinet Secretary for Finance in the Welsh Government, Mark Drakeford and the Permanent Secretary for the Northern Ireland Executive, David Sterling.