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The cuts are coming

Brian Taylor | 15:38 UK time, Tuesday, 22 June 2010

Certainty. That VAT rise, the cuts in benefits, the restoration of the pension earnings link, the increase in capital gains, the reduction in corporation tax.

Imponderable. The precise details of public spending - including, even, the overall total for the Scottish block because that is dependent upon Whitehall negotiations which are about to get under way.

But even within that imponderable we can be certain of one thing. Scottish public spending is about to fall and fall sharply.

As an advance guide, the chancellor indicated that non-protected Whitehall departments could expect to experience a cut of around 25% over four years.

However, that does not necessarily translate directly to Scotland because one of the protected Whitehall departments is health (the other being international aid).

Health accounts for roughly a third of the Scottish total. Hence, if that protection applies fully in England, then that should have a mitigating effect upon the Scottish calculations - because Barnett works by averaging out the rise and fall in comparable English departmental budgets.

But Treasury, Scotland Office and Scottish government all stress that it is far too early to start making detailed calculations based on such flimsy substance.

Cash terms

The Comprehensive Spending Review round (with the Scottish government playing a part) will determine the allocation of cash across Whitehall.

Then, when that is concluded in the autumn, we will know the impact upon Scotland.

But, even if we do not know the final destination in cash terms, we already know the direction of travel. Downwards.

Next, for Scotland, consider a couple of contrasting announcements.

Scottish start-up companies will be among those to benefit from a scheme of partial exemption from employers' NI payments.

It's aimed at nations and regions outwith the relatively prosperous south-east of England.

That's been welcomed - while there's been anger voiced at the decision to scrap a proposed assistance scheme for the video games industry which has its base in Dundee.

Welfare cuts

Next, the politics. It has been intriguing to witness the extent to which the criticism from opponents has been aimed at the Liberal Democrat members of the coalition.

The calculation, presumably, is that the LibDems feel intuitively less comfortable with cuts to welfare than Conservatives.

Consequently, the belief is that the LibDems might be more vulnerable to being prised away from support for the necessity of the tough measures announced by George Osborne.

In that regard, the various "goodies" announced by Mr Osborne are crucial in sustaining coalition support.

Among these may be counted the move to take the lowest earners out of income tax (author, Vince Cable); and the measure to help the poorest families via tax credit.


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