Scottish budget: Downhill fast

The recent passage of the latest Scottish budget—voted down mere days before—by a formidable margin of 123-2, is a political achievement unlikely to be seen anywhere this side of Pyongyang. Bringing together the SNP, Labour, Tories and Liberal Democrats on such a potentially divisive issue is a testament to Alex Salmond's political skill, if nothing else. Yet despite the self-congratulatory tone of many in the Scottish press and Holyrood, the contents of the budget leave plenty to be concerned about.

The £33 billion package, according to Scottish finance secretary John Swinney, is aimed at stimulating economic recovery. The Labour Party successfully added on 8,000 apprenticeships to the budget following its original defeat, whist the Liberal Democrats were brought on board by the SNP’s word that the Calman Commission, which reviews devolution, would be asked to allow Scotland to borrow money for its public spending – a fiscal measure Holyrood is currently unable to use. The Lib Dems also managed to create a taskforce on jobs in the financial services industry - as Edinburgh is in fact the United Kingdom’s second financial capital.

All of these measures are certainly welcome in addressing the disastrous economic situation; but they amount to millions in spending out of a budget of billions. The petulant squabbling seen at the budget’s original vote was caused by measures amounting to a tiny proportion of total government spending. The revised budget certainly addressed some of the fears of Labour and the Lib Dems over important political issues, but as far as addressing the harsh realities of this recession, many are justifiably alarmed.

Whilst Westminster devises plans to secure the future of the private sector, Scotland is on the path to becoming one of the most welfare-dependent nations in the world. Last year, £16billion was spent on welfare payments, and wages for public sector workers amounted to £12billion. In case you missed it, The Times recently published findings from a report by the Centre for Economics and Business Research (CEBR) projecting that Scotland will soon have the third-largest proportion of state-dependence in the world. By 2012, the CEBR estimates that 67 per cent of GDP will be spent on public services, lower only than Cuba's figure of 81 per cent, and 87 per cent in war-torn Iraq.

Perhaps the ferocity of the debate over the budget had to do with the fact that the amount of money still to be appropriated was so small. South of the border, the English make do with 22 per cent less welfare spending per capita, and have a healthy combination of industrial sectors. In Scotland, there is little heavy industry left and while financial services contribute to a large proportion of GDP, the sector doesn’t amount to a huge number of jobs – especially for those without university degrees. After whisky and tourism, there are few industries with comparable contributions to the number of jobs and the output of the economy.

Scotland certainly provides services of critical importance, with some of the finest state schools in the country, widespread infrastructure investment and, for all its imperfections, one of the world’s best public health services. The heart of the matter is that Scotland could be spending far less on subsidising apathy and a lot more on investing in education, encouraging businesses to come to Scotland, health education, and various other good causes. There reaches a point where more public spending does little but burden the taxpayer. Scandinavian countries have extensive welfare states, but manage to attract successful businesses, have healthy populations, and are leaders in the conversion to sustainable energy. The politicians in Holyrood always have the choice to invest in creating a sustainable, competitive economy, and yet they seem to be eager to maintain the slow shift towards dystopian state dependence.

Despite the near unanimous vote in favour of the budget, there has been apprehension from all of the opposition parties, and rightly so. The Liberal Democrats have been pushing for tax cuts—ones that didn’t make their way into this budget—and the Conservatives have warned of the danger of returning to the excessive state employment of the 1970s. The question is whether such a fragmented parliament can create a coherent economic policy before Edinburgh becomes known as "Little Havana." Though this may bring an influx of mojitos and cigars, the costs may exceed the benefits.

If Salmond truly wants to make the case for Scottish independence he needs to show that he can create a sustainable, forward-looking spending policy – unless he is deliberately running up the tax bills of the English to the point that they are willing to disband the Union.