The growth-shaped hole in the Queen's Speech

There was little in the speech to revive growth and employment this side of the election. But can Labour take advantage?

The Queen's Speech was proof that David Cameron has taken Lynton Crosby's advice to scrape "the barnacles off the boat" and focus on what he regards as voters' core concerns: the economy, immigration, welfare reform and education. Out went the international aid bill, the "snoopers' charter", minimum alcohol pricing and plain packaging for cigarettes. In came bills limiting immigrants' access to public services and benefits, making it easier to deport foreign criminals and giving the government new powers to tackle anti-social behaviour. In another concession to the right, the speech made no reference to the equal marriage bill (which was introduced in the last session and is being carried over), although the energy bill, which is similarly being carried over, was mentioned. 

David Cameron and Nick Clegg will point to bills introducing a £72,000 cap on social care costs, a single-tier pension scheme and High Speed Two as proof that the coalition is not short on ambition. But the social care and pensions measures aren't due to take effect until 2016 (so after the next general election), while the high speed rail project won't be completed until 2033. In the short-term, both Cameron and Clegg's fortunes will hinge on the performance of the economy, and here the speech was decidedly lacking. 

"My Government’s legislative programme will continue to focus on building a stronger economy," it read (almost as if the double-dip recession, the loss of Britain's AAA credit rating and the £245bn increase in forecast borrowing never happened), promising "the creation of more jobs and opportunities". But aside from the new £2,000 Employment Allowance for small businessses, there was little with the potential to stimulate growth and job creation. It is here that Labour will concentrate its attack in this afternoon's debate. Last week, Ed Miliband unveiled an alternative Queen's Speech, which included the creation of a British Investment Bank, a temporary VAT cut, a one year national insurance holiday for small firms and a jobs guarantee for every adult out of work for more than two years and every young person out of work for more than a year. But Labour's reluctance to make the case for a short-term increase in borrowing (highlighted by Peter Hain today) has left it struggling to take advantage of the coalition's inertia. After a mixed set of local election results and the first hints of a Tory recovery since the "omnishambles" Budget, Miliband needs a strong performance today to earn him the political breathing space he requires. 

David Cameron and Ed Miliband walk through the Members' Lobby to listen to the Queen's Speech. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
Show Hide image

Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.