Archive | Economy RSS feed for this section

Scotland £40 million wealthier after initial cuts ?

9 Jun

So the Conservatives have decided to inflict £6 billion of cuts on the Country. The share for Scotland will be £332 million.

1. Scotland will not have to make these initial cuts cuts until next year.

2. Scotland has also secured an additional £182 million in funding from the UK government known as the fossil fuel levy.

3. Alex Salmond also seems confident he will receive £190m for Scotland as part of the Barnett formula through spending on the London Olympics.

It appears that Scotland does not need to make any cuts after all regarding it’s share of the £6 billion. In fact after this initial round of spending cuts Scotland will be £40 million better off. Must be nice living in the already most affluent nation in Britain.



27 May

Science, Technology, Engineering and Maths, fallen asleep yet ? These subjects do not raise the pulse of many, let alone young people. They have been discreetly dropped by many students for a long time,  leading to a problem for England’s (and UK’s) future economic success.

Recently Nissan gave a press release for release date for The Nissan Leaf in the UK (February 2011). The first 50,000 cars will be made in Japan, with production then moving to Sunderland in 2013. It will be one of the first major electric cars made in the UK.

This raises a number of questions.

Electric cars do away with the need for Petrol. Britain has 31 million cars on the road contributing to some £25 billion in fuel duties to the government. This revenue will slowly dry up unless the Government finds other energy to tax. If we see the petrol replacement (electricity) taxed to compensate we will see a large hike in home utility bills.

Electric engined cars will greatly reduce engine damage and need fewer parts and maintenance. This will add to large job losses in Petroleum and auto repair related industries (mechanics, garages, parts specialist and scrap).

We are looking to new manufacturing, green energy and power to take up an extremely large number of jobs, and revenue. Is the UK ready or preparing for this revolution in jobs and revenue substitution ? let us ask industry about our obvious foresight and planning.

One company that makes engines is JJ Churchill, recently is Managing director said

JJ Churchill has an excellent staff retention record. Historically, advertising was never needed to fill vacancies and many senior managers began their careers on its apprenticeship scheme. “Then, about two years ago, we found we could no longer fill vacancies by word of mouth. Despite our growing expenditure and effort in recruitment, we are struggling to find the quality and commitment we need and the situation is steadily getting worse,” he explained.

And they are not alone.

“Skills gaps are rife throughout many areas of manufacturing; in the advanced and emerging industries, around which the UK wants to centre it’s ‘new economy’, they are in severe deficit. The situation looks set only to get worse as an ageing work force fetches its pipe and slippers throughout this decade. “

Only yesterday Thales which makes software for military and civilian applications announced that it’s Wells factory will close down due to buildings being unmaintainable. Their main priority is not to recruit elsewhere, but to try to keep its 550 employees and move them to other factories. “We understand that this is a challenging time, but our employees are our most important asset and are they are key to our success”. Simply there are not enough skilled workers out there, companies are doing all they can to maintain what they have.

We will see a reduction in government income from petroleum-based industries, fewer jobs in petroleum, car parts, servicing and maintenance industries. Resulting in a need for more manufacturing, green production and energy jobs. However we have no clear plan on how to do this. We cannot afford to lose the jobs and revenue without replacing them in new technologies. We are nowhere near to tackling these issues, we will have problems unless the coalition make greater strides in correcting the situation. If not ?

“So we then advertise for young people who are looking for work and they invariably tend to be the ones that haven’t been successful in other more fashionable industries and therefore they are generally a lower quality of candidate.” at a recent business breakfast set up for local firms to discuss apprenticeships, two manufacturers reported that their 20 year strategies include potentially moving production to Asia. This is not because of any perceived cost benefits but because they feel there will not be the necessary skills in this country to support their operations. “It broke my heart to hear that,” Jackie Freeborn the Chief Executive of Business ; Education South Yorkshire.

We are moving towards correcting these problems, but much, much more needs to be done to make England into a economic manufacturing powerhouse.

England gets no say… as we have no voice

21 May

No England voice

The Conservative Liberal Democrats have set out their ‘blueprint’ for a “radical, reforming government”.

There are two issues surrounding British Politics that the ‘blueprint’ simply ignores or attempts to put on the back burner. 1) Fair funding of the devolved nations 2) Devolution for England.

Both David Cameron and Nick Clegg have prioritized tackling Britain’s record budget deficit. What they meant by beginning to tackle Britain’s budget is targeting England.

The Barnett Formula that gives Scotland £1,600.00 per head more funding than their English counterparts, will not change (even though both parties promised to address it). The coalition kicked into touch any possibility of changing the Barnett Formula. Instead the government say…

“at this time, the priority must be to reduce the deficit and therefore any change to the system must await the stabilisation of the public finances.”

Changing the formula now would help the deficit.

So England tightens its belt whilst Scotland takes comfort as it continues to get extra funding and making no cuts this year. The people of England continue to get less and cut now.

How long must we wait for the stabilisation of the ‘public finances’ 3, 4, 5 years ? The Conservatives and Liberal Democrats are as intent as Labour to ignore England in favour of the devolved nations. It certainly goes against the Conservatives near all England base and the Liberal Democrats general election manifesto, where they called for “a new needs-based funding mechanism to replace the present system”.

Our worries over this Coalition government addressing English concerns on funding and devolution seem justified. Just weeks into the coalition it may already be time to start pressuring the Liberal Democrats and Conservatives.

Danny Alexander, the Scottish Secretary and the Lib Dems’ chief negotiator in the coalition deal, said “The Prime Minister and deputy prime minister have agreed the overriding priority of this Government is to reduce the deficit. This is as vital to Scotland as it is to the rest of the UK.”
But he concluded: “It is clear this deal will deliver great benefit to Scotland.”

Professor David Bell of Stirling University, who has made a special study of the implications has warned: “If it was put into practice, it would have dramatic effects on the Scottish budget. The size of the block grant from Westminster to Holyrood would shrink substantially. Instead of the Scottish grant being 20 per cent higher per head than in England, the margin would shrink to 5 per cent. At current spending levels, this would mean a cut of around £4.5 billion in Scotland’s annual grant from Westminster.”

Underfunded England to be hit hardest by future cuts

26 Apr

new study by ippr published today (Thursday 22 April) warns that the current funding disparities between England and the devolved nations might widen as spending is cut across the UK.

With the prospect of significant cuts in public expenditure after the General Election, the study argues that because of the way the Barnett formula works the budgets of the devolved administrations will be better protected than those in England for spending on comparable services. This means that although spending across the UK will fall overall, the spending disparities that currently exist between the devolved nations and England, which are the source of considerable and growing tension, may actually widen during a period of spending retrenchment. Certainly the spending gap will not narrow in coming years.

The study suggests two reasons for this:

  • Firstly, devolved administration’s budgets will be relatively well sheltered from the worst cuts that fall on England since the bulk of the block grant going to them is based on health and education spending which the Conservative and Labour parties have promised to protect. Health and education funding make up more than half of the ‘comparable’ spending programmes in England upon which the value of the grant is based.
  • Secondly, the so-called ‘Barnett squeeze’, which means that over time the Barnett formula is supposed to bring about equal spending per head in the four nations, goes into reverse if spending cuts are being made. This means that the proportionate fall in spending in the devolved administrations will be lower than that experienced in England.

The study warns that public opinion may not tolerate a situation whereby the devolved administrations, and Scotland in particular, is perceived to be suffering less pain than England. Previous ippr research has shown that the number of people in England who think that Scotland gets ‘more than its fair share of funding’ has almost doubled in recent years (from 22% in 2003 to 40% in 2009) which suggests growing public unease about the distribution of money. This is only likely to grow if spending disparities widen during an era of cuts.

Devolution in a Downturn, by Professor David Bell, also highlights a number of other deficiencies with the way that the devolved administrations are funded. Since their grants are determined by spending decisions made in England by the government in Westminster, over which they exercise no influence, the devolved administrations cannot control the size of their budgets (though they are free to spend the block grant as they see fit). This also makes financial planning difficult and places the devolved administrations in a state of limbo: they know that spending cuts are coming from 2011-12 onwards but they do not know how these will affect them until these decisions are taken.

The study argues that the UK as a whole would benefit from more discussion on how the budgets for its constituent nations are set – this could lead to better decision making and improved economic performance.  It suggests that the UK could learn from federal countries like Germany where the federal government formally consults with the Länder over budgetary decisions.

Devolution in a Downturn shows that unlike in previous recessions, Wales and Scotland have not seen much higher levels of unemployment than elsewhere in the UK – though Northern Ireland has suffered steeper increases in joblessness than elsewhere. (Northern Ireland has also seen a worse crash in its house prices – partly because it is linked to the extremely depressed property market in the Republic of Ireland.)

The devolved administrations therefore face broadly similar economic problems, but are severely constrained in how they respond:

• They cannot significantly expand or reduce spending
• They cannot significantly change the tax burden
• They have very limited powers to shift the timing of spending
• or to reallocate spending to promote growth

The report’s author, David Bell, Professor of Economics at the University of Stirling, said:

“The recession has exposed the lack of powers within devolved administrations to influence demand in their national economies. Control of macro-economic policy remains firmly in Whitehall.

“Having been tethered closely to the economic fortunes of the UK as a whole, the devolved administrations now await with some powerlessness significant cuts to their block grants.

“However, this lack of control is not unique to the UK – for example the German federal system does not allow the Länder to respond differentially in any significant way.  It is also the case that the funding formulas which leave the devolved administrations so dependent on Westminster could work in their favour when spending cuts begin to bite.”

In the paper, Professor Bell argues that giving devolved administrations more fiscal powers is not necessarily the answer, however.  The argument that giving them greater power to respond to local economic circumstances has to be offset against the danger that greater autonomy will simply lead devolved governments to spend more, knowing that in the end they will be bailed out by the UK Treasury if things go wrong.

Identifiable public spend per head, minus social security, across the UK nations, 2008/09

Identifiable spending per head, minus social security Index of spending per head (UK=100) Variation from the average (%) Spend per head Variation from the UK average (£)
England 97 -3% £4,827 -£170
Scotland 120 +20% £6,016 +£1,019
Wales 110 +10% £5,506 +£509
Northern Ireland 122 +22% £6,120 +£1,123
UK 100 N/A £4,997 N/A