October 9th’s Hootsmon carried a minor tirade from David O’Neill, President of CoSLA and Leader of the Labour administration of North Ayrshire Council in which he asserts that the present freeze on Council Tax in Scotland—in place for the last six years—is unsustainable. That he has made this assertion is neither new nor surprising. But what is surprising is that the Hootsmon editorial takes him to task for it—and yet the man has a point.
Let’s look beyond the Pavlovian nay-saying of most Labour spokespeople when it comes to any chance to do down SNP policy—and make the (admittedly brave) assumption that local politics is neither so partisan, nor so short-sighted. Let’s also ignore that Cara Hilton seems to be making up Labour policy on the hoof as she struggles to win in Irn Broon’s back yard (she claimed Labour is ‘solidly behind’ the Council Tax freeze) and presume a more senior and experienced figure than Cara has it right.
This debate needs a resolution, given either outcome of the indy referendum. We need to consider what Scotland can or cannot afford—and our balanced decision needs to come well before 2016/17. Some fiscal drivel from Project Fear—including Ruth Davidson in a good but ill-informed conference speech—is going the rounds that Scotland would face a £32bn bill. Peter Jones’ Op Ed piece in the Hootsmon on October 1st accurately nails that particular canard.
Any sensible strategy must accommodate reality. The Scottish Government’s budget, once around £30bn (2009/10), is now £4bn short of that and will continue to deteriorate because of a declining block grant from Westminster. Given that the thick end of the wedge is a decline to £24.5bn by 2016/17 before any rise can be anticipated, some rethinking what a budget cut of 25% can realistically sustain is overdue.
And since the expected turning point back to growth has been revised further into the future (twice), we find ourselves in the highly unusual position of agreeing with Johann Lamont (we think, because she has swithered about on it): that the new fiscal reality demands a root-and-branch budget review is needed. We Scots have shibboleths that are overdue for re-examination, including:
- Council Tax Freeze. From raising ~20% of their income from Council Tax, its freezing since 2006/07 has dropped the proportion to 14%, with much of council loss compensated for by increase in Grant Aided Expenditure (GAE) given to councils. It is speculation how much councils might have raised tax with no freeze but taking a low average of 3% each year across all 32 councils means a total of £1,633m is not being raised.
- Free Personal Care. Costing £194m in 2002/03 and doubling to £384m by 2008/09, this policy is now running at £458m and the number of those entitled is expected to rise by 26% before 2025. It last came under the spotlight in 2008, as a result of rising costs and concerns over some councils operating waiting lists for free personal care, a postcode lottery in eligibility and charges being wrongly made for services such as food preparation. Then, an independent review for the Scottish government, chaired by Lord Sutherland, expected free personal care to be sustainable until 2013, when those increasing numbers of older people would start to bite.
- Concessionary Travel. Although intended to free the elderly from their homes and give them cheaper access to shops and social opportunities, this has become something of a monster. Not only does it start at 60 and has no means testing but examples are legion of people not just traveling the country in express buses but taking whole vacations on the back of it. The result is a £248m bill.
- Free Prescriptions. Though they started out being free in 1948, by the time the Scottish Government got their hands on the NHS, there was still a nominal fee per item which was abolished by the SNP. Since then, usage has grown to 95m items annually costing just over £1bn.
- Free Eye Tests. Since introduction in 2006, the number of eye tests performed increased by almost 50% and a general improvement in vision health has been rather offset by a clear disparity between rich and poor, with the former taking most advantage of the programme and costs running around £95m per annum.
- Winter Fuel Allowance
- Free TV Licences
Admittedly the last two are UK-sourced and no Scottish Government will have control over them as long as we remain in the Union, although they would likely be picked up as currently implemented in the event of Independence. The threat to all these benefits was first flagged up by Scotland’s Auditor General, Robert Black, in the second half of 2009. It raised its head again in the more recent Independent Budget Review Panel Report – the “Beveridge Report” – which stated very plainly:
“The principle of universality in the delivery of many of our public services, such as concessionary travel, prescription charges, eye examinations, free personal and nursing care and tuition fees is commendable, but simply may no longer be affordable. A debate needs to be had on whether those who can afford to pay might be invited to do so, thus allowing better targeting of those in most need.”
In this era of ever-constricting budgets that has yet to come to a clear and demonstrable end, rather than pushing the popular (and populist) line that Scotland’s budget is balanced and all of the above is affordable, we should be considering what is NOT being invested in by way of services in order to preserve the shibboleths listed above. We hold John Swinney to be the most astute finance minister either Edinburgh or London have seen for a while but it seems his colleagues are twisting his arm on this one
But what could he do? Without laying waste to the principles that make them so attractive, what could be done that would ease the squeaking of local government pips?
- Council Tax. Allow councils a rise of 2% on condition that all those paying prior to the start date were given the same as discount. This means: pay for next year by April 1st and your council tax is effectively frozen. By receiving the money early, councils can make more than 2% by putting it to work immediately. Net income boost: ~£100m. It also reclaims some of the power lost to the centre as councils are dictated to over tax.
- Free Personal Care. If this were means tested—as financial payments for care homes already is—at least a third of current costs would be met individuals still able to afford it. This would be preferable to stretching the present budget with economy measures, such as the unpopular 15-minute visit, and releases £150m for other things.
- Concessionary Travel. Undoubtedly one of the most popular measures, it could still be effective without being so profligate. There seems no logical reason why travel should be country-wide and not just local, why it needs to be available at peak times and why eligibility should not start at 65. Around 1/3rd of the burgeoning numbers of trips currently being made would thereby switch to normal fares at a saving of £80m.
- Free Prescriptions & Eye Tests. The logic why these should be free when basic health elements like dentistry is not is not obvious and seems arbitrary. By using means testing mentioned above, those perfectly capable of (and often willing) to pay for services would do so, with NHS administrators given the job of managing this (and other commercial questions such as charging for health tourism). Allowing for the extra work monitoring entitlement, there should be income of around £150m from prescriptions and £25m from eye tests.
The argument that charging causes unnecessary administration overheads does not hold water: means testing exists for many things from free school meals to benefits so the issue of a single personal service card (not unlike the present concession card) used across all services would be a minimal cost per person.
The result would be (taking the amounts proposed in the bullets above) of giving the Scottish Government over £1/2bn more to spend on more urgent issues—or absorbing half of the annual reduction from Westminster they are faced with each year. In times of plenty, why not be generous to people who pay their way?
But when demand is rising and many people are perfectly capable of handling the charges involved, cutting back on essential investment in the future because monies are being locked up in populist policies like the above seems a short-sighted, if not self-serving approach by an otherwise competent government.