Shiona Robinson delivered a progressive budget to parliament in December 2023, a sharp contrast to the UK government’s Autumn statement a month before. This is nothing new – the Institute for Fiscal Studies (IFS) highlight the year-on-year divergence between the governments, in their recent podcast budget explainer.
The cumulative effect of consecutive, relatively progressive budgets has formed a wide disparity between Scottish government public spending decisions and those in the other UK nations. The think-tank’s Associate Director, David Phillips notes the distinctive progressive nature of Scotland’s budgets and describes it as a “Scottish policy model.”
Budget decisions based on social contract
Robinson stressed the Scottish government’s commitment to making budget decisions based on the ‘social contract,’ a Rawlsian view promoting universal basic services while increasing taxes on higher earners, who are perceived to own enough wealth and resources to avoid any noticeable change to lifestyle. This concept of government was the basis for the whole of the UK between the end of World War ll and the start of the neoliberal era in the mid to late 1970s.
The chart below, from the BBC in March 2023, illustrates the IFS findings. The IFS also point out that higher earners are £2-3k worse off as a result.
This is the reality of the fixed-budget economic system imposed on the Scottish Government by Westminster. The finite nature of money in the economy requires a redistributive element, from top to bottom of the income hierarchy, to ensure families and individuals at the margins are supported and that unnecessary suffering is reduced to a minimum.
Unfair burden by the fixed-budget economic system?
It may appear that this constitutes an oppressive tax on competence or success for the most wealthy. A more positive view may be that the payment is a sign of benevolence to society. However, it is worth bearing in mind that any saved wealth is rising due to interest rates that have increased massively over the last two years. The families in the top earning bracket may be slightly worse off than contemporaries in the rest of the UK, but unearned wealth increases easily cover the extra tax liability imposed on them.
Still not enough
Despite the allocation of this additional funding, which equates to the poorest Scottish households being a significant £600-700 per year better off than their equivalents in the rest of the UK, deprivation is still rising in Scotland according to the Joseph Rowntree Foundation in their recent paper, Poverty in Scotland.
The Finance Secretary concluded the budget statement with a reasoned, passionate plea for the Scottish population to wake up to the benefits afforded to society through independence. There is so much more that Scottish government ministers could achieve if the shackles of Westminster were thrown off and the Scottish government was able to make the economic decisions for the citizens with no interference or diverging priorities from the rest of the UK.
The currency question should have been put to bed
What Robinson failed to highlight, however, is the importance of Scotland issuing its own currency from a Scottish central bank. Whether it is Sterling from the Bank of England or Euros from the European Central Bank, a Scottish government deciding to use a currency it cannot create at will to allocate resources, will find itself dancing to the tune of a higher authority. The government will not be able to guarantee putting the Scottish people first in every economic decision.
Additionally, the asset-stripping of Scotland’s natural resources will continue as England or Europe, depending which currency is adopted, would be able to create whatever money was needed to purchase the essential water, food, technology, and energy, away from benefitting the Scottish public.
A Scottish currency budget
In planning the first budget speech in an independent Scotland, backed by a currency-issuing central bank, Shiona Robinson’s successor would be confronted by a completely different array of choices and constraints. Potential would no longer be measured financially. It would be constrained by what could be done to improve the living standards of the population.
It will be necessary to ensure that the Scottish Office of National Statistics can gather and disseminate complete and up-to-date data. Firstly, of the skills, education, and talents of the people.
Secondly, a stocktake of the natural resources and industrial production available to provide sufficient, essential subsistence for all and recognise where surplus may be available for trade with other nations.
Thirdly, an audit of the resources not yet in production in Scotland that would be necessary for wellbeing and the living standards aspired to.
Fourth, an audit of the areas in society that did not reach desired standards and require improvement through technology or other resources. This will form the basis of the initial government budget decisions. Although I have used the term ‘budget’ this still does not infer that money be brought into the equation.
The analysis of the audits will highlight the need for redistribution in society, not financial, but physical and cognitive. By prioritising the areas of need in society, for example homelessness, care for the elderly, or health, and highlighting essential services, a section of society will be shown to be employed in socially useless tasks. These workers can be encouraged to re-purpose to more impactful employment.
Redistribution of resources – not money
There are many ways for government to manipulate the distribution of resources in society. One way is through the tax system. Taxation could be utilised to disincentivise non-productive behaviour and higher wages or subsidised training and education can influence where the working population apply their skills and knowledge. Whatever method is applied, control of the country’s resources is in the people’s hands through their elected government.
A Scottish budget becomes an exercise in deciding what requires to be done, at the most local level possible, to meet the needs and desires of the Scottish people. The government could create whatever amount of money is required to provide the necessary employment to fulfil the objectives. It is this unifying purpose, the positive outcome of manifestos in a functioning democracy, that would decide how much money is created.
In the current devolved system, the cart is put before the horse. The Scottish government is given a set amount of money that in no way can meet the desired improvements in living standards for ordinary Scots.
The current system of law and regulation in the UK, however, promotes ever more centralisation of corporate power and provides profits and dividends for business owners and shareholders. It should be obvious that the resource-based policy platform has been available to the UK government since the start of the fiat currency era in the 1970’s. Repeatedly, UK governments of all the main parties, have made the political choice to value business and wealth over the British people.
Deteriorate in Despair or Aspire to Better?
Scots know perfectly well that there is a huge disparity between where they want their country to be and where it is. The feeling of helplessness, as living standards drop along with life expectancy statistics, nurtures despair and nihilism leading to anti-social problems through addiction, mental health issues and suicide.
Independence can allow a re-alignment of our lives. It is quite possible to re-purpose the population both physically, in the work they do, and psychologically, by providing meaningful work for the benefit of the community. Money will never be the measure of what can be done in the budget reports of future finance ministers in an independent Scotland. The measure of progress in this Scottish nation should be the health and education standards of the people and the part Scots can play, as a result of these factors, in playing a part in guiding the advancement of humanity as a whole.
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