Funding our Future Public Services

27 October 2012

Scottish Labour under Johann Lamont has set up a Commission to look at the future funding of public services in Scotland .

She states quite rightly that it is not possible to have high quality Scandinavian-style public services funded by a policy of low taxation.

Her Commission will look at how targeted public services and universal public services can be paid for at a time of less money being available and demand for these services increasing

This has created a rage of Pavlovian tweeting from Labour’s opponents that this would create a variety of apocalyptic political and social scenarios in Scotland.

In the vanguard of the attack of the work of the Commission were the SNP whose conference in Perth concluded with this observation from STV news, 

 “Free education, bus passes and personal care are among the incentives that Nicola Sturgeon has said will persuade Scots to vote for independence….

“Ms Sturgeon said independence would ‘guarantee’ these services into the future, but she did not specify how far into the future this guarantee would last beyond a Yes vote.”

Added to that was the Financial Times blog article  “SNP can’t guarantee universal benefits” (22nd. October ) in which  a party adviser spoke about how long the provision of universal benefits would last.

“At the moment, we afford these items from a fixed budget and we make it work. But who knows what is going to happen in four, five, ten years’ time?”

Johann Lamont’s Commission follows in the same vein as the work of the Commission that was headed by former STUC leader Campbell Christie on the severe problems that the public sector in Scotland faces from the rising demand and expectations that public services face from a longer living population as well and chronic health conditions.

The Christie Commission declared,

"Our public services are now facing their most serious challenges since the inception of the welfare state.

"This rising demand for public services will take place in an environment of constrained public spending.

"In the absence of a willingness to raise new revenue through taxation, public services will have to achieve more with less."

 “….Times of fiscal austerity inevitably require the Scottish Government to take difficult spending decisions between competing demands.”

 There are areas where the money can be gained for spending on public services rather than awarded to the private sector or to individuals.

Here are just three.

Private schools in Scotland enjoy an annual £10 million subsidy tax in rates relief because of their classification as “charities” .

 State schools receive no such discount.   

( In digressing, private schools also enjoy an annual £3million of public funding through the Continuity of Education Allowance which allows senior figures in the military to send their children to them as pupils while the top brass are posted elsewhere. I recall Labour colleagues on the former Tayside Regional Council protesting about the use of the Continuity of Education Allowance.

Unfortunately, this funding does not come under the responsibility of the Scottish Government, but it is another addition to the budget of private schools. )

The bonus culture within Scottish Government quangos must be completely scrapped.

While public services suffered  millions of pounds in cuts, £10 million of public money was paid out in bonuses across the quangos last year.

Take for example, Scottish Water . 

Earlier this year, the Daily Telegraph reported that “ Senior chiefs at publicly-owned Scottish Water paid themselves more than £1.5 million last year including a £369,000 bonus despite most state-employed staff having to endure a pay freeze.

Richard Ackroyd, Scottish Water’s chief executive, retained his position as Scotland’s highest paid public sector employee, earning a basic salary of £263,000, a bonus worth £105,000 and other benefits totalling £12,000.”

There are the distinction awards in the NHS that need to be reconsidered in these tough economic times.

Over the next three years, £24 million is being set aside each year for awards to consultants on the top of their salaries while others in the NHS are subject to a pay freeze and don’t get bonuses just for doing their jobs.

£24 million would employ several hundred nurses a year instead from the 2,000 post nursing and midwifery posts cut in recent years.

All decisions taken have their consequences , and, despite the rhetoric, the SNP’s decision  to freeze the council tax until 2016 will by then have taken away  £3.1 billion that could have been spent by local authorities on important services for their communities.

The only reason why there is council tax freeze is that the Scottish Government is too frightened to abolish the council tax and replace it  with its own flagship polcy of a local income tax (LIT) which would be a vote loser for them at the Referendum.

It promised to be so much of a vote loser that the SNP Government spent £80,000 of taxpayers' money in court battles to prevent details of their local income tax plans from being made public before the 2011 Scottish Parliament election.

If the council tax is to remain,  the Commission may want to look at Scottish Labour’s 2007 manifesto which proposed to add to extra bands to council tax banding - one at the top and another at the bottom .

This , said the manifesto, “will ease the financial pressure for those in the lowest value properties and ensure that those in the higher value properties make a more proportionate contribution.”

The blog “Better Nation” carries research which estimates that to freeze the council tax over 4 years for the top 10 per cent of highest income people in Scotland costs a total of £108 million of public money.

To freeze the council tax for the next 10 per cent of those with the highest income costs a further £82 million.  

Very well off people in Scotland have done very well out of the SNP’s low taxation policy.

These are just a few examples of where the redistribution of spending could take place.

 However, beyond the financial  limits which the Commission has to work within, there is another way and another perspective which we must not lose sight of.

The Christie Commission made its own estimate of the shortfall in funding public services seeking to meet the increased demand from an ageing population and long-term health problems.

“The pressure on budgets is intense and public spending is not expected to return to 2010 levels in real terms for 16 years…

“NESTA (National Endowment for Science, Technology and the Arts) has produced an estimate based on published sources of information that indicates that over the next 15 years:

“Scotland’s public services will need to cope with additional demands in health,

social care and justice alone amounting to more than £27 billion, due in particular to an ageing society and the prevalence of certain ill-health conditions.

“The Scottish Government has estimated that if current models of care continue, the care budget of approximately £4.5 billion will need to increase by £1.1 billion by 2016 and £3.5 billion by 2031.

“For local government services alone, projections commissioned by the Strategic Funding Review Group (SFRG) show that if services remain as currently configured a gap of over £3 billion could arise between demand and available resources by 2016-17.

“Over half of this projected gap would be driven by demand growth.”

Compare the projected £3 billion a year gap between the cost of local government services and the money available with the £120 billion a year that the Public and Civil Service Union estimate is lost each year in the UK ( £25 billion in  tax avoidance, 70 billion in tax evasion by big companies and wealthy individuals, and £25 billion in taxation is lost through not being collected.)

As the union has said, "Closing the tax gap, as part of overall economic strategy, would negate the need for devastating cuts."

With that policy, Scotland’s share of the proceeds could mean that the choice needn’t be between free concessionary travel for the elderly and university tuition fees.

The choice would then be between allowing tax evasion and tax avoidance to be tacitly accepted on one hand or universal benefits and local government provision on the other.


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