Geoff Mawdsley, The Scotsman, 22 September 2009
It is easy to sympathise with John Swinney’s predicament over the Scottish budget. The bulk of it comes as a block grant from the UK Government largely determined by the ‘Barnett Formula’. His budget bed, so to speak, is made for him and he has no option but to lie in it.
Reform Scotland argued in its paper ‘Fiscal Powers’ that it would be much healthier if the Scottish Government had the ability to raise the money it spends. This could be achieved by giving Holyrood control over a range of taxes. Such a change would both enhance accountability and alter the whole nature of the political debate in Scotland for the better. The role, scope and size of government in Scotland would become the central issue with the focus shifting to the appropriate overall level of taxation and the best way of raising the money required to meet the country’s needs.
For now, though, the debate continues to be about how best to manage the budget Scotland receives from Westminster. Until the financial relationship between Westminster and Holyrood changes, all Scottish governments will have to work within these constraints and do the best they can to create the framework for enhanced economic growth and improved public services.
The recession brought on by the credit crunch has meant that Scotland’s budget allocation is tighter than in previous years. The party political debate has been dominated by arguments about exactly how much tighter and no doubt that will continue.
However, leaving that aside, John Swinney’s budget yesterday accepted the reality that Scotland cannot escape the effects of the recession. What is now becoming clear is that whichever party wins the next General Election, we are going to see further reductions in public spending to reduce the UK’s budget deficit and the level of borrowing which are running at unsustainable levels. These, too, will have an impact on Scotland.
There is no point in burying our heads in the sand about this; we need to start planning for it right now.
The search for greater savings should continue and be stepped up. More importantly though, we need to make a virtue out of necessity by putting in place policies that will deliver better value for money by improving the performance of our public services.
Reform Scotland’s research shows that there is plenty of room for improvement here. For example, over the last decade spending per pupil in our schools has more than doubled. Yet, official figures show that the percentage of pupils in Scotland receiving five good grades by the end of compulsory education in S4 has flat-lined. On this measure, the extra money spent over the last ten years has had little effect on educational attainment.
Interestingly, over the same period and on the equivalent measure, educational attainment in England has improved steadily to the point where it has overtaken Scotland. Further, international studies of educational performance such as the most recent Trends in International Maths and Science Survey (TIMSS) show Scotland performing poorly compared to other OECD countries.
The same trends are evident in healthcare. Despite welcome reductions in waiting times in recent years, we still lag behind other European countries, including England, when it comes to cancer survival and mortality rates – key measures of how effectively a healthcare system treats patients.
It is high time that we started to learn lessons from other countries about how to make our public services more effective. There are three main areas that we should consider.
The first is giving the users of public services much greater control over the services they receive. Taxpayers’ money should flow through our public services in accordance with the needs and wishes of people so that they can determine where the money goes rather than have it decided for them by bureaucrats. One mechanism for ensuring this happens would be a parent entitlement scheme in education which would give parents the right to transfer the average amount spent in their local authority area to another school, with a premium for students from more disadvantaged backgrounds. This is similar to schemes in the Netherlands and Sweden designed to offer greater parental choice. In health, the equivalent mechanism is a tariff which ensures that the set amount of money for a specific treatment follows the patient to the provider of their choice.
The benefit of money following the choices of parents and patients is that it rewards those providers who provide a high quality service. However, maximising this benefit requires the second area of reform, which is encouraging a more diverse range of service providers. It is no coincidence that educational attainment in England has improved as it has introduced more specialist schools and academies. This is in line with most European countries where there is a balance between the state funding and regulating services and a range of organisations such as local authorities, charities, churches and companies providing the service. The result is increased choice for those using public services. At the same time, stiffer competition drives innovation and higher standards as new, better ways of providing services are discovered and implemented.
The third area we should look at is how our local authorities can be given greater autonomy. Compared to other European countries, we have become incredibly centralised, with our councils having total discretion over only 9 per cent of their tax income stream. We need to give them the ability to raise more of their own money so they have a real incentive to provide value for local taxpayers’ money. If it is right for the Scottish Parliament to raise more of the money it spends, it must also be right for our councils.
Scotland should have much greater responsibility for raising the money it spends. But until that happens there are still things we can do. We don’t need new powers to improve the performance of our public services – just new policies.