UK economic crises threaten Scotland's status as a developed nation

A piece I did during my tenure at Newsnet Scotland. I will resume publishing with the title Scottish Times.

by Alex Porter, Economy Editor

If you wondered just how bad Westminster's austerity cuts are going to be, news that the Labour-run council of North Ayrshire is bringing forward proposals for a four-day school week in all primary and secondary schools is a not-so-subtle hint.
This is not another ambush by the Labour party to manufacture a story and blame it all on the SNP government, this is the first real sign of what's to come. Austerity cuts are not going to squeeze public services, they're going to crush them. This proposal by North Ayrshire council will likely be dropped as it is shocking in its implications and public opinion is not yet accustomed to such traumatic events. However siclike stories will soon become less shocking as they increase in frequency.
The real significance of this announcement is that it demonstrates how the bankruptcy of the UK state is now threatening Scotland's status as a developed nation.

Crisis in the community

Shocking though it is, this plan for a cut in the school week will only save £2.3m, however the council has a target of saving £38m by 2014. A raft of other cuts are being explored by the council in their “strategic options” document.

Not surprisingly reaction has been one of deep concern. Paul Arkison of the GMB Scotland trade union said of the four-day week plan: “The mere thought of this proposal shows you the sad state of affairs this council is in. Parts of North Ayrshire have some of the highest levels of unemployment and the worst areas of deprivation in Scotland. To put school children on a four-day week could threaten their educational development and would cause chaos for working parents.

Perhaps it is a sign of the nationalists' paranoia about an ambush that SNP MSP Kenny Gibson commented:

“I am astonished that Labour-controlled North Ayrshire Council is considering a reduction in the school working week from five to four days.

"The law makes it clear that pupils should have a minimum of 190 days a year in school. A four-day week would mean a 47.5 week year, something I doubt would be welcomed by parents, teachers or pupils. Educationally I can see no merit in this proposal which appears to be finance driven.”

While perhaps Mr Gibson could point to council mismanagement it is perhaps unfair to lay the blame solely at the Labour council's door.

The cuts come from the UK government in London and are indicative of more to come. With huge cuts expected over the coming years Britain could easily be looking at the privatisation of council services, the introduction of road tolls and cuts in police numbers just as crime rises due to an acute increase in financial hardship.

It would not be wise then for the SNP government to get drawn into bickering with councils when clearly the the core of the problem is the UK's economic crises.

UK crises and preparations for another another City bailout

In 2008 the financial crisis saw the UK's financial sector become insolvent. It should have been put into administration and a new financial architecture established. This would have meant the banks' shareholders and bondholders would have lost their money. Instead Gordon Brown bailed them out by transferring the debts to the taxpayer. In conjunction with this policy the Labour government colluded with the Bank of England to print new money (quantative easing) and lend it almost free to banks.

The result was that a colossal amount of debt owed by the financial sectors were hung round the neck of Joe Public. So far the public has witnessed a huge increase in unemployment and now inflation, but the true price of the banks' bail out has yet to be revealed. The debt is enormous - many times GDP - and will be getting paid off by generations of taxpayers not yet born. Gordon Brown's legacy is not just economic collapse but an immoral tax on generations who will pay for his bribing of the financial sector long after his insane economic policies are swept under the carpet by a grateful financial establishment.

More astonishing though is that despite large amounts of private debt being transferred to the taxpayer, the financial sector is still irretrievably insolvent.

Yes, they are posting profits but that's because they are buying and selling products from and to each other using bailout money and freshly printed new cash from Mervyn King. The reason this isn't picked up by auditors is that the accountancy rules were relaxed by Gordon Brown so that the banks could hide their losses and not go under. He wasn't going to go down as the chancellor who destroyed the UK's financial sector. Not Prudence. The effect is that bankers can announce profits and so justify big fat bonuses. And then you'll be warned that if we don't let them have bonuses they'll leave. Yes, if we don't stop them robbing us blind they'll walk off and rob someone else blind. How will we cope?

Why doesn't the UK's political class deal with the situation? Simple. What brains do exist in London do not reside in the skulls of politicians but financiers. The political parties are mere bankers' puppets. And they've got the media pretty much tied up too. That's why they can transfer taxpayers' wealth to themselves with impunity. On top of that they believe their own hype so much they actually believe the population would suffer without them.

They are not going to take criticism. If a politician speaks out, 'city analysts' will howl about their economic policies and get into bed with the Labour opposition. And as we saw under Brown, Labour would not bat an eyelid over bankrupting the UK state and mortgaging your grandchildren's future to get elected.

What is even more mind-boggling is that after selling the population into debt-bondage the financial sector is still broke. The reason austerity cuts are being rolled out is because they are looking to save money up for the next round of bailouts. And David Cameron is currently engaged in ensuring that the taxpayer is properly tenderised for the bankers' banquet.

If, in the middle of the night, you went to your livingroom and happened upon a burglar you'd be entitled to be a tad enraged. With the taxpayer now saddled with generations of other people's debts the public are jusifiably angry.

Cameron's response is that he is not interested in "headlines satisfying people today and tomorrow that I've given the banks a good kick in the pants. Can we do more on bonuses, particularly on those banks we own? Yes we can, and yes we will," he told The Sunday Telegraph. "But look, we've just been talking about growth. I don't believe actually in the long run, you can deliver the enterprise-growth agenda while having a running war with the British banking industry at the same time."

Eh? David might have went to the same public school as these merchant bankers but the fact is that children in Scotland are looking at a four-day school week. This happens nowhere in the developed world. These banksters extract the public's money and then use it to buy the politicians that they shmooze around City clubs with.

Keeping the financial sector at the public trough is now sinking HMS UK PLC. According to the Office of National Statistic (ONS) government borrowing for the single month of November was a record £22.77bn. And there is absolutely no sign at all that this borrowing will not continue to increase as austerity diminishes the governments tax receipts. Yes, the idea of austerity is to cut costs but unemployed public servants don't pay tax, pay less VAT and require benefits..

A general bombardment of economic propaganda means numbers are difficult to put into perspective. That weill-kent Unionist business leader, Iain McMillan of the CBI, complains that the SNP governments' National Conversation has cost the taxpayer £1m. On the subject of the impact that UK government debt will have on the Scottish economy he is strangely silent.

Every day the interest payments alone on UK government borrowing are £119.3m. This is estimated to rise to £182m a day in 2015-16. Total debt (except those being kept off the balance-sheet) is around £1 trillion. That amount of money would pay for the Scottish bloc grant thirty times over and more.

Swallow the UK deficit or go for a Scottish solution?

Officially Scotland is in surplus but here we are facing the kind of cuts to public services which are experienced nowhere in the developed world. This is because the powers over taxation in Scotland are not controlled by Scotland's own parliament but reserved to Westminster. Scotland consequently has to take austerity cuts and so subsidise those south of the border where the deficit is generated.

This fact will not be altered by the Scotland Bill. The Scotland Bill will see a transfer of powers to and from the Scottish parliament but these new powers will be minimal as the process is mere tinkering, and bad tinkering at that.

The Scotland Bill is supported by Scotland's Unionist opposition parties. Aside from the limitation of the Bill's scope it is widely believed to be poorly thought out. Internationally renowned academics, economists and business people have characterised it as "dangerously flawed", "unworkable" and "a perfect storm".

Although it is Westminster legislation the Scottish parliament's Scotland Bill Committee is helping to craft the Bill. The Committee is chaired by disgraced former leader of Labour's Holyrood group Wendy Alexander who had to quit her post amidst corruption allegations.

Ms Alexander's chairing of the committee has seen the Scottish parliament's dignity suffer as eminent academics have been "ambushed" in committee hearings which were meant to deliberate the Scotland Bill but which was used by committee members to attack the SNP government.

Scotland's other option is Full Fiscal Autonomy (FFA) which would defend Scotland from the UK deficit crisis. Without assuming full tax powers the Scottish parliament will be impotent to prevent councils like North Ayrshire needing to effect policies such as a four-day school week. Alarming though it is this is exactly the kind of example FFA campaigners need to point to if they are to get a dry tax argument over to the Scottish electorate.

FFA is widely supported by academics and the business community and the Scottish population are largely behind the idea of their parliament having more tax powers. Only by generating momentum for the idea will force the Unionist parties into removing their ideological and parliamentary block to the process of increasing significant tax powers for the Scottish parliament.

The North Ayrshire plan should then bring the debate over economic independence to the fore. A crisis to Scotland's social structure is looming and the electorate has to have the facts from both sides of the argument so that they can instruct their political servants on how to act in their best interests.

Before the Holyrood elections there will be more signs of just how painful the impending austerity culls will be. With so many Scots now worried about jobs and family budgets, the issue of Scotland's economic choices of the Scotland Bill or economic independence must take centre-stage. Scotland has to make a decision. Making the wrong one could have profound implications for our international status as a developed country.

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