Jam today, but not next year
Here's the figure to cause an audible gulp among MSPs at Holyrood: £332,466,000.
That's the amount as a result of today's spending cuts for Whitehall.
That's before the SNP's finance minister implements the cuts that will be required of him in next year's budget, which are near certain to be far greater.
According to John McLaren, who has taken a leading role in analysing this at Glasgow University's Centre for Public Policy for Regions, the combined effect of the deferred cut, plus the end of a pot of savings kept back from previous years, plus the first tranche of three really big annual cuts, means that Holyrood's spending cuts next spring will be around 5 to 6%.
Indeed, the next few years will are set to see spending reductions of around 10 times the amount announced today.
Olympic largesse
The announcement from the Chancellor, George Osborne, and the LibDem Chief Secretary, David Laws, included a £704m cut for "the devolved administrations".
The three First Ministers are currently meeting at Stormont in Northern Ireland to discuss some of the issues around that, including their claim for some of the Olympic 2012 largesse being visited on the regeneration of east London.
Wales is facing a net cut this year of £168m, and it hasn't yet been decided if it will accept the offer of a deferral.
For Northern Ireland, the consequences of applying the Barnet Formula to its spending grant mean a cut of £128m.
The Scottish calculation comes from sharp cuts to Whitehall budgets that will reduce universities spending (already hit in the most recent Labour budget) and the regional development authorities.
These roughly mirror the role played by Scottish Enterprise, which itself has been through a sharp budget cut in the past three years.
Transport is also taking a very large hit, with knock-on consequences for those devolved budgets - though, as with business, it is up to the parliament and assemblies to decide if those are the same departments that will take the hit outside England.
£1 in every £100
What cushions Scotland, Wales and Northern Ireland is that there is a ring-fencing of most health, schools and young children's centre (Sure Start) spending.
As they make up a large part of the devolved responsibilities, that ring-fencing reduces the impact of the cuts.
The other cushion is that there are a few areas of increased spending for England, including a boost to apprenticeships and more for capital spend on further education spending.
Scotland's share of that extra spending will be £42m.
So once £375m has been cut off this year's budget, £42m has been added on, leaving the total cut just above £332m.
That's roughly £1 in £100, which is what the Conservatives said it would be during the election campaign.
David Cameron and George Osborne said that if any household can cut back on £1 in 100, then so can the government.
Ministers to standard class
Of course, it's a bit trickier than the family not going out for a pizza once every second month.
There are those unintended consequences of making sudden cuts: for instance, cutting the wrong thing to hit a spending target this year, but at the expense of investment that would deliver longer-term savings.
And there's the argument - deployed by the Scottish government - that cutting public spending now will pitch us back into recession, because the private sector is not yet strong enough to pick up the slack from reduced government spend.
One of the ways that happens is with private firms that depend on government contracts.
If you're in IT, or a consultant to the government - including the Big Four accountancy firms - then the cuts being implemented this year and over the next four years looks likely to create a big hole in your business plan.
Likewise advertising companies, and spare a thought for the poor train operators without the first class purchasing power of all those ministerial travel budgets.
What, then, does today's announcement leave George Osborne to announce in his emergency budget on 22 June?
He's already unleashed his spending cuts.
What's left is the economic forecast, as supplied by the new Office of Budget Responsibility, and shorn of any lingering over-optimistic assumptions.
There are also tax changes to be announced - maybe not for this year.
They'll start with a rise in the basic rate income tax threshold, and increases in employees' national insurance contributions.
I would expect to see some reviews set up, just as Gordon Brown used to do as Chancellor.
Capital gains tax is already set for a hike, though that will need a lot of political cover.
And June would be an opportune moment to start softening us up for future increases in VAT.
Hullo, I'm Douglas Fraser, and I'm business and economy editor at ´óÏó´«Ã½ Scotland. Welcome to my blog, where you can read my take on money matters, viewed from a Scottish perspective.
Comment number 1.
At 24th May 2010, universality of cheese wrote:This comment was removed because the moderators found it broke the house rules. Explain.
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Comment number 2.
At 24th May 2010, Ruaraidh wrote:This comment was removed because the moderators found it broke the house rules. Explain.
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Comment number 3.
At 24th May 2010, Wee-Scamp wrote:Yep. Gordon Brown's profligate approach to public spending and his general mismanagement of the economy are now beginning to bite.
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Comment number 4.
At 24th May 2010, yourkidding wrote:Ruaraidh
judging by your sarcasm " president Salmond " and the fact you say they will be voted out next year and Gordon Brown spent their way into a crisis, I would be interested to know who exactly is going to be addressing the financial crisis in Scotland ?
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Comment number 5.
At 25th May 2010, David Lilley wrote:Congratulations on a balanced article.
David Laws and Nick Clegg might have been moved towards cuts on the back of the global worry about contagion in the Euro-zone beginning with Greece. Few seem to have noticed that Greece is number four and not number one. Latvia, Romania and Hungary reveived their EU/IMF bailouts before Greece and are already into "creditor rule"/austerity.
One in three workers work for the state in Romania, the same as Scotland, and the President has described it as a 200Kg man sitting on the shoulders of a 50Kg private sector man (the tax payer). It doesn't work. The private sector cannot handle the weight.
It is political expedience to work the line that "there should be no cuts until the recovery gets off the ground". And I have no quarrel with political expedience. Talking is always better than fighting. But our elected servants should have some professional qualification to manage our books. They should certainly be numerate.
We should all be pleased about the cuts but we should never-the-less perform our democratic duty of vigilence and ask if they are fair and even. This will help us to get the ten times bigger cuts that follow right.
Vigilence is what has been missing under Labour. You, and not so much me, have failed to stop the borrowing getting out of control. The credit crunch was the inevitable consequence of a decade of debt and not the starting gun. Labour had run up £30-40b of debt every year since 2001. We had a national debt of £776b at the time of the 2010 budget in April. But we had most of this (£600b) before the 2007 credit crunch.
When Scotland, Wales and N. Ireland, the ex Chancellor and the unions keep banging on about "further stimulus" some citizens will start to enquire about their economic credentials and find them vacant to the extent that they haven't even heard of Mr. MacCauber and the bottom line on debt.
Even with the new management we will struggle to prevent debt servicing costs exceeding the cost of the NHS in four years time. In four years time we can add £165b, £130b, £96b and £78b to the national debt. Add these numbers together plus interest. Cutting a mere £6b is tough. We have a lot of cutting to do. I am only the messenger. You simply were not vigilent.
Please delight that the new management is making a start in preventing the 200Kg man growing to 500Kg and start to sideline the descenters. Ask them to make way for numerate servants and start being vigilent such that the £50-£60b cuts that follow are fair to you the electorate.
We do have a very pleasing initiative, the Office for Budgetary Responsibility. You can now rely on tax and spend calculations made by professional and numerate economists with independence rather than historians and lawyers (Gordan and Alistaire).
If you still need a good reason to rejoice in the cuts announced today then think for a moment of your forbears, born in fifty years time, who will have to pay your bills run up on your behalf by incompetent management.
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Comment number 6.
At 25th May 2010, Votadini wrote:#5 David Lilley
Perhaps you should consider these comments:
"Total public sector employment currently accounts for 24.9 per cent of total employment in Scotland. This has increased from 23.1 per cent in Q1 1999 and increased from 22.6 per cent in Q1 2008."
"The public sector, excluding the financial corporations, currently accounts for 23.1 per cent of total employment in Scotland."
Source: Public sector employment in Scotland published 17 June 2009
This compares with a total of 21.1% employed in the public sector across the whole of the UK in Q3 2009 in Table 3 of the ONS publication Public Sector Employment Q3 2009.
So, while Scotland's is higher, the gap is hardly huge, is driven by nationalised banks in part, reflects the difficulty of delivering services in one third of the UK landmass with one 11th of the population who are older than the UK average and have poorer health. It also falls some way short of comparing with Romania....or Hungary, Greece or Bulgaria or wherever, so stop talking Scotland down, maybe?
Perhaps those who are criticising politicians of opposite colours to themselves should check out their own facts / numeracy first (and literacy). Alex Salmond was a professional economist and has a panel of advisers who include some of the brightest and best economists in the land and who are of international standing. I trust them to do what is in Scotland's interests.
P.S. Mr MacCauber was not an economist - and while I might agree with some of his famed lines, he was a fictional character.
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Comment number 7.
At 25th May 2010, Votadini wrote:#5 David Lilley
P.P.S. I do agree with you that there is a need to prevent future generations from paying the price for economic incompetence, but just would argue with the assertion that the public sector is already one third of employment. Hopefully as the banks are returned to the private sector, the numbers will head in the right direction, although I am unclear on the tiomescale for this as yet!
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Comment number 8.
At 25th May 2010, yourkidding wrote:As an ordinary taxpayer (and public sector worker ) could you please explain to me Douglas why no managers at local level or former Labour Government ministers are being held to account regarding the economy ?
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