The Chancellor has made a lot of huge promises, but can she afford them, asks TERRY MURDEN
Perhaps the key takeaways from Rachel Reeves’ long-awaited Spending Review were that she’s attempting to put the great back into Great Britain, and has announced long term commitments which promise a lot of jam tomorrow. Stuff happens in the long term and the Chancellor has put all her chips on the table in the hope that her numbers come up.
Any deep analysis and forecasting even over the short term is a bit of a muddle so the promised outcomes over the length of a parliament have to be taken with a hefty pinch of salt. There were a lot of big numbers that should come with a “no guarantee” warning.
Others came over as gestures to keep the punters happy, a few treats to ensure everybody felt they were getting something from a Chancellor who seemed keen to earn the “Spend, Spend, Spend” headlines of 1960s Football Pools winner Viv Nicholson, which didn’t end well.
Take Kirkcaldy high street, singled out by the Chancellor for investment that will “create jobs and new business opportunities”. Nothing specific, just a vague pledge. And why Kirkcaldy? Has she visited the town and been shocked by the boarded up shops, or did it get a mention because her predecessor Gordon Brown was raised there and was once its MP? Keeping the promises “in the Labour family”, even if she struggled to pronounce the town’s name properly.
Reeves has an annoying habit of creating and then repeating phrases that she thinks will hammer home the message. “Putting more money into the pockets of working people”, and in this latest address: “Labour’s choices, the choices of the British people”. But her pledge to “renew Britain” is aimed across the spectrum, even at those waiting to pounce from the Reform UK benches who got name checked over their budget plans, and the Tories whom she never tires of telling us had “trashed the economy”.
So what does the list of multi-billion pound project promises really mean? Specifically, what does it mean for Scotland?
Apart from the cash to help clean up graffiti and flytipping in Kirkcaldy and other struggling towns, we got confirmation of the supercomputer for Edinburgh university, more warship and munitions investment on Clydeside and Rosyth, and the carbon capture and storage project to help clean up those pesky emissions.
Much of the benefit they may bring is for the future, even beyond Ms Reeves’ expected tenure at the Treasury, so she won’t be answerable if none of it works out. The carbon capture project in particular, has become one of those “must haves” for politicians, trade bodies and other lobbyists who give it the status of the holy grail without really understanding how it works, or if it will work.
Finlay McCutcheon, managing director of SSE Thermal, offers assurances that it is a good thing. He says “carbon capture technology is essential to achieving the UK’s Clean Power targets” and as he works for one of the UK’s top energy firms we have to believe it is money well spent.
There is £22bn of investment across the UK in research & development, such as new medicines, an uplift in funding for the British Business Bank, more support for the steel industry, housing and transport. As CBI Scotland director Michelle Ferguson says, all this means “hardwiring the growth mission into government priorities”. She points out that the supercomputer will enhance Scotland’s world-class research base, unlock new opportunities in life sciences, climate tech, and data-driven industries, and help position the UK as a G7 leader in R&D. Labour will love all that, so let’s hope they don’t add her to all those the party has let down since last July.
A lot of the new spending, particularly in housing and transport, will cascade into Scotland through consequentials, though the grievance has already begun. The Scottish Finance Secretary Shona Robison claims the UK government is “again treating Scotland as an afterthought and failing to provide us with the funding we need”.
In fairness, she says there will be a gap of about £1bn in the block grant though this may have something to do with Whitehall departments taking on a bigger share of spending in Scotland in areas such as defence. It may also confirm Ms Robison’s concerns that Holyrood is being by-passed by more direct spending in Scotland from London. However, it may mean the Scottish Finance Secretary will have to cross off one or two items on the list of Holyrood’s promised freebies.
A bigger worry beyond filling the SNP government’s ever-growing begging bowl is the level of borrowings and potential tax rises that the Chancellor is keeping from us to pay for her Big British Renewal. Ms Reeves insists her spending plans are within the fiscal framework and will not require further taxes. Mel Stride, her opposite number on the Tory benches, disagreed and flew into a rage, saying business would pay the price for her “spend now, tax later” statement.
“Will she admit she has made a conscious choice to borrow more?” he asked, adding that business confidence was down, unemployment up and the “bond market vigilantes are circling”. He noted there was no mention of the continuing damage being done to farmers. There was also no mention of oil and gas, let alone the unloved windfall tax.
There was also no mention of small businesses, the cafe and restaurant owners, butchers, painters and decorators and others who don’t grab headlines like supercomputers and billion pound investments in airport expansions. But they do make up most of the economy and once again they went unmentioned, even though they will be the engine of Ms Reeves’ growth plans.
Terry Murden was Editor and Business Editor at The Sunday Times Scotland, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business.
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