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the Johnstone's View Index
Johnstone's View 3rd July
2009
Last week, in a statement to
Parliament, Prime Minister Gordon Brown attempted to
relaunch himself as the man who would save the country, if
not the world, from it’s economic gloom. He found himself
quickly rocked on to the back foot as the Organisation for
Economic Co-operation and Development (OECD) told him that
he and his Government will need to be much more “explicit”
about the need for public spending cuts.
The OECD’s Economic Survey
of the United Kingdom, released last week, says that the
Government should be more “ambitious” in order to rebalance
the economy and calls for "more explicit targeting of
programmes for expenditure cuts".
In his statement, the Prime
Minister set out three broad themes: the economy; public
services; and political reform. I am also happy to deal with
these themes. First, the economy, on which the Prime
Minister talks about what he is doing for the unemployed.
Well, under his stewardship, we have more of them since the
number of young people out of work and not in employment or
not in training, is higher today than it was a decade ago.
Worse than that, this was the case even before the recession
began, and there are now one million young people in that
situation.
On banking, we need to
recognise that the whole system has failed that is why
Conservatives are planning to end the whole tripartite
system, granting new powers to the Bank of England so that,
in future, the Bank call time on debt. Instead of decisive
action, all we have seen is tinkering with a system that
simply doesn’t work, from a Prime Minister who set it up in
the first place and cannot afford to admit he got it wrong.
As for the public finances,
when will the Prime Minister address the fact that Britain
is heading for the worst budget deficit in the developed
world? Gordon Brown speaks as if the Treasury was rolling in
money. When is someone going to tell him that he has reached
the bottom of the barrel?
The OECD says that the
Government has got to be more ‘ambitious’ and more
‘explicit’ about the need for spending cuts.
By doing so, they have
joined a growing list – from the Institute for Fiscal
Studies to the Governor of the Bank of England and frankly,
half his Cabinet in private, who now believe that he has got
to be straight with people on spending. We are told however,
that there will be no spending review before the General
Election. Any household or company faced with this level of
debt would start to get it under control. It is essential
that the Government start reviewing spending now.
Here in Scotland, we will
not be immune from the impact of accumulated debt and the
need to plan much more effectively for the future. We are
however, unfortunately saddled with a Government in
Edinburgh which has much more to gain by demanding that
Scotland should be spared it’s share of the pain, so that
they can then manipulate public opinion in years to come
when we have to pay the price for years of overspending.
It is therefore, something
of a useful coincidence that this week should have also seen
the publication of the report of the Calman commission into
Scottish devolution. While the report covers a range of
ideas for how the Scottish Parliament might be enhanced, the
main focus attention has been on the proposals to extend the
powers of taxation and to grant the Scottish Government, for
the first time, the power to borrow. These proposals have
been warmly welcomed by the Scottish National Party.
So what is Alex Salmond’s
plan? Well who knows what goes on on the mind of the man who
would be King! I am prepared to guess though.
The Chancellor of the
Exchequer currently plans for a 7.3% real terms cut in
public expenditure over the next three years. It is
unlikely that a future Conservative Government would be able
to avoid matching these spending plans. This will inevitably
feed through to the Scottish block grant, requiring any
Scottish Government to cut it’s cloth accordingly.
We know however, that the
First Minister and his friends intend to resist any cuts in
the grant, somehow believing that the rest of the United
Kingdom should carry the can for Gordon Brown’ poor
arithmetic and that we should be protected. This will not
happen, leaving the only conclusion that, Alex Salmond’s
Government intend to continue to live above their means by
taxing and borrowing their way into the future.
Gordon Brown mark two. Come
on Alex – tell me I’m wrong!
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