INFLATIONARY NIGHTMARES: WORK LIKE A DOG, JUST TO LIVE AS ONE
I don't need a referendum First Minister, I need action on inflation, falling real earnings and diminished disposable income
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SCOTLAND is hurting amid a perfect storm of unaddressed long term economic challenges and recent global shocks. The pandemic has contributed to a surge inflation amid resurgent demand and continuing disruptions to global supply chains. This chaos has been worsened by pandemic fallout and chaos wreaked by the Russia-Ukraine war. Yet it remains a fact that Scotland entered the pandemic with stagnant productivity, innovation worse than any time since 2008 and a looming tax and spending crisis. All of these pressures demands a close examination as to how the Scottish Government is choosing to spend our taxpayer money.
Scotland faces the toughest inflationary pressures in four decades, as prices rise at their fastest rate in forty years. The Consumer Prices Index (CPI) shows the rate by which prices are rising is 9.0 per cent in the 12 months to April 2022; up from 7 per cent1.
The Scottish Fiscal Commission has projected real average earnings decreasing by 2.7 per cent in 2022-23 and that the poorest will be disproportionately hit the hardest, due to the suffocating effects of the inflationary crisis2.
And the Scottish Fiscal Commission findings about inflation hitting Scottish households hard is fully conceded by the Scottish Government. In their Resource Spending Review they helpfully lay out the worsening outlook for real household disposable income per person (‘Figure 1’ below).
So at this point everyone is agreed: Scotland is facing inflationary headwinds unpresidented for four decades, and Scottish household earnings and disposable income is going to be squeezed hard. And those on the lowest income will be hurt most. This is all agreed, not in dispute.
So the same Scottish Government spending review becomes incredibly fascinating when we examine its spending plans for 2022-23. On page 53 of their publication ‘Investing in Scotland’s Future: Resource Spending Review’ the Scottish National Party-led government reveals a pledge to do two things.
Firstly, continually increase spending on ‘external affairs’ and secondly, allocate £20m for a referendum next year.
So it is abundantly clear what Kate Forbes and Nicola Sturgeon are telling us. They fully accept and do not dispute inflation is running rampant and real earnings are due to take a pounding over 2022-23; nevertheless they will persist with a referendum that Scots not consider a priority.
And believe me, Scots do not consider holding a referendum before the end of 2023 a priority. According to a May 8th poll conducted by Survation3 a mere 29 per cent of Scots think ‘another referendum on Scotland leaving the UK should be held before the end of next year’.
To tackle the inflationary crisis, interest rates have been risen. This means that the rising cost of living and rising interest rates will put pressure on how much households can afford to spend on moving home. Thus, Scotland also faces house price growth being revised down too as more people delay and put off moving home due to costs.
Further, the Scottish Government will actually witness its overall budgetary growth nominally grow, but in real terms be cut due to this nightmare inflation. According to the Scottish Fiscal Commission,
“The Scottish Government will see its overall funding levels increase through and beyond the Spending Review period. However, inflation will erode this growth. Real terms funding will remain slightly below that of 2022-23 for most of the Spending Review period, increasing only modestly in its last year”4
Even income tax is expected to reduce the size of the Budget in the first year of the SNP’s Spending Review period, thus underscoring just how severe the economic headwinds we all face are likely to be over the course of the next 12-18 months.
But despite all of this, the Scottish Government insists on spending £20m on a referendum that only 29% of Scottish voters believe to be a priority. Indeed, even among those who voted SNP in the 2019 General Election, there is little evidence of a clear consensus for holding a new referendum vote on the First Minister’s timetable.
According to the previously referenced Survation poll from May, 48% of those who voted SNP in 2019 either think the referendum should not happen before the end of 2023 or are not sure. Even granting the usual caveats for the cross-tabs sample sizes meaning larger margins of error, it’s still quite clear there is no clear consensus.
Surging, runaway inflation is a true nightmare for governments and citizens. Inflationary pressure for those on lower incomes (such as myself) means we face the prospect of having to work like dogs, just to live like one. It is then all the more remarkable that this Scottish Government is so disconnected from the real needs of those whom it governs. I do not need a referendum before the end of next year, I need something done about inflation and the cost of living crisis, First Minister.
ONS (2022, 18 May) Home Economy Inflation and price indices Consumer price inflation, UK Consumer price inflation, UK: April 2022, Office for National Statistics, https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/april2022#:~:text=The%20Consumer%20Prices%20Index%20(CPI,of%200.6%25%20in%20April%202021.
Scottish Fiscal Commission (2022, May), ‘Scotland’s Economic and Fiscal Forecasts - Summary’, Summary, https://www.fiscalcommission.scot/wp-content/uploads/2022/05/Scotlands-Economic-and-Fiscal-Forecasts-Summary-May-2022.pdf
Survation conducted online poll. Sample size 1050 people aged 16+ in Scotland. Commissioned by Scotland in Union. https://www.survation.com/archive/2022-2/
Scottish Fiscal Commission (2022, May), ‘Scotland’s Economic and Fiscal Forecasts - Summary’, Summary, https://www.fiscalcommission.scot/wp-content/uploads/2022/05/Scotlands-Economic-and-Fiscal-Forecasts-Summary-M