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What savings from nuclear fallout?

Douglas Fraser | 07:51 UK time, Wednesday, 21 April 2010

So what will you cut, and which taxes will you raise?

In an , they're the questions that keep getting asked, and keep going unanswered.

We've seen Labour, Conservative and Liberal Democrat face questions on them. They have all left a lot of uncertainty around how to get the structural deficit under control.

So as would like to debate the leaders of those UK parties, how about putting his manifesto to the same test?

The test doesn't last long. He hasn't put forward a manifesto for Westminster that makes any pretence of offering a costed approach to solving Britain's financial woes.

Why should he? It would be both politically painful and unnecessary.

London's cuts

But he still gets the questions. Whoever is Prime Minister after 6 May, Alex Salmond has another year as First Minister, and he will surely face decisions around a comprehensive spending review this autumn.

That will include its first year of implementation from April 2011 - a month before the Holyrood elections.

So how is the question of balancing the books being answered?

There's the independence answer. Mr Salmond used it again this week.

Lots of oil and gas still to be pumped, so why does Scotland face "London's cuts"?

It's more rhetoric than budget.

But it returns to a familiar tension: if Scotland were to have access to its geographic share of offshore oil and gas revenue, it couldn't spend that on protecting public services and also use the same money to build up a Norwegian-style trust fund.

Fair deal for motorists

Short of independence, what's the answer?

The most prominent answer is: keep spending.

This is partly to keep the stimulus going, without any indication of when it might be stopped, or when deficit reduction should start.

There is at least one tax cut suggested, with a return to SNP support for business tax cuts, as used successfully by other countries. (Ireland is no longer specified as one of the "similar nations across Europe" which the SNP has in mind.)

There's a call for a "fair deal for motorists", paring back tax when the price of oil goes up.

That would reduce anticipated tax revenue, and risks compromising the party's green credentials.

And there are spending pledges, more to protect cherished services than to add commitments.

One of the pricier ones, though, is for high-speed rail.

That's in common with other parties.

What is different about Alex Salmond's plan is that he would require that building should start from Scotland.

That raises two questions: why build long, expensive stretches first, when the quick revenue return would be with high use further south?

Public subsidy would have to be higher that way.

Salaries freeze

And there's the independence question: would an English government want to build north of Manchester?

And if that weren't viable, would an independent government in Edinburgh be willing to subsidise building so that it reached the border at Carlisle?

The manifesto offers up some savings the Scottish government is proposing.

There's £40m if it succeeds in slimming down the extent of quangos. There's a halving of the marketing budget, which should deliver £5m in savings. There's 5% shaved off Scottish government administration costs. This year, the reduction is of £8m of savings, down to £262m.

So that equals savings of less than £50m, to which you can add a freeze on senior government salaries. So far, it's looking a bit piecemeal.

The manifesto goes on to cite efficiency savings already delivered by the SNP Scottish government; £250m from smarter procurement, better estate management and shared back office.

Big ticket savings

That's a more impressive figure, but it's going to have to be repeated year after year.

And it's quite a long way from the £3bn savings that experts predict may be required of the Scottish government.

What, then of the savings the SNP suggests for Whitehall.

The list from Alex Salmond; scrapping identity cards and saving £5bn: not spending £4bn on nuclear waste depositories: abolish the House of Lords, and its £100m annual bill: and no more Scottish Office, saving another £10m.

The big ticket saving, which gets the applause, is £100bn on Trident.

Looking closer at these, it seems much of the spend on ID cards has already been committed.

Conservatives also want to scrap them, and they reckon that would save them £1bn to £2bn on the set-up costs.

Ending plans for a nuclear waste depository would hardly make the cost of storage go away, so that's not a clear saving.

Nuclear submarines

And what about Trident. The £100bn price tag is an estimated lifetime cost, then rounded up by quite a few billion. Defence specialists put it closer to £80bn.

It remains a long way from the £15bn to £20bn figure the government originally announced for replacement with four submarines.

How much of that would be spent over the most intense period of the spending squeeze, and how much could cancellation help?

The British American Security Information Council reckons on less than £500m in development costs being spent for the next three years.

It then ramps up to £1bn per year in 2016.

That doubles in 2018, and in 2020, it looks like five years of spending more than £4bn per year, before falling in 2028, to a £2bn running and maintenance cost for the remaining 14 years of the system's lifespan.

Morality

So by that calculation, cancellation now could save a total of about £4bn over the next five or so crunch years of what they like to call "fiscal consolidation".

Now, you can make a powerful argument against replacement of Trident on the basis of military priorities, defence strategy, long-term costs or morality.

But what you can't do is pretend that cancellation of Trident's replacement is the way to get a structural deficit under control, which was most recently estimated at an annual £67bn.

Comments

  • Comment number 1.

    "And what about trident" mmm an interesting question. Has Britain EVER had an INDEPENDANT nuclear deterrent ?

    interesting that you accept that you can make a powerful argument against replacement of Trident but morality is at the bottom of the list exactly the mirror image of almost every opinion poll done on the subject

    Sid

  • Comment number 2.

    "And there's the independence question: would an English government want to build north of Manchester?" (for high-speed rail)
    The answer is; probably not. However, in an independent Scotland with very poor connections to the European mainland, I would suggest that the EU might well step in at this point and make the connection. Alternatively, we (Scotland) could invite Carlisle and Berwick to affiliate to Scotland, and that could provide the pressure to complete the link.

  • Comment number 3.

    Spot on Douglas. The focus of the political parties and the media on cutting now or later is a red herring. The crucial issue is dealing with the structural defecit that you touch on in your final comments. None of the parties touch on this in any detail in their manifestos. Why? Well as the protracted rescue talks for Greece have highlighted, there can only be losers in a fiscal financial restrucuring. Taxes have to rise or at the very least collection rates have to be optimal; of course public spending has to be cut and if inflation picks up as many expect it to do, then the level of real cuts to departmnetal budgets is magnified. The other route to take of course is through an enhanced level of economic growth. After all the rate of growth in China has remained in double digits regardless of the recession in many of their end markets. We somehow need to expand our involvement in global trade. How? Who can tell, but the billions of pounds of "investment" in public services by successive labour governments over the past 13 years is likely to show very little return as we stagger out of recession. Here in lies the rub, the bulk of public spending ring-fenced in healthcare and education is a fixed cost - salaries and estate management costs - many of them legacy costs likely to spread over the next generation. Without a miraculous recovery in our economic performance, these two key areas of expenditure are likely to be massively curtailed in real terms over perhaps the next decade. So what can we expect? We could bury our heads in the sand as the four main parties are doing currently. Or we could focus on efficiency savings as both Whitehall and Holyrood excell themselves in doing. The fly in the ointmnet with this approach however, is that cash is never released, simply recycled into protecting frontline services.
    Post the election result, we can only hope that the financial markets remain benign with no similar collapse in confidence as seen in Ireland and Greece. We can learn a lot from the harsh conditions being pushed through on public spending in Ireland. It is from the necessity of such action that a newly dynamic Irish economy will surely grow. We haven't even read the small print on the medicine bottle label yet.

  • Comment number 4.

    Morality?
    "Trident. The £100bn price tag is an estimated lifetime cost, then rounded up by quite a few billion. Defence specialists put it closer to £80bn"
    "structural deficit, which was most recently estimated at an annual £67bn"
    "But what you can't do is pretend that cancellation of Trident's replacement is the way to get a structural deficit under control"
    Trident cost £80bn - structural deficit £67bn. Hmmm...
    It also strikes me that having nuclear weapons is immoral, and they should be disposed of at any cost anyway.

  • Comment number 5.

    Ach you're right Douglas
    We need to buy brand new trident missiles - otherwise who knows what these pesky North Koreans will do.
    And of course you are right about High Speed Rail - I mean the French would never dream of connecting their West and South coasts - and I mean the Spanish - they'll never link up their Capital to the pesky Catalans way up North in Barcelona. It just wouldn't happen.
    And I mean if a Defence Specialist could predict the price of a loaf of bread, I'd give this SNP bashing of yours some credibility. If the MOD are saying it'll only be £80Billion - they actually mean it'll be MORE than £800Billion.
    Not your finest day or your finest article. Must be due to you spending too long in the pub with "The Comrades" in Dundee?
    Slainte Mhor

  • Comment number 6.

    "Short of independence, what's the answer?"
    Suicide?

  • Comment number 7.

    This comment has been referred for further consideration. Explain.

  • Comment number 8.

    This comment was removed because the moderators found it broke the house rules. Explain.

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