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

SNP supermarket tax will boost local communities

A piece I did for Newsnet Scotland:

by Alex Porter, Economy Editor

The SNP government aims to raise £30 million to pay for public services by taxing Scotland's predatory supermarket chains.

With the UK coalition about to slash the Scottish block grant by £1.3 billion and with workers already facing pay restraint the SNP government are looking at ways in which to spread the pain and protect front line jobs.

In order to mitigate against this funding shortfall Finance Minister John Swinney announced in his November budget last year that he would impose a levy on large corporate supermarket chains such as Sainsbury's, Tesco, Asda and Morrisons.

Effect on local economy

Supermarket chain shareholders are, as one might imagine, none too pleased at the tax which is aimed at giant retail firms who own properties with a rateable value of more than £750,000.

Sainsbury's chief executive Justin King threatened to shelve the supermarket chain's entire Scottish investment plans unless ministers cancel the tax hike.

However the move will provide a new lease of life for small shops and communities the length and breadth of Scotland which have been decimated due to the predatory corporate tactics of supermarket chains, who are regularly accused of bullying and having overly close relations with politicians.

Representing the large chains, Fiona Moriarty, Director of Scottish Retail Consortium (SRC) has claimed that the SNP's tax will put 8,000 jobs at risk. This concern will be viewed with a mixture of anxiety and interest by local supermarket workers many of whom will never have met Mr King or any supermarket shareholders.

Claims of job losses always raise anxieties and especially so during times of economic crisis. The supermarkets warn us of how many new jobs may be lost because of their threat to pull investment but in order to calculate the true cost to affected local communities these projections of jobs to be created must be set against the value of the jobs lost in small family shops and communities after supermarkets become established.

Communities are enriched by small shopkeepers. How this process works is simple. In a thriving community the barber spends £1 in the tea shop, the tea shop owner spends that £1 in the butcher's, the butcher spends that £1 in the baker's, the baker spends that £1 in the newsagent's and so on until eventually it gets banked.

This process is what economists call 'money velocity'. The benefits to the community are important in generating vital economic activity and a higher quality of life. Small shopowners have key relationships with the community offering jobs in book-keeping, loading and delivering, cashing up and banking, supplying, ordering, security, inventory, planning and other management skills.

Supermarket business models are widely documented. When supermarkets open, little shops close driving local owners and wealth creators away. Supermarket jobs are mostly unskilled positions, such as trolley collectors and shelf-stackers. Main street retail outlets close and become occupied by charity and betting shops.

The former community model which saw money velocity supporting a vital community is lost and replaced with benefits/low income family expendable income going into supermarket tills and then straight into investors' bank accounts. Such investors will never know the names of most of the towns where their returns are generated.

Some might argue that supermarkets are one of the reasons for the UK's economic crisis as communities are stripped of wealth and unable to contribute to the Treasury.

Local farms

It's not just higher value local jobs which are lost when supermarkets are established in a community, farmers' livelihoods are squeezed across Scotland too.

Kenneth Campbell, who owns a herd of 400 cattle in Castle Douglas, said:

"It's sickening when you see milk being used as the loss-leader in supermarkets. It is costing me 30p a litre to produce and I'm getting 25p for it. People are getting very despondent."

James Withers of the National Farmers' Union (NFU) Scotland said: "Family farms are not looking for special treatment, just fair treatment. The average milk price for a Scottish dairy farmer is 3p below the cost of production. And whilst they lose money on every pint produced, retailers are making millions on milk and other dairy products."

Political fall out

All three Holyrood opposition parties are against the SNP's "supermarket tax" and indeed now threaten to vote down Swinney's budget if the measure is not removed.

Raising one serious concern the leader of the Conservatives' Holyrood group Annabel Goldie said: “The retail sector in Scotland is a major employer – higher taxes will only make Scotland less competitive than the rest of the UK.”

As these same supermarkets exist in both Scotland and England this, Ms Goldie is implying, will lead to people across Scotland going to England to shop. This potential unintended outcome, Unionist opposition parties will argue, shows that the SNP haven't thought these proposals through.

For the Lib Dems the matter is a little muddled. Their finance spokesman Jeremy Purvis said he had lodged a parliamentary motion to annul the measure and that it may 'harm Scotland's reputation'. However, until last week he 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.

Labour are thought by many to have very close, longstanding ties with big supermarkets. In 1998 it was reported that the lobbying firm LLM secured a waiver on paying a car park tax for their client Tesco. The tax would have cost Tesco £20 million per year but the waiver was secured and Tesco contributed £11 million into funding for Labour's pet Millennium Dome project.

Like the Lib Dems, Labour also exhibit some confusion on the issue as during the minimum pricing for alcohal debates they argued that the Scottish Government should find a way to tax supermarket profits.

The SNP make the case that they back local businesses and that communities should have a fighting chance when it comes to competing with supermarkets. Christine Grahame MSP said: “The SNP is committed to backing small business and to levelling the playing field for our town centres."

Threat or promise?

Sainsbury's Mr King said that the SNP levy could force the supermarket chain to shelve plans for stores in Kelso, Nairn and Irvine as well as three planned extensions to existing premises in Linlithgow, Stirling and East Kilbride.

Given, as many argue, that the supermarket business model causes local economic and social stagnation, local residents and businesses will wonder if this is a threat from Mr King or a promise.

News Scotland

Iain Gray under pressure as voters blame Labour for deepening crisis

A piece I did for Newsnet Scotland:

by Alex Porter, Economy Editor

Results of a shocking new survey conducted by YouGov show that 5 percent of people in Scotland - equivalent to 207,500 card-holders - have used credit cards to pay their mortgage or rent in the last 12 months.

The findings (1) are extremely worrying according to Graeme Brown, director of Shelter Scotland, the housing and homelessness charity which commissioned the survey:

“A reliance on high interest options such as credit cards to pay rent or a mortgage is a highly dangerous route to go down and is known to contribute toward uncontrolled debt, repossession or eviction and, eventually, homelessness.

“It is also very worrying that thousands of people in Scotland are being forced to move in with family or friends and that many more are having to take on extra hours and/or a second job just to make ends meet."

The survey results coincide with YouGov tracker evidence which shows Labour are blamed by the electorate for the parlous state of Britain's public finances.

The UK-wide survey (2) asked who people thought were "most to blame for the current spending cuts." Of the respondents 22 percent thought the ConDem coalition government were culpable, 40 percent the last Labour government and 25 percent pinned the blame on both the present and previous governments equally.

These consistent findings will deeply concern the leader of the Labour group at Holyrood as he seeks to lead his party to victory over the sitting SNP government at the Scottish elections on May 5th.

Economic Competence

With UK government borrowing hitting £23.3bn per month according to the Office for National Statistics (ONS), and seemingly now out of control, the electorate are increasingly concerned about job prospects and family budgets. Electorally the issue of economic competence will be the decisive factor in the choice of who will form the next government in Edinburgh.

Across the UK the economic outlook is extremely pessimistic according to YouGov. Asked, "How worried are you that people like you will not have enough money to live comfortably" over the next two to three years, 70 percent of respondents replied that they were "fairly" or "very" worried.

During the political campaign the principal contenders will have to explain to the electorate how their party will best insulate Scotland against the worst effects of the UK's sovereign debt, currency and financial crises.

Holyrood's leading contender Iain Gray will have the unenviable task of defending the Scotland Bill which on Tuesday was slated by world-renowned economists and academics as a "perfect storm". The economists fear it could damage and trap the Scottish economy with a too narrow spread of tax powers at a time of prolonged austerity and economic volatility. The warnings about the Scotland Bill are the latest in a growing list of anxieties expressed by experts over the Bill, characterising it as "dangerously flawed" and "unworkable".

Former economist and current first minister Alex Salmond has by contrast the luxury of advancing the case of economic independence which enjoys popular support in Scotland, as reflected in the recent Social Attitudes Survey 2010 which showed 57 percent of Scots wanting the Scottish parliament to have full tax powers with 62 percent wanting the Scottish parliament to fully control benefit payments.

Leadership Popularity

As though these problems were not enough for Iain Gray, his popularity rating of 24 percent in a YouGov poll back in October lags some way behind Scotland's First Minister with a 42 percent rating.

Some recent attempts by Gray to close this gap in the leadership popularity contest have backfired. This will have raised concerns for many of his MSPs fighting in two-way marginal constituency contests. His most recent gaffe caused diplomatic anger. In an attempt to associate recent Balkan problems with Scottish independence, Gray offended Montenegrins by wrongly claiming that their country was involved in ethnic cleansing and a war-crimes tribunal. In fact the country is proud that it stayed out of the Balkan conflicts.

The good reputation and standing of Scotland internationally is a core responsibility in a first minister's job specification. On Newsnight Scotland this week Gray was given the opportunity to express his regret at the insult but refused:




As YouGov trackers are showing a sharp increase in people believing Westminster cuts are having an impact on their lives, up to 72 percent from 62 percent in December, Iain Gray will need to find a way to deflect blame for Labour's role in the UK debt crisis onto ConDem austerity cuts. The Scottish electorate will need to be convinced that Labour can protect Scotland from the UK's troubles despite the widely held belief that Labour caused those problems in the first place.

With popular backing for the SNP's economic prospectus and its leader, SNP strategists will believe that by keeping the pressure on Iain Gray the election will swing their way during the campaign. To find a winning formula Iain Gray will have to do more than attack his opponents. Scottish voters are tired of petty party bickering and will demand comprehensive solutions to deepening economic problems.

The alarm has been sounded by Shelter Scotland's Graeme Brown:

“As we brace ourselves for the full impact of savage cuts to jobs and housing benefits, we are very concerned that more people are going to face even greater debt and the threat of homelessness."

Whichever party provides the most compelling economic solutions and treats the voters with the respect they deserve will be entrusted with the reins of power come election day.

Notes:
1. Press release from SHELTER

2. Yougov poll

News Scotland

Peak Oil and a Changing Climate

With no-one trusting anyone these days and with conspiracies about conspirators rife, what with banks robbing us blind aided and abetted by almost democratically elected governments and Scotland's pro-union mainstream media spinning like a gyroscope it is no wonder that 'climate change' is another subject that folks are sceptical about.

I mean big business is involved in making everyone scared stiff about climate change so they can introduce carbon trading, which will be followed soon after by the kind of derivative trading that has brought the world to its knees by endemic fraud. Introducing the tax that would 'legitimise' world government and carbon credits which can be bought and sold - bought by heavy consumers with a series carbon footprint from the poorest on the earth who have no carbon footprint.

And then the biggest carbon offenders apparently being pregnant women, because of their children's footprint, means racial cleansing as rich white people buy poor South Americans' or Africans's credits who can only sell it if they agree to joining sterilisation programmes, we really do get people extremely worried.

Then there is the whole issue of 'peak oil' which some, including myself, argue will hugely decrease carbon footprints as we hit post-industrial society. Surely we shouldn't be so concerned then?

I have seen both sides of the debate and find it a bit of a shame that attitudes are so hard on the subject. It doesn't follow for example that because there are a lot of scams in the 'climate change industry' that we don't have a problem. There are scams in the health care industry does that mean we don't need doctors and nurses?

How useful it is then to get a series of informed contributions on the matter such as the following:

UK VAT rise poses strategic dilemma for Salmond

A piece I did for Newsnet Scotland:

by Alex Porter, Economy Editor

So the latest measure to save the UK economy from collapse has been rolled out by the ConDem coalition government in London. Everything consumers buy - except most food products, prescription drugs, baby's clothing, passenger transport and books - will now be taxed by the UK treasury at 20 percent - a rise of 2.5 percent from 17.5 percent.

The Scottish government has estimated that this VAT hike along with rising gas bills will cost the average Scottish family £600 in 2011, extracting £1.4 billion from the Scottish economy to help plug the UK's deficit. Government borrowing in November reached a staggering £23.3bn according to the Office for National Statistics (ONS). Total UK government debt is now accelerating towards the £1 trillion mark. To put this into context, if you think of it in terms of the Scottish bloc grant from Westminster the money that the UK government now owes is the equivalent of over 30 Scotlands.

These Spiralling debts and collapsing tax revenues are the legacy of the last Labour government to Britain's public finances. In an attempt to wrestle with the magnitude of this problem the ConDem coalition have brought in an austerity package which is a combination of cuts in public services and benefits as well as today's VAT increase.

Holyrood Impact

This latest raid on family budgets will fuel further calls for economic independence in order to protect Scottish taxpayers, businesses and institutions from the worst effects of the UK's deficit crisis. Scotland's national accounts (GERS) shows a surplus and that is currently sent to London. On top of that, cuts to the Scottish bloc grant will see a further £1.3 billion leave Scotland this year and head to the London treasury.

With the Holyrood elections looming the governing party in Edinburgh, the SNP, will hope to be re-elected by arguing for economic independence. The nationalists' argument is that Scotland should not be made to take the economic medicine for an economic disease it doesn't have. This case will resonate strongly during the campaign as the ConDem austerity measures are introduced forcing the leading electoral contender, Labour, to argue why they support the Scotland Bill.

The Scotland Bill is Westminster legislation, falls well short of 'fiscal autonomy' which has the support of the Scottish population, if opinion polls are to be believed, and leaves the Scottish economy fully exposed to the UK's escalating deficit problems and the ConDem coalition cuts.

Social Impact

With thousands of families across Scotland already struggling because of the UK's rapid economic decline this latest measure will tip many more families into poverty and hardship. SNP Lothians MSP Shirley Anne Somerville said: "There will be few families in Scotland that can afford the cost of a Tory government in London."

Families are under a lot of financial pressure already. Stress on family budgets is known to contribute to break-ups, homelessness and domestic violence. The accountancy firm PKF has warned that that 440 Scots are likely to be declared bankrupt every week in 2011. Increasing VAT will tip many Scottish families into desperate circumstances putting an increased burden on social services which are simultaneously facing ConDem austerity cuts.

Institutions such as those in Scotland's university sector face a funding crisis as Westminster reduces Scotland's budget. The SNP have promised to keep access to university free but it is not yet clear how universities can afford to maintain standards and at the same time absorb the ConDem cuts.

Unless a percentage of North Sea oil revenues are assigned to ringfence university funding, or some other solution is found, it is likely that fewer students will be offered higher education places. Also, with less high paying jobs to graduate into, students from poorer backgrounds will think again before taking on student debts. The VAT effect on Scottish families will pressurise poorer students into taking a low paid job instead to contribute to the family budget.

Businesses, especially in the retail sector, will be hit hard as goods become more expensive to buy and so demand will drop off. There are also forecasts of job losses in the building industry where companies fear reduced demand for repairs and maintenance work. Many of these job losses will hit the low paid and part-time workers.

Economic Impact

These likely consequences raise the spectre of an increase to the VAT rate being counter-productive. This outcome is a very real possibility and economists, investors and business leaders are anxious. At a certain rate of VAT consumers are priced out of the market and move into the black market. A combination of this and falling sales could see VAT receipts remain static or fall meaning that there will be no gain for the treasury whilst private sector activity actually shrinks and jobs are shed.

Should this scenario play out at the same time as public sector cuts, the combination of the two could be a lethal concoction. The reaction by the ConDem government in London and the Bank of England will undoubtedly be more 'quantative easing' aka money printing, which will cause devaluation. Devaluation means that everyone's money becomes worth less as its purchasing power diminishes - your salary stays the same but you buy less with it. This is a backdoor wage cut.

Without economic independence money will continue to be drained out of the Scottish economy. The SNP government's freeze on council tax bills is therefore absolutely pivotal in offsetting the VAT hike in Scotland in order to ensure that as many families as possible can afford the essentials.

However, making matters worse is London's policy of devaluing the pound which combined with a sharp rise in commodity prices and oil - still to be priced in to the economy - has led to analysts forecasting increased inflation and so reducing the average household's purchasing power further still.

Salmond's Dilemma

The Scottish government has called for the VAT rise to be postponed, but in reality Alex Salmond's Cabinet has no influence over the principle economic powers that steer economies.

In view of increasingly grim economic assessments of the UK economy First Minister Salmond will come under pressure to explain to fellow nationalists how the powers of economic independence are sufficient to protect Scots from the UK's sovereign debt, financial and currency crises.

The UK's VAT increase will impact on the UK's monetary position. The powers of 'economic independence' will protect Scotland from the UK's fiscal impasse but not the deeply troubling monetary predicament south of the border.

It may not suit Salmond's political strategy to campaign for full independence but it is now imperative economically that full independence is prominent on the political agenda so that Scots have the comfort of knowing they can - if they need or wish to - escape from the pound, establish a Scottish currency and protect the Scottish population from the inherent dangers of the UK economy: sovereign debt default, currency devaluation and price inflation.