Covid-19 Fiscal Implications

Part of the debate – in the Scottish Parliament on 16th June 2020.

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Photo of Angela Constance Angela Constance Scottish National Party

The stark reality is that what is required to combat Covid, protect our public services, care for our communities and build businesses far exceeds what is available in tools of the trade and hard cash.

This debate is about the here and now. It is about the budget, its revisions and the fiscal framework, which all impact on every aspect of economic and social justice in this country. Therefore, the debate is also about our shared future and the Scotland that we seek.

As we look to life beyond lockdown, we need to rewrite the rules and rebuild an economy that is more democratic, more entrepreneurial and fairer. In times of crisis, those with the least always suffer the most, so we need a resilient economy that cannot be blown off course when it comes to jobs, proper pay and ending poverty.

Where do we start? I start by declaring an interest—I sit on the board of Common Weal, which, in a recent publication, made three suggestions for the here and now. The first two could be done by Westminster at the stroke of a pen: to remove the borrowing cap and give full dispensation to the Scottish National Investment Bank. The third action is around public procurement, which, under the Scottish Government, has come on in leaps and bounds, but there is more to do. I have always been interested in the work of Preston City Council, which systematically increased the proportion of its budget that was invested and spent locally.

I am being political when I say that we have a problem but not all the tools to sort it. The Finance and Constitution Committee received evidence that the fiscal framework is not designed for a crisis in which we need to be fleet of foot. Instead, we sit and wait for Westminster to develop, cost and announce, and then we wait for the cheque to arrive in the post. We know that consequentials can be revised downwards as well as upwards—a risk that Audit Scotland highlighted. We do not even have the ability to transfer capital to resource funding; that is not radical, but a simple, flexible measure that most other countries have.

The UK Government can borrow to fund additional Covid-related spend; the Scottish Government cannot. The UK can borrow cheaply in the long term with no binding limits; by contrast, the Scottish Government has to balance its budget, although other Organisation for Economic Co-operation and Development countries have relaxed rules for devolved Administrations. Will we even be allowed greater access to the national loan fund?

I am glad that the UK Government has got over its austerity-driven aversion to borrowing. I have never understood the logic of a Government that opts out and pleads prudence, yet is content to see individuals, families and businesses burdened by debt, insecurity and poverty. I am disappointed that Alex Neil is not speaking today, because he would be arguing for Scotland’s share of the £645 billion that the Bank of England is printing for the UK Government.

The big question is how we will support economic recovery without more borrowing powers and additional flexibility. The question for Westminster is, will it give us more powers or more money? I worry about how one of the most fiscally centralised Governments in the world will answer that question, which will mean that the choices for the Scottish Government might be completely unpalatable.

Those of us who represent or were raised in constituencies that still bear the scars of unemployment from the 1980s or the financial crash of 2008 will be desperate not to go back to the future. The prospect of unemployment reaching 10 per cent or more is grave, particularly given the fact that it would mean a corresponding rise of two to three times that in youth unemployment, possibly reaching 30 per cent. According to the Social Market Foundation, in constituencies such as mine, the nature of the local economy means that it faces the disproportionate impact of a double whammy of Brexit and Covid.

For those of us who are looking to life beyond lockdown and want to rewrite the rules to include a jobs guarantee scheme, a citizens basic income, more investment in housing and the maximum response to the biggest crisis of our lives, the choice is how, when Westminster says no, we say yes and work together for the right powers for the right purpose.