Fear cuts will push economies back into recession

SCOTLAND AND WALES:SCOTLAND AND Wales now fear that their economies will fall back into recession following yesterday's spending decisions by chancellor of the exchequer George Osborne, particularly because of major welfare benefit cuts and sharp falls in capital spending.

Despite Mr Osborne’s declaration that both will enjoy cash increases by 2014/15, it emerged later that Scotland’s total budget, including health and education, will fall by £1.3 billion (€1.46 billion) next year, from £29.2 billion to £27.9 billion, and to £25.9 billion four years from now.

Scottish finance secretary John Swinney said: “Today, [he] went beyond our expectations, particularly on swingeing cuts to the capital budget, with an overall cut in next year’s Scottish budget of £1.3 billion – including an £800 million reduction in vital capital spending. Today’s cuts go far too deep, far too quickly – the capital budget cuts alone will threaten some 12,000 jobs in Scotland.”

Scottish consumers, left fearful by the talk of cutbacks, have already curbed spending, down 0.4 per cent last month on the year before – even though figures for the United Kingdom as a whole showed a 0.5 per cent rise.

The value of Scotland’s production of goods and services increased by 1.3 per cent in the three months to June, though the Scottish Nationalist Party-run Scottish executive says this is because it brought forward work on infrastructural projects by a year.

The decision by Mr Osborne to slash spending by half on new local authority housing will create particular difficulties for Scotland, since it will face pressures elsewhere in its budget if it attempts to keep its own housing budget intact.

The Welsh assembly government in Cardiff will see its current budget cut by 7.5 per cent over the coming years; but its capital spending will be down by a severe 41 per cent. The capital spending for Scotland and Northern Ireland will fall by 38 per cent and 37 per cent respectively.

There is fury about the government’s decision to make the BBC responsible for meeting £7 million of the £80+ million budget of Welsh language TV channel, S4C. The station will challenge the decision in the courts.

Local governments in England face cuts of 26 per cent to their budgets over the next four years, but their Welsh and Scottish counterparts will have to wait until the end of November to learn what grants they will get from their governments.

Mr Osborne’s decision to cut a further £7 billion from the welfare system as a whole in the UK – on top of £11 billion in cuts already announced – will have a disproportionately bigger impact in Scotland and Wales because of higher levels of poverty.

Prof Brian Morgan of the Cardiff Management School at the University of Wales said, however, that “a radical change” in welfare is inevitable. “It is incredibly tough, [but] what we have done in the past is now unsustainable in the future.”

SPENDING REVIEW MAIN POINTS

* £83 billion in spending cuts over four years

* Structural deficit to be eliminated by 2015

* £7 billion in additional welfare budget cuts

* Almost half a million public sector jobs likely to be lost

* Average 19 per cent cut over four years in departmental budgets

* Foreign office budget cut by 24 per cent

* Police and criminal justice budget cut by 20 per cent

* Arts funding cut by 30 per cent

* Retirement age to rise from 65 to 66 by 2020

* English schools budget protected; £2 billion extra for social care

* NHS budget in England to rise every year until 2015

* No cuts to overseas aid budget

* Bank levy to be made permanent