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GERS tells Holyrood to live within its means

Terry smiling headNicola Sturgeon admitted yesterday the outlook for the Scotland’s finances was “challenging”, but there were few clues during a half-hour briefing as to how her government intends to reduce its deficit.

Economic performance is indeed robust and employment is at a record, but Scotland continues to spend more than it earns and shows little inclination to do anything about it.

Fraser of Allander Institute director Graeme Roy said one reason Scotland’s deficit remains stubbornly above the UK average is the higher spending on social and welfare programmes. Opponents claim that health and education budgets are too meagre. Mr Roy is implying that Scotland is living beyond its means.

Spending in Scotland on these measures has risen, from £41.3 billion in 2012-13 to £44.6bn in 2016-17.

Asked by Daily Business if her government would take note of his comments Ms Sturgeon said she made “no apologies” for its spending programme. That’s no change, then.

But where will the extra income come from? Oil revenues are up, but only slightly and although she talked up signs of a recovery in the North Sea she admitted the industry now appears to be in the “new normal” as far as the oil price is concerned.

Unfortunately, the SNP government has become addicted to blaming Tory austerity and Brexit for the country’s difficulties, as if austerity and Brexit do not affect the rest of the UK. It should also be noted that we are not yet in a Brexit situation and these figures show what is happening now.

More legitimately, she also said the country was hamstrung “under current constitutional arrangements”. Aside from the more fundamental arguments over independence, it has been argued in this column that without access to the full levers of power the Scottish government – and this applies to any party – is restricted in what it can do.

That, however, is not a reason to simply blame others for failing to raise the revenue side of the country’s balance sheet.

Ms Sturgeon chose to make her comments during a visit to the Edinburgh BioQuarter, a visible example of the “new economy”. But she is grappling with some of the same old problems. She said her ambition is to reduce the deficit to a “sustainable” level. Yet there are few indications that the government is working to achieve that end.

A fear must be that business will once again be targeted. The GERS report was published just 24 hours after Ken Barclay’s recommendations to reform business rates. His proposals were largely welcomed, but mainly for making the rates burden more manageable. The government has insisted that any changes are “revenue neutral”.

If there is no appetite in Ms Sturgeon’s government for clipping the social budget then it must find other ways of raising money to pay for it.

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