After the Referendum – What should Labour Do?

After the Referendum – What should Labour Do? 

STUC, 333 Woodlands Road, Glasgow

Saturday 25th October 2014

Programme

 

This conference is for members of the Labour Party.

10.00   Welcome from Elaine Smith MSP, Depute Presiding Office Scottish Parliament and Convenor of the Campaign for Socialism (CfS) and Neil Findlay MSP, Shadow spokesperson on Health, leading discussion on the consequences of the Referendum decision.

10.45   Break

11.00   Industrial and community policies (based on STULP document)  –  a short introduction  from Jackson Cullinane (Political Officer Unite) and then group work.

The manifesto is available here: http://www.revitalisescottishlabour.org/wp-content/uploads/2014/01/STULP_manifesto_2014.pdf

12.00   Local Democracy – policies and powers. Councillor Gordon Munro (Edinburgh) will provide a short introduction and then there will be group sessions led by Councillors Matt Kerr (Glasgow) Angela Moohan (West Lothian) and Kenny Selbie (Fife)*

13.00   Short lunch break

13.30   What powers and what democratic structure do we need to deliver a winning agenda – introduced by Richard Leonard (Political Officer GMB) and Dave Watson (Head of Bargaining and Campaigns, Unison)

14.15   Concluding session with group feedback and agreeing a working committee to take the ideas forward – Pauline Bryan CfS

15.00   Fraternal greetings John McDonnell MP

 

*Not all of the invited councillors have responded yet

The Citizen, the Journal of the Campaign for Socialism, will be available at the event.

Differing assumptions on iScotland’s public finances

We have two weighty reports today on Scotland’s public finances post independence, one from the Scottish Government and the other from the Treasury. The numbers are some way apart and that’s due to their respective assumptions, not a dodgy calculator.

The BBC has done a good job of summarising the claims in both reports with some nice info graphics. So I will focus on two key areas – start up costs and public finance projections, both key concerns for UNISON members.

The Treasury has published a projection for the costs of creating government departments for an independent Scotland. Based on LSE estimates that it costs around £15m to set up an individual department, this means a £2.7bn bill to replicate the work of the 180 government departments and agencies in Scotland. They have previously estimated that a new benefit system could cost £400m, while setting up a new tax system could cost as much as £562m.

In my view this calculation is mince and I note that one of the LSE researchers has also said as much. Only four wholly-new departments are needed – defence, foreign, HMRC and a Scottish Department for Work and Pensions. Crude calculations like this do nothing for the UK government’s credibility in this debate and undermine much better papers in the Scotland analysis series. They can of course, with some justification, point to the absence of costings from the Scottish Government on this issue. John Swinney’s argument that we are saving on the putative Revenue Scotland, is a bit thin.

The Scottish Government is on much stronger ground when it brings Scotland’s share of the UK’s £1.3 trillion public sector assets into the debate. The Treasury’s Whole of Government Accounts for 2011/12, shows a total public sector estate in the UK worth £745bn and financial assets worth £288bn. Although much of Scotland’s share will already be domiciled here, less the bits we don’t want like Trident!

Let’s move onto the more substantial part of both papers, the assessment of public finances.

Here the Scottish Government outlines a much more optimistic medium term picture for Scotland than the IFS and others. The Scottish Government’s paper claims that total spending in Scotland in 2016-17 would exceed revenues by 2.8% of national income – more optimistic than the Treasury paper and the 5.2% deficit forecast for Scotland by the Institute for Fiscal Studies (IFS).

The main reason for the difference is varying forecasts for revenues from North Sea oil and gas. The Treasury and IFS used the Office for Budget Responsibility’s projections. The Scottish Government report uses their own, higher forecasts. Their figures assume that Scotland will receive £6.9bn (or 4.1% of Scottish GDP) in tax revenues from offshore oil and gas production in 2016–17, rather than the £2.9bn (1.7% of GDP) forecast by the OBR. David Bell from Stirling University puts this in perspective by explaining that the difference exceeds the annual revenue from council tax and non-domestic rates combined.

David Bell has explained these forecasts in some detail and is worth a read. However, the bottom line is that oil revenues are both volatile and notoriously difficult to forecast.

There is another problem with the Scottish Government’s position that IFS has previously highlighted. In the longer term, Scotland’s ageing population will place greater strains on public finances and revenues will decline as oil and gas reserves are depleted. The Scottish Government claims that this can be addressed in their scenarios for increasing productivity, employment and population growth through immigration. These may happen, but again they are optimistic scenarios, not for the cautious or faint hearted. In addition, public service spending per person usually increases in line with productivity growth, so unless relative public spending was to decline, it is difficult to see how these scenarios make that much difference.

As is often the case with the referendum debate, these points depend on assumptions and forecasts that don’t have a strong track record for accuracy. You certainly wouldn’t bet the Friday night pub kitty on them, let alone your mortgage. The UK public finances don’t look good, but it also requires a leap of faith to accept the Scottish Government’s alternatives.

 

 

Pensions and independence – needs more numbers and less rhetoric

The latest independence pensions row still leaves the voters short of hard data on which to assess the implications for state and occupational pensions. Pensions are too important to be treated in this cavalier manner.

The UK government has today published the latest in their Scotland Analysis series on work and pensions. My main interest is the pensions chapter as I am the lead negotiator for the largest pension scheme in Scotland (LGPS) and work with many others.

The essence of the paper’s argument is:

•    The UK has a sophisticated pension system developed over many years.

•    The size of the UK enables economies of scale and risk sharing such as the Pensions Protection Fund.

•    Scotland’s ageing population and White Paper policy commitments add £1.4bn per year to the costs of pensions in an independent Scotland.

•    Significant cost implications of setting up new systems and disentangling Scotland from UK .

•    Public service pension liabilities of around £100bn.

 The Scottish Government’s response was given by Nicola Sturgeon who said, “Pensions and welfare are more affordable than in the rest of the UK, that would be the starting point of independence. And why do a I say that, well they make up a smaller proportion of our GDP and a smaller proportion of our tax revenues. This is just another example of a UK government that is scaremongering that is plucking figures out of thin air to try and tell people in Scotland you can’t do it.”

Comparisons with the proportion of tax revenues is as as pointless as the UK Government’s comparisons with oil revenue. Sadly, this sort of exchange is what passes for informed debate at present.

It certainly is the case that the paper’s numbers, if not plucked out of thin air, are suspiciously rounded and there isn’t a lot of detail as to how they are calculated. Having said that, the Scottish Government has produced even fewer numbers to justify their assertions.

On the cost of establishing a new system the White Paper tells us that an independent Scotland would continue to use the UK systems for a transitional period. That of course assumes a common currency, which is unlikely, and the same benefits – when the White Paper tells us they would make changes. It simply isn’t credible to expect another country to make expensive changes to their systems to accommodate Scotland. Exactly how much extra all this would cost is unknown and I suspect the UK assessment is on the high side, but the onus is on the Scottish Government to publish a credible assessment.

The Scottish Government is certainly right to claim that pensions would be cheaper in Scotland because we die earlier. Any pensions negotiator knows that this is the key metric determining the cost of pensions. However, they are ignoring the other costs that go with poor life expectancy such as ill health, older workforce etc. Having recently renegotiated the biggest pension scheme in Scotland, these factors balanced out to the extent that the Scottish scheme cost the same as the English one. As John Swinney signed off that calculation he should understand this!

For private sector occupational pension schemes the cross border provisions of the IORP Directive are still a concern given typical underfunding. In most cases it would require a very challenging funding increase or splitting the pension scheme. For Scottish based companies of a reasonable size this won’t be a problem, but for the Scottish arm of UK companies it will be. The Scottish Government was banking on the EU rules being reviewed, but that is now not going to happen. Something the FM was obviously not aware of when he wrongly implied that they would, in an answer to a question at the STUC last week.

The weakest section of the UK paper is on public service pensions. A very crude number of £100bn is presented without any attempt to calculate the actual liability. Apparently this is too complex. Strange, given that the UK Public Service Pensions Act requires just such an assessment of liabilities. The paper also gives the impression that this liability falls on Scotland on Independence Day! Of course it is spread out over many years and doesn’t reflect the annual revenue from employer and employee pension contributions. You need to look at both sides of the balance sheet. The local government scheme is already separate in Scotland and won’t cost a penny more, and the NHS is actually in surplus. We also know that UK public service pension costs are falling as a proportion of GDP.

In conclusion, if we ignore the rhetoric from both sides, the actual paper is a useful contribution to the debate and poses questions that the Scottish Government’s very broad brush on pensions needs to address. However, it could have been much more useful if the Treasury had commissioned the Government Actuary Department to do some real calculations, rather than rely on pretty crude apportionment.