The budget is a reason to wake up, not fall into despair

by | 14 Dec 2022

The Scottish Budget will bring grim news, but it is not the end of the story. Doing more of the same will fail, but there are entirely different directions to take

On day three of my attempts to find reasons to be cheerful I want to look at something which at first glance offers no reason for optimism at all – tomorrow’s (at the time of writing) Scottish Budget. After all if there is one thing that everyone can agree on, it’s that this is going to be grim.

So where’s the cheer in that? I suggest you find it in the realisation that there is an alternative to ‘only cuts or tax’ and to think that this could be a tipping point where we actually pursue that alternative.

First, a bit of grim reality. Set aside the immediate future, where we are now should be enough to alarm you. The NHS really is struggling as much as it looks like it’s struggling. Local government is faced with the reality of making more cuts pretty well every bit as much as it claims it is. Progress on climate change really is as poor as you’ve been told.

In fact in everything from child psychological services to backlogs in the justice system to islands without ferries, the problems are real and they are everywhere. Only big corporations get everything they ask for. Only they seem to exist without limits on public support.

If we keep doing what we’re doing and we don’t make more investment into public services, they will slowly fall apart (or in some cases not slowly at all). But (whisper it) we could do something that isn’t the same as what we’re doing. I don’t want to give the impression it would be a silver bullet and I most certainly don’t mean that more investment isn’t needed.

What it does mean is that we can take steps which are neither ‘raise taxes very substantially’ or ‘slash the public realm’. And those steps are very much needed.

But before I discuss them I want to make two things very clear. The first is that our public services most certainly do need more investment. Common Weal has been presenting work on how to do this for years now and the STUC has a well-received proposal too. It’s not a question of do we need it but how do we do it?

For example, one weakness in the STUC proposal is that a property tax and a wealth tax hit just about exactly the same people in Scotland. It would probably need to be one or the other because of our wealth structures. Scotland’s tax base is not like London’s tax base. We can’t just lift-and-shift rhetoric about taxing the super-wealthy.

But (whisper it) we could do something that isn’t the same as what we’re doing

The second thing I want to make clear is that I in absolutely no way mean ‘efficiency gains’. There was this massive push at the time New Labour was coming to power to persuade people that there was a way to increase investment into public services without taxing or cutting, if only efficiency failures could be cut out.

Thing is, not only did it not work, it actually made things worse. For New Labour efficiency meant introducing business management practices and increasing the role of the market in public services. It didn’t release value, but it did suck up resource.

So with that clear, what can we actually do that offers even a glimmer of hope? Loads. That is all I want you to take from this article. We are not powerless and there are lots of things we can do if we want to. I am going to present a few under two broad themes – investing more and getting more out of it.

The first of these is more straightforward. The second the Scottish Government is serious about protecting public services it can replace the Council Tax. A Property Tax would be more progressive so raise more from those who can best afford it. And it would also tax land, finally making Scotland’s feudal landlords pay for their privileges. With that and a range of smaller measures I think raising an extra £1 billion is a realistic target.

In the medium term we could of course stop giving away our national assets on the cheap. The ScotWind fire-sale looks like more of a betrayal of the nation with every passing day. Instead we could make them work for us and invest the very generous proceeds into public service.

In the slightly longer term, an independent Scotland could start to do a helluva lot more. I’ve set out the basics of what an independent Scotland’s fiscal and monetary policy could do for public services and there is a lot more in the book Sorted. We don’t need to live with the European austerity model of public finance (a self-defeating model no-one else in the world tried).

But even this isn’t the real win. The real win is to make tax work efficiently by reducing inequality. With so many people earning so little (and therefore not paying tax) and a much smaller group earning and owning so much that they can avoid tax, our tax base is woefully inefficient. Greater income equality means much, much more tax take.

Again, as a reminder, a few years ago we modelled how much tax Scotland would raise if we had the income distribution of a Nordic country. Same total national income, same tax rates, just distributing the income more evenly. And it raised about £5 billion without raising tax rates at all.

This is what I mean by ‘not doing the same thing’. The right wing is positively goading Scotland to raise taxes knowing that the UK’s horrendous inequality and utterly mad tax code (remember, it’s longer than the King James Bible) mean that our tax base is designed to fail if you try to keep everything the same and tax your way out of problems. We need a national mission to create greater economic equality.

Everywhere you look, Scotland is spending the same kind of money on any given public service as other countries and yet they’re getting much better outcomes

That is a snapshot of how to find more investment. A snapshot of how to use it better is even more encouraging. What Tory free-market reforms and New Labour ‘efficiency through marketisation’ did was load the entire public sector with a dreadful top-heavy management regime and a horrendous culture of targets and back-covering. Everyone in the system is incentivised to avoid stepping up.

Everywhere you look, Scotland is spending the same kind of money on any given public service as other countries and yet they’re getting much better outcomes. This is for a whole host of reasons. For one, professionals aren’t trusted to do what their judgement tells them they should and instead are forced to chase after targets set by politicians. It is hopelessly inefficient.

Everything is driven by finance managers and they have distorted public services in ways that cause them to fail – look at the drive to increase occupancy rates in the NHS by slashing beds, and then look at the cascade of failure that resulted. Managers are risk-averse and so create endless incentives for staff to shrug and say ‘I’m not allowed to do that’. They don’t want to shrug – they are forced to shrug.

And virtually everything is now driven by private sector consultants. Everything they design (which is almost everything in the public realm) is designed to leak money to their clients. Nothing isn’t up for privatisation and marketisation, nothing can’t be streamlined by squeezing staff more, nothing isn’t better if staff are disempowered and made to dance for the management class.

This is really the story of devolution, sadly. Government in Scotland has been entirely captured by a management class which proliferates everywhere. You find them in the ‘NGOs’ delivering public services which are indistinguishable from Serco. You find them everywhere in the labyrinth of quangos and agencies, invisible but inserted between the public and their public services everywhere.

They are on all the Scottish Government’s advisory groups. They are both in control and have clear self-interest. Their empires grow and grow, they are paid much more than any actual public servant. The whole machine is self-enriching.

To be clear what I’m saying here, I’m not suggesting that they extract enough money to fix all the problems. What I”m saying is that the mechanisms which they use for extracting money create a public service destined to fail.

Put in its very simplest terms, the biggest resource in the public sector by a million miles is its staff, and the management class see staff as more problem than opportunity. There is no scope for savings in the public sector if we think in terms of ‘efficiency gains’, but if we instead think in terms of the potential to release human resource by getting off the backs of public service workers and trusting them, it would be like a major financial investment.

The devolution era has frankly been fat, lazy and a bit to greedy – not frontline workers, the machinery around them. Radical reform is not only possible, it is long overdue. The first 20 years of devolution have seen a governing class run wild. It is time to tame them, and allow public services to reap the rewards.

These are only a few examples. Tomorrow’s budget is going to be grim and everyone is going to behave like grinning and bearing it (with some generous dollops of spin) is our only option. It isn’t. We can transform how government in Scotland works, we can begin the process of restructuring our economy, and we can set our public service workers free from bureaucracy, free to actually serve.

Do not be fooled into despair. Doing more of the same, worse each time is only one choice we have. There are other, better choices available.

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