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.

news scotland

Scottish economy a Swinney success as UK enters stagflation

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

The good news in Scotland is that the economy grew by 0.5% in the third quarter of last year but the bad news is that in the fourth quarter of 2010 the UK economy contracted 0.5%, according to the Office of National Statistic (ONS).

Economic growth right now may be a blessed relief for Scottish job-seekers and businesses although the bitter-sweet reality is that Scotland must face cuts to its block grant from Westminster in order to pay for the UK's spiralling budget deficits.

UK crises deepen

If you are in the habit, as most are, of swallowing the mainstream media's economic analysis whole then you will now know that the UK economy has gone into a "shock reverse". Apparently "analysts" had predicted modest growth and told us that the UK was experiencing a fragile recovery. Suddenly "analysts" are telling us that the UK economy is already showing symptoms of stagflation. This is when prices rise but growth contracts.

A shock turn of events? No.

Readers of Newsnet Scotland will note that this outlet was never on-message and the 'recovery' meme was never pumped out for mass consumption and distraction here. Indeed two years ago when the "green shoots of recovery" baloney was being disseminated as if it were one of the ten commandments this observer warned elsewhere that "analysts" were smoking those green shoots.

Just to recap. In 2008 the financial crisis happened because of the implosion of the rapid expansion of a fraudulent market in financial products called derivatives. This market was valued globally at around £500 trillion. To put this in context, global GDP at the time was around £50 trillion. Not everyone understands money on this scale so think of it this way: imagine you earn £1 per year and from that you have to pay taxes, pay the rent, eat and pay your bank charges. At the end of the year you have managed to save 5p (well done, most are already using behind on credit card payments). Then someone tells you that you suddenly have £10 debt to pay. How long will it take if you can save 5p every year to pay off that £10 debt? 200 years and that's excluding interest. That's the situation the world is in.

Now draw a deep breath because the worst is yet to come - Britain was the epicentre of the derivatives market. The City packaged and sold the majority of them around the world. Hence the "global crisis".

To put it another way, the UK financial sector is dead. They are being allowed to hide those losses so that they are not forced into liquidation. Meanwhile the government is borrowing like a drunken sailor and the Bank of England is printing money like confetti to keep the banks on a life-support machine.

Keeping the City on life-support means the UK economy is being squeezed and the pips are starting to squeak. Printing money, for a short while, feels like economic growth but it's debt and illusory economic performance. The outcome is devaluation and so we now have the situation where sterling is nose-diving and products are becoming more expensive. Inflation is nearing (officially) 5% while at the same time the economy is contracting - this is the definition of stagflation.

The citizen of Britain PLC has money which is rapidly losing value as the UK government gets out the epson money printing machine and goes to town. That's really dangerous not to mention worrying if you're a pensioner or low paid. That's life in the UK; banking buddies of the political class in London get socialist state hand-outs to the tune of trillions of pounds while the poor get the capitalist medicine - pull your socks up.

If it were all that easy it would simply make you livid. However the real problem is that all this money the government is borrowing to keep the banks going has to be paid for. In the single month of November 2010 UK borrowing reached a record £23.3 billion and the trend line is upward. Government tax receipt showed a small recovery last year but that is clearly dependent on the government pumping more money into the economy.

What's so worrying is that as tax revenues are not recovering owing to economic growth then how is the UK supposed to be able to keep paying back the money it's borrowing - and with interest? The point of bankruptcy has been reached. UK PLC is printing money to pay its debts. It may only be a matter of time before those who own long terms UK debt realise that they will be repaid in devalued currency and dump their UK bonds before everyone else does. That means currency collapse and capital flight ala Argentina circa 1999.

What about all the indicators and stories of recovery? Ok, think about it. All the borrowed/printed money is going to the City. Where are the "analysts" based? All the borrowed/printed money is going to the financial sector. Who do "analysts" work for? And why is it that when the government borrows money which then enters the economy and is spent then that money is not subtracted from GDP figures? You know, the figures which show "growth". And why are the unemployment figures massaged for that matter?

I'm sorry to have to tell you this but the mainstream media is pumping you full of propaganda.

Now, I doubt very much that the Scottish growth figures can be trusted because UK government borrowing is not subtracted, but official figures do show that fiscally the Scottish economy shows a surplus while the UK deficit is now completely out of control. Make no mistake, borrowing is premised on growth projections so that the principle can be repaid with interest. That's why the government does all it can to protect the population from the truth. Money printing and devaluation makes the economy look like it's growing on paper but that's nominal growth not real growth. Real growth was probably last achieved in the UK in 1976. Ever since then Britain has used the credit card to party on and they had future oil revenues so the credit card company were happy to extend credit, but that's all over now boys and girls.

There are calls for the Osborne to do a U-turn on economic policy but let's be clear 'austerity' has not started yet. The problems being experienced now are caused because of the banks. Yes, the wars and the missile systems are exorbitantly expensive but the reason the economy is going down the tubes is because of the bail outs and debt.

Opposition and trade-unions will argue for stimulus which means add to the debt meaning more of the problem cures the problem. You can't cure an drug addict or a ideologue by giving them more of what they want. Stimulus suits the financial sector and that's why it was and still is current economic policy. Stimulus sounds good but don't forget it's debt and keep in mind that Britain PLC is printing money to pay its debts.

Mervyn King (BoE) is warning of 5% inflation. The key mandate of the Bank of England is to keep inflation below 2% so why are interest rates not rising? Believe me, there's more inflation coming. You can't print money without prices rising eventually. Commodity prices around the world are surging. Prices like sugar and silver are skyrocketing and these type of commodites go into everything you consume such as chocolate bars and mobile phones. There's a time lag before rising commodity prices hit the main street but it's starting.

Inflation figures can be massaged too, but let's say the official rate goes up to 6% by spring. "Analysts" will start to panic about inflation rising very quickly. Interest rates will then be used to reduce the supply of money in the economy to bring down prices. Now with public and private debt at 449% of GDP and with the government already printing to pay debts how are interest payments going to be met?

In Scotland around 5% of the population, or 207,500 people, according to Shelter Scotland, are already using credit cards to pay their mortgages. So what happens if mortgage interest rates spike by say only 2%? I prefer not to imagine it.

Ugly stereotypes will be peddled from the London media as the UK government seeks to blame the economic malaise on subsidy junkies up North, the EU, the Welsh, the immigrants and yes, the poor will be blamed for being lazy. All this already happens so just imagine the magnification of those images in the dishonourable dash for political cover. Expect a rise of extreme right activities.

Scottish economic debate

As I said, the good news is that Scotland has an economic surplus in its accounts. It really is remarkable how Scotland has managed to remain in robust economic shape during the crisis and that is testimony to the sound economic management of the SNP government in Holyrood.

Our national parliament has few of the powers needed to effect real economic change but those which it does have are being handled more than capably by Alex Salmond and John Swinney - credit where it's due.

Large corporate businesses, and the parties they donate and lobby heavily to, have a dispropotionate influence over how economic news is reported. What the mainstream media seldom tells you is that the health of the private economy is essentially down to small businesses. Many more people work for small companies than large corporates and so the small business relief policy has been an SNP economic master-stroke. It is the probably the single most important reason that Scotland remains in surplus.

In order to help small companies compete with giant retailers the SNP introduced into its budget a levy on the the big out-of-town supermarkets. The move was well received by Scotland largest business organisation the Federation of Small Business. Today, it was voted down by the Unionist opposition parties which perhaps is a reflection of where supermarket polical donations will be going in the run-up to the Holyrood elections.

The Nationalists have also, after a suspension lasting a generation, undertaken council house construction projects and the Scottish construction sector is now contributing to Scotland's economic growth.

Crucial to protecting families and communities has been the SNP's freezing of council tax payments. This has saved family budgets from being plundered and so with a little more to spend in the shops small retailers have been thrown a lifeline to support them in times of UK crises. To prevent council services from being cut the party has achieved public sector efficiency savings especially by making public sector procurement more efficient. This is, for me, one of their most impressive achievements in government demonstrating ministerial capability and sound management.

Austerity

I mentioned above that the current parlous state of the UK economy is not related to austerity. That is not to say I think austerity will help. Indeed, I believe it will cause further economic decline.

Throwing hundreds of thousands of public sector workers on the dole and slashing benefit payments is the wrong way to deal with a problem caused by the financial sector - especially wealthy finance houses. Look no further to the collapse of the Irish government to see where this policy will take us. With the private economy contracting how will the burden of the austerity cuts be borne? Now, you can argue that cutting down the public sector is a good idea and that's a valid poltical viewpoint to hold under normal circumstances. However cutting public sector jobs and services at the same time as a private sector contraction is the economics of the madhouse.

Laid off public sector workers will have to be paid benefits. Many struggling to pay their mortgages will experience repossession. And with salaries gone and benefits cut there'll be less money going into the shops, already suffering from a VAT hike, and so there'll be a further drop in retail sector jobs. And do not public sector workers pay taxes? You might deduct their salary from the cost of running government departments but you must at the same time calculate the hit on the Treasury in terms of the consequent income tax revenue and VAT receipt losses.

Holyrood Elections

With the Holyrood elections looming, the UK sovereign debt, currency and financial crises will be the central theme of the campaign.

In the red corner will be disgraced former leader Wendy Alexander priming Labour spokespersons on the benefits of the Scotland Bill. Internationally renowned economists and academics have characterised the Scotland Bill as "fatally flawed", "unworkable" and "a perfect storm".

Adding to the opprobrium being heaped on the Scotland Bill this week saw the Institute of Chartered Accountants of Scotland (ICAS) claiming that the tax changes proposed by the Scotland Bill could mean a “disproportionate” amount being spent on collection and a backlash from workers who consider them unfair. The institute calculates that anomalies in the system could see an epidemic of evasion costing the Scottish taxpayer £150 million. The Scotland Bill is widely perceived as a Unionist project designed by opposition parties to prevent significant new economic powers being transferred to the Scottish parliament.

Economic independence, as espoused by the SNP, is very popular with the Scottish electorate. The Scottish Social Attitudes Survey 2010 showed that 57% of Scots would like their parliament given full control over Scottish taxes and 62% full control over benefit payments.

Economic indepependence would see Scotland fiscally protected from the dire UK economic situation and is supported by a large number of business leaders, economists and academics. Such shelter would be welcome news for Scottish families, businesses and institutions such as the university sector all of whom must now plan for Westminster austerity cuts.

Alex Salmond's cabinet has shown itself to be very competent and many commentators who are not aligned to the SNP will tell you that, albeit privately. Despite the SNP minority government facing a hostile and often feverishly anti-independence media the party has survived its first term with dignity and kudos. Many in Scottish civic society have praised its professionalism and commitment to the nation.

Salmond and his advisors must then point not simply to their economic successes but to get re-elected they must compare the healthy state of the Scottish economy with the UK's crises. Yes the Nationalists really only benefit from upbeat messages, but if they must be sparing in their criticism then negative criticism must be spared to point out that the UK's deficit was caused by the Labour party. That will give them the opportunity to ask the electorate to think twice about believing that Labour can be believed to solve a problem that Labour themselves caused.

For Gray, economics is not his strong point and to win control of Holyrood he must defeat a popular and charismatic sitting First Minister who is a former economist. Gray's strategy then must be to avoid the subject when possible and when he must simplify his message and use Labour's ubiquitous influence over the mainstream media to focus all the blame for the UK's economic crises on the ConDem coalition.

As far as the electorate is concerned the next electoral term is not about getting elected but keeping a roof over the head and food on the table.

Scots will have to decide whether they believe that the size and prestige of the British economy and currency is going to help their family survive and prosper over the next few years or whether they they should opt to have their own parliament take the important decisions over the Scottish economy.

The propaganda is thick when it comes to politics and economics and so deciding how to vote will be a difficult decision to make. In times of crises people tend to be conservative but when you are on a sinking ship and you see a lifeboat, radical and decisive action is widely believed to be an appropriate response.



News Scotland

Egyptians versus Israel

It goes on. The demonstrations in Egypt are about deposing the Mubarak regime. The people are waiting and waiting for Mubarak to go. A stalemate has been reached. Clearly, the US is trying to manage the situation in order to suit the interests of Israel.

The swearing in of Vice President Omar Suleiman by President Mubarak represents the Whitehouse desire. He is trusted by the Israelis whose network are said to control the US Congress and the bulk of the US political system through Zionist lobbying organisations and political campaign funding. Israel has a kind of bouncer role in its role in the middle-east which provides cheap oil to the US. Dollar hegemony is the issue as the middle-east sells oil to the rest of the world and that business is done in dollars which is the single most important factor in holding up the value of the dollar as the Federal Reserve and Obama continue to flood the world with dollars. You want to buy oil, you need to buy dollars first..

Israel wants an obedient regime. Clearly though, the interests of Israel/US are not those of the protesters. Stories about how the US is behind the protesters are merely attempts to position themselves to benefit from any outcome.

This is why the stalemate goes on and why intimidation and violence is likely to continue. Hundreds are now dead as the authorities have released prisoners from jails. Criminal gangs are now looting and committing act of violence. Police are said to be among the looters, organising and encouraging them. Communications have been cut and as I write airforce jets are flying low over the capital. In neighbourhoods water has been cut. State TV are showing scenes which do not reflect the true nature of the demonstrations. Al Jazeera have had their accreditation withdrawn but they are still filming live. Watch here: http://english.aljazeera.net/watch_now/

These Egyptians are brave. They, again, are defying another curfew.

It is becoming clear that they are not going to settle for a new regime which reflects the interests of the US and Israel. They have waited decades and now is their time.

I therefore fear the worst. I imagine there will be some pretext for a brutal clamp down. Perhaps the crowds will be sprayed with chemicals designed to passify the demonstrators but the demonstrators seem stubborn. I hope I am wrong but the US and Israel will not permit a situation whereby Egyptians will have an opportunity to decide their own destiny as that could lead to an outcome which doesn't suit their interests in the region.

My take is to ignore all calls from the US when it calls for democratic reforms. That is not what they want. They want a puppet regime controlled by themselves. And repressive regimes are usually the very kind of states the US prefers as they are easier to control and it keeps they keep populations poor and so oil cheap. All you've got to do is look after the dictator and make him rich.

So, we wait. However, my view is that all sorts of plans are taking place to quell the protestors. It seems that the longer the US put things on pause the more likely violence will be the only way for either side to succeed.

News Scotland

Failed state and Scottish political branch operations

Piece I did during my tenure at Newsnet Scotland. I will resume publishing with Scottish Times.

by Alex Porter

News this week that the Conservatives in Scotland must hand over their management and their money to their London headquarters is yet another indication that the Unionist parties face an identity crisis in Scotland.
A growing membership means their SNP rival can now claim, with validity, to be not merely Scotland's largest party but Scotland's party.
As Unionist measures to control the Scottish political landscape become increasingly bizarre, the issue is not about whether Scots can be persuaded to remain within the Union but rather whether Britain's current economic, social and political crises are signals that the Union's end is imminent and irreversible.

Conservative branch

The story of how the Conservatives in Scotland have been brought to heel by their London bosses broke in yesterday's Telegraph in an article by Simon Johnson:

"Senior insiders told the Daily Telegraph that money raised by the Scottish Tories is being passed to the UK party along with ultimate oversight over a radical restructuring of their operations."

Ahead of the Holyrood elections Scottish party chiefs are to be sidelined according to Johnson and applicants for three new regional campaign manager posts in Scotland must apply to the Conservatives’ Millbank headquarters in London.

The London party is not happy that the party in Scotland managed to secure only a single MP in Scotland in the Westminster election last year. After a review by Lord Sanderson of Bowden senior party insiders, who have expressed the view that the party in Scotland is not trusted to deliver desired changes in terms of leadership, financing and membership recruitment, are quoted as saying that London has "taken control" and, "Every penny we raise now has to go to London.”

An advert, announcing the campaign manager posts, has been placed on the Conservative website and states that the successful applicants will be based respectively in the east, north and west of Scotland. The job description says: "Reporting directly to the Scottish Field Director the Regional Campaign Manager will be responsible for front-line campaigning in all constituencies in their area."

The party will now face ridicule as it seeks to examine the economic prospectus of the other parties during the Holyrood election campaign as their adversaries will simply point out that if they themselves are not trusted with their own money then how can they be taken seriously with Scotland's money. More serious though is the historical significance of this development. It can be seen as another sign of Unionist parties losing control in Scotland.

Labour branch

There is perhaps no clearer a sign of this crisis of Unionism in Scotland than the fact that Labour simply never accepted that they lost the Holyrood election to the SNP in 2007. Having assumed for generations that Scotland was their natural fiefdom their loss was traumatic and in opposition Labour have exhibited symptoms of denial.

Failure to come to terms with losing to the SNP has meant Scotland has missed having a constructive parliamentary opposition. Instead, the parliament and public debate have been trivialised by the use of abusive procedural tactics against the SNP minority government.

The motivation for this is merely to wreck legislation and disrupt ministerial activities in accordance with an overarching plan to undermine everything the Scottish government tries to achieve. Labour's Holyrood strategy team is not concentrating on improving the lives of Scots families or the long term health of Scottish institutions but purely and simply on getting elected.

This weekend the press is carrying a story that internationally renowned academics have lodged a formal complaint to the Scottish Parliamentary Standards Commissioner over their treatment after having agreed to give evidence to the Scotland Bill Committee. Expert economists Professors Andrew Hughes-Hallet of George Mason University in Virginia and Drew Scott of Edinburgh University prepared, in advance and as requested, to give evidence in relation to Westminster's Scotland Bill. The professors are known to hold views favouring the Scottish parliament having the powers of fiscal autonomy. The committee, chaired by Labour MSP Wendy Alexander, 'ambushed' the academics on that subject showing no interest in their evidence in relation to the Scotland Bill.

Scotland's parliament has had a good relationship with experts who over the years have offered up their time freely to help its committees improve legislation before becoming law. This latest furore will undoubtedly undermine the parliament's committee system. One academic and constitutional expert who does not support the SNP, Alan Trench, has already cancelled his visit to a hearing by the same committee describing its treatment of fellow academics as an 'inquisition'.

The issue has drawn attention internationally as a senior colleague of Professor Hughes-Hallett from Virginia, Professor A Lee Fritschler, who served in the sub-Cabinets of Presidents Clinton and Carter, has written to Presiding Officer Alex Fergusson expressing his “dismay” at the way the two witnesses were “harassed in mean, petty and non-germane ways”.

Sadly this is only too indicative of how Labour in Scotland have behaved as an opposition. It is only a few weeks since Iain Gray, in his visceral desire to undermine the idea of small countries gaining independence, inadvertantly insulted Montenegro resulting in incensed diplomatic communiques from the Montenegrin chargé d’affaires, Marijana Živković.

The reason that the opposition parties are in such a pathologically oppositionalist mode is because they really are not allowed to offer anything more to Scotland. With no real scope to offer increased powers or an alternative agenda to what's currently on offer from London, Labour can offer no vision nor even a better managerial team. It is therefore reduced to carping and insulting and the net effect is that the Scottish electorate switches off.

Lib Dems branch

And the last of this oppositionalist triumverate are the LibDems. Many of their voters were angered that they didn't form a coalition with the SNP to create a majority governement for the good governance of Scotland. Their move into opposition was seen as a result of interference from London. Against this backdrop their forming a UK coalition government with the Tories in London has discredited the party in the eyes of many Scots voters and a mauling at the Holyrood elections is expected by political commentators.

Centralisation of a failed state

Scotland is being pulled in rival directions. Both London and the Scots want more control over Scotland.
The forces which are at work run deep. Britain PLC is running deficits which are spiralling out of control. In the month of November government borrowing reached £23.3 billion and total UK government debt is approaching £1trillion. If you think about this in terms of the grant given to Edinburgh from Westminster it amounts to over 30 Scotlands.
This year North Sea oil receipts will represent 25% of UK government revenues from corporation tax and that ignores tax revenues from the pumps. Without North Sea oil the UK would not be able to offer repayment guarantees to creditors. In that scenario the current planned UK austerity cuts would seem like a walk in the park in a late spring morning.

When the City imploded, Gordon Brown, advised by current shadow chancellor Ed Balls, bailed them out with tax payers' money. The mighty merchants of the City of London failed as capitalists and begged for state benefits in the form of bail outs from hard working citizens. People who were conned into believing that the bail outs saved their jobs and savings.

That wasn't enough for the bondholders and shareholders, so the Bank of England and Brown and now Cameron turned on the money printing machine. The new money diluted the wealth of the people and was given to financial institutions so they could continue trading fraudulent financial packages with each other and draw down large bonuses which properly reflect their skillsets as preeminent scammers. The population is continually threatened that if the bankers don't receive large bonuses they'll leave.

Yes, the supine British media presents that as a threat rather than a promise.

In recent weeks some of the Icelandic bankers who caused their own financial system to collapse have been arrested as has former Prime Minister Geir Haardie who faces charges of gross economic negligence - a crime which carries a two year jail sentence. It is perhaps stretching credulity to compare Britain to a European democracy.

There's never going to be enough for the City. Bail outs are a guarantee that no matter how much risk you take you can't lose and so they go gambling away with impunity. That's why the austerity cuts are coming. Bankers know that another round of bail outs are in the pipeline and are making sure that there's enough cash around for them to go back to the public trough. The citizens are being squeezing in anticipation.
This is the real reason that Scottish economic independence is being resisted. London City needs its next fix and the surplus in Scotland's national accounts is ripe for the plucking. However the real threat to Britain's kleptocratic rulers is that if Scotland demands economic independence the oil money will be next and then you can forget about the ballooning deficit. No-one will lend to Britain PLC. The IMF will come knocking on the door and demand austerity cuts that will relegate Britain from the league of first-world countries.
Right now Mexico is declining as an economic power and the accelerating trend is towards centralisation. When states go into a death spiral they suck capital into the centre from the peripheries in a desperate attempt to shore up the apparatus.
The result is rapid economic decline around the peripheries leading to the dramatic drop in tax revenues we are now witnessing. The centre can buy a little more time but it has increased the unsustainability of its hegemony. When the penny drops the state experiences capital flight and the population is fed to the dogs. Ask Argentina.

Failed states are typically characterised by social, political and economic crises and the rapid process of centralisation of resources just in advance of the tipping point where the state seizes up, fractures and then awkward pieces start breaking off. The Soviet Union is a case in point.

This is why Scots are not being offered a referendum on the Scotland Bill. The alternative is far too attractive but for Westminster far too dangerous.

The Conservatives may not like having their money controlled by their London bosses. Pondering the Tory membership of the Calman Commission in light of this turn of events would make you laugh at the irony of it all if it didn't underline and highlight an unedifying Scottish trait.

For some reason Unionist parties can effectively argue that Scots can't trust their own Parliament with the powers needed to improve Scotland's economy even at a time when London is technically bankrupt. That deep-rooted insecurity in my fellow Scots concerns me.
Read previous essays written by Alex Porter for Newsnet Scotland:
Scotland's Choice: Calman's Gulag or Economic Independence
Scotland versus Britain
Part 1, Part 2

LABOUR'S BANKRUPT BRITAIN

Rediscovering Oil – A From Rags to Riches Story
Part 1, Part 2, Part 3

Would an independent Scotland have a viable economy?


news scotland

Newsnet Scotland Launch

It's election year and Scotland has a captured media which perpetuates the myths of Unionism.

To take back our nation we must build an alternative media. (Complaining about injustice achieves nothing.) Newsnet Scotland is involved heavily in this effort. I urge that all bloggers which support Scottish self-determination put aside all our regional and personal differences, for a short while, and post Newsnet Scotland's video (see below) on your blogs.

Newsnet Scotland believes that Scottish languages are absolutely central to Scotland's national identity. On our Burns Day launch we wish to let everyone in Scotland and our friends around the world know that Newsnet Scotland has arrived.


Work as if you live in the early days of a better nation:

Ed Balls bad news for Iain Gray's Holyrood chances

Piece I did for Newsnet Scotland:

by Alex Porter, Economy Editor

With the UK budget deficit accelerating, the British pound plummeting and austerity cuts just around the corner, the issues of jobs and the economy will cast a long shadow over the fast approaching Holyrood election campaign. What effect will Labour leader Ed Milliband's choice of shadow chancellor, Ed Balls, have on the crucial economic debate on Scotland?

To answer that question we have to realise that the UK economy is not in the same robust shape that the Scottish economy is in. While Scotland's national accounts show a surplus, the UK's deficit reached a staggering and unprecedented £23.3 billion in the single month of November last year, according to the Office of National Statistics. As government debt (minus off-balance sheet debts) are soon to pass the £1 trillion mark there is no real sign that Britain PLC can stop the deficit from ballooning further out of control.

Labour's Crisis

Gordon Brown's fiscal, monetary and regulatory policies sped up the process of refocussing the UK from a manufacturing economy into a service sector economy. If you manufacture fewer products then a national economy suffers as it cannot earn income by selling goods abroad. As consumers Britons spent money on goods from abroad meaning more money left the economy than came in. This is unsustainable as deficits continue to rise. Britain's economy under Labour was driven by more debt, not growth.

Deficit finance is no longer a disaster waiting to happen, it is happening. Unable to pay its debt the UK government and the Bank of England are indulging in money printing. This policy devalues assets and wages and is effectively legal fraud. After money printing there's a lag and then price inflation visits and you realise you have the same money in your pocket but it buys a whole lot less.

Of course most currencies around the world are now devaluing. The developing world must now print to devalue their currency so that their exports remain competitive in a world of ever increasing dollars. Britain is simply the worst offender. However Britain is printing money not to be competitive - it's an importing country after all - no, it's printing money to pay its debts.

The tax take from the financial sector has fallen off a cliff. Bail outs and stimulus had to be paid for and so drained the private sector, meaning tax receipts are not recovering and firms are now dependent on increased government borrowing to maintain earnings. Decreased tax receipts are what is causing the deficit to grow not an increase in public spending. While the City was selling dodgy derivatives around the world the UK government had a good rake but that's largely gone. Unless the public keeps stuffing banks with newly printed or borrowed money they would not be posting any profits at all.

Printing money to pay debts means Britain is technically bankrupt. And if you thought there was some kind of economic benefit to devaluation you were wrong. Sterling has lost 20% of its value against key trading partners but whereas public confidence in the UK economy continues to tumble, Germany is recording its lowest ever unemployment figures.

The devaluing pound will mean that importers will have to use more pounds to import goods for consumption inside Britain and those costs will be passed on to the consumer. Food prices are already rising but we're only at the start of this process. The price of oil is set to rise too meaning transport costs for food will make matters worse. An early indication of problems can be seen in recent food riots in Algeria, Tunisia, Morocco, Yemen And Jordan. Tunisia's President fled after failing to quell public unrest by slashing staple food prices. In the developing world a larger percentage of expendible income goes on the family food budget and so nations with poorer populations act as canaries in the global economic mine.

Gordon Brown's drive to shift the British economy in the direction of services means that the UK is now trapped. The massive wealth generator that was the City of London was an illusion based on fraud. The Treasury was aware of the problem but Gordon Brown facilitated the rapid expansion of City activities through 'light touch' regulation. Britain looked flush for a while and then the truth emerged. The City was packaging and selling fraudulent derivatives around the world which resulted in the financial crash of 2008. The reality was that the City was a giant economic parasite sucking the rest of Britain dry and relying on North Sea oil to guarantee its debts.

Britain's sovereign debt, financial and currency crises will, when the history books are written on the subject of Britain's fall from its status as a global to a second-tier power, be attributed to Fife's Son of the Manse.

Balls's name is inextricably bound up with Brown's, so he too is closely identified with the financial crisis. He was close to Brown and the Treaury throughout the years when the crisis was incubating. Balls was appointed as an economic adviser to Shadow Chancellor Gordon Brown (1994–97) before becoming chief economic adviser to HM Treasury from 1999 to 2004. During this time he was once described as the 'most powerful unelected person in Britain'. On becoming an MP he stepped down as chief economic adviser to the Treasury and spent some time at the Smith Institute, a political think tank, before being made Economic Secretary to the Treasury in 2006. When Gordon Brown became Prime Minister in 2007, Balls was promoted to Secretary of State.

Balls was at the heart of the Treasury and was a key ally of Gordon Brown when the policies of light touch regulation were rolled out and legislation was designed to favour the financial sector. He was therefore central to the creation of the derivatives bubble and the 2008 crash which ensued.

Will Balls help or hinder Labour in Scotland?

Iain Gray will attempt to shift the debate onto the ConDem coalition's austerity programme but according to YouGov 40% of the UK population blame Labour for the public sector cuts, 22% blame the coalition and 25% see both London parties as equally culpable.

For Gray to win the keys to Bute House he will have to convince the Scottish electorate of his party's economic competence. People are extremely worried about jobs and the economy and are rightly angry about the reasons the crisis happened. Labour strategists will have their job cut out for them in refocussing attention away from the causes of the crisis and onto the current UK government's management of it. Given that Balls is so closely associated with the last Labour government and closely identified with Gordon Brown, putting this recent economic record behind Labour will be much harder to effect. The electorate are no fools and know that the financial crisis happened during Labour's time in office.

By making Balls the UK Shadow Chancellor, the SNP has been handed an electoral gift.

The new Shadow Chancellor has a combative style and that may resonate with voters over time and as austerity bites. The problem for Labour UK is that this will bring the ConDem coalition out fighting. George Osborne will seek to pin the blame for the deficit on Labour's legacy but fortunately for the Chancellor there is now a Shadow Chancellor to point the finger of blame at.

As the Holyrood campaign focuses minds on Scottish politics the benefit Labour accrues from coalition bashing will dissipate. Iain Gray will be asked searching questions on a subject he is weak on - economy. And he faces the big beast of Scottish politics - former economist and sitting First Minister Alex Salmond.

Salmond has no need to attack Tory cuts during the campaign. He can simply blame Labour and Balls for causing the crisis. Labour will be put on the spot and forced to point to the ConDem cuts as the root of the problem. The SNP will have the luxury of killing two birds with one stone. And it gets better for the Nationalists. As Labour are forced to defend themselves they will struggle to pin the blame both on the ConDem coalition and the SNP government simultaneously. Salmond can jab Labour but Labour's counterpunch will be weakened.

Of course Iain Gray and Labour have a seemingly pathological obsession with attacking the SNP and so with some calm economic logic Salmond can lay traps and watch Gray and his campaign team walk into them with predictable regularity.

The Nationalists have another trump card. If Labour tries to blame the SNP over the state of the economy the SNP can retort that the powers needed to drive the economy are reserved to Westminster and so the crisis is London's fault. The case will be made that what few powers the Scottish Government does have were used effectively. After all, Scotland's economic state is healthier than the rest of the UK's. And the kicker for the Nationalists is that the argument that the UK umbrella protects Scotland from volatile international markets can be presented by the SNP as having always been a myth.

So, blaming the SNP will only serve to move the economic agenda on to their turf - the case for economic independence. On this territory the SNP have a majority of public opinion behind them. A significant majority of Scots, if polls are to be believed, want their parliament to have complete control over taxation and benefits in Scotland. At the same time Labour must defend the Scotland Bill from heavy criticism by internationally renowned economists and business leaders who have characterised it as "dangerously flawed", "unworkable" and "a perfect storm".

For Labour the longer the media focus is on the ConDems and London politics the less they will come under real scrutiny in Scotland and the higher will be their poll ratings. By contrast a specific media focus on Scotland can't come quickly enough for the SNP who are currently behind Labour in popular opinion surveys. The fact that there will be a referendum on the AV voting system on the same day as the Scottish elections will not be helpful to the SNP. Neither will the royal wedding scheduled for a week before.

With the all-important economy issue such a key advantage for the SNP, Labour will need to try and bury their role in causing the crisis or the Scottish electorate will migrate towards Salmond and the SNP's case for economic independence. With Balls as Shadow Chancellor, Iain Gray's strategy of shifting the electorate's attention away from Labour's role in the financial crisis is now much less deliverable.

News Scotland

Lib Dems U-turn as business backs SNP supermarket tax

A piece I did for Newsnet Scotland:

by Alex Porter, Economy Editor

Almost three-quarters of Scotland's businesses - 74 percent - support the SNP Government's proposed 'supermarket tax', which aims to raise £30 million for public services, according to Scotland's most important business organisation - the Federation of Small Businesses (FSB) Scotland.

With the Holyrood elections approaching the supermarket chains are behind a campaign to have the SNP drop their 'levy'. This campaign by the corporate giants will promote the message that town centres and retailers in general will suffer however evidence shows that around 92.3 percent of the tax will be paid by the big 5 out of town chains: Tesco, Asda, Morrison, Sainsbury and B&Q.

Lib Dem policy U-turn

Lib Dem finance spokesman Jeremy Purvis who has lodged a parliamentary motion to annul the measure and who called the SNP measure "perverse" and "anti business" said,

"I heard the identical concerns from retailers about the damage that the large retail levy will have on jobs, the economy, Scotland's competitiveness and our economic reputation.

"The SNP are putting Scottish businesses at a competitive disadvantage."

However, it has emerged that only last week Mr Purvis listed on his website “more support for local retailers struggling against the big supermarkets” as one of his top 11 priorities for the Scottish Parliament.

The sudden U-turn will raise confusion among floating voters who will want to know if Mr Purvis's view last week or his view this week now represents Lib Dem policy.

Business Support for SNP plans

With 20,000 members the FSB, which represents Scotland's SMEs, believes that the tax will help create a level playing field for its members when competing against the large corporate supermarket chains.

In their submission to Holyrood's Local Government Committee on the proposed move, the FSB highlights that, despite claims the supplement will hit city centres, figures in the public domain suggest that 86 per cent of the projected take (£25.7m of a projected £30 million) will be paid by the "big four" supermarkets.

In the Committee's hearing next week, the FSB's Public Affairs Manager, Colin Borland, will argue that the SNP's move willl bring more fairness and proportionality into the rates system.

Of local competetiveness, Mr Borland said,

"Supermarkets are here to stay. Their business model is incredibly successful and their record profits and turnover are testament to this. But, at a time when rising overheads are further squeezing margins in local small businesses, when cash-flow is tight and financial reserves depleted, it is now more important than ever that the playing field is levelled wherever possible.

"Progress has been made through the introduction of the Small Business Bonus. But rates are still a disproportionate burden for the small businesses who pay them, with nearly half citing them as a major barrier to their business success. Contrast this with the 225 largest retail properties whose bills, according to Scottish Government calculations, account on average for only around 2 per cent of their turnover.

"It is for these reasons that three quarters of our members feel that it's time for the largest out of town supermarkets – who benefit from free parking and other amenities our members don't enjoy – to start paying more of their fair share."

In contrast David Lonsdale of the Confederation of British Industry (CBI) which represents large corporate businesses and has around 90 members said,

"Our members are greatly concerned that this new tax will make Scotland a less attractive place for retailers to invest and create jobs, and that other sectors could be similarly targeted in subsequent budgets from the devolved government.

"The campaign against this hefty tax rise on business is gaining support and momentum."

Figures in the Times newspaper in an article entitled "Supermarkets see red over ‘supermarket tax'" on Tuesday 11 January show that under the SNP's proposals to raise £30 million pounds, Tesco would pay £9m, Asda £8.8m, Morrisons £4.4m and Sainsbury's £3.5m totalling £25.7m. This is around 85.7% of the total amount which it is estimated could be raised by the proposals. Included in these figures is B&Q who would pay £2m – bringing the projected total for these 5 out of town retailers to 92.3%.

In 2006, the FSB in Scotland published a report (1) based on an extensive research study entitled, "The effect of supermarkets on existing retailers" – looking at how new supermarket developments affected town centres and independent retailers in Alloa, Dingwall and Dumfries. The full report's conclusions were that, in each of the towns, a new supermarket meant:

• A decrease in the number of convenience retailers operating in the town centre;
• An increase in the number of vacant units and corresponding floorspace;
• A broad shift in convenience expenditure away from the existing town centre retailers to those operating the new supermarket development;
• A significant decline in the level of business activities undertaken by existing retailers. This is attributable in the main to competition from the supermarket; and
• A general acknowledgment in respect of a decline in the overall number of shoppers frequenting the traditional town centre.

News Scotland