Osborne in Scotland: right message, wrong messenger

The Chancellor is on strong ground when he highlights Scotland's difficult currency options but his toxic reputation could damage the unionist cause.

Which currency would an independent Scotland use? Alex Salmond's answer to that question used to be the euro. Back in 2009, the Scottish First Minister quipped that sterling was "sinking like a stone" and argued that euro membership was becoming increasingly attractive ("the parlous state of the UK economy has caused many people in the business community and elsewhere to view membership favourably"). But that, to put it mildly, is no longer the case and so Salmond has changed tack. The SNP leader's new preference is for Scotland to retain the pound in a formal currency union with the rest of the UK after independence is declared. 

But that isn't as simple as it sounds. As a new Treasury report makes clear, the UK would only agree to a currency union were significant constraints to be imposed on Scotland's tax and spending policies, the lesson of the eurozone crisis being that monetary union is inherently unstable without fiscal union. Were Scotland to reject such restrictions, it would be left with three options: to continue to use sterling unilaterally (rather like Panama uses the dollar and Kosovo uses the euro), but without any say over monetary policy, to adopt the euro (if it is able to join the EU) or to form its own currency, a hazardous path at any time for a small country but most of all during a global economic crisis. 

George Osborne, who will launch the Treasury paper in Glasgow today with Danny Alexander, made the essential point on the Today programme this morning when he remarked that "If Scotland wants to keep the pound, the best way to do that is to stay in the UK." Why, at a time when economic insecurity is hardly in short supply, create even more? The polls suggest it is an argument the voters readilty accept. But while this is the right message, one doubts if Osborne is the right messanger.

The reputation of the man who has presided over a double-dip recession and may yet preside over a triple-dip does not improve (nay, it worsens) if one travels north of the border, where the Conservatives still have just a single MP and typically poll around 15 per cent. A recent Ipsos MORI poll showing that support for the coalition's economic policies plummets when Osborne's name is mentioned was a warning to the "submarine Chancellor" to remain below the surface. His decision to take the fight to Salmond allows the First Minister to cast himself in his favoured role as the resistance to the English Tories. 

Since the independence campaign began, David Cameron has wisely taken a backseat as Alistair Darling and other centre-left figures have led the charge. If Osborne wants to help rather than hinder the unionist cause, he should do the same.  

George Osborne addresses the CBI Scotland annual dinner on September 6, 2012 in Glasgow. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.