Talk to the hand, Nicola, because the face ain't listening. Photo:Getty
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SNP manifesto 2015: Less of a ransom note, more of a blank cheque

The SNP's manifesto, far from a ransom note, is easily reconciliable with Labour's fiscal plans. The bigger fear is that none of the parties are planning for what happens if the economy takes a turn for the worse.

Nicola Sturgeon launched the SNP’s manifesto yesterday with a plan to end austerity, and provide an alternative to the cuts proposed by the Conservatives and Labour. The SNP says it is “the only party offering an alternative to the Westminster cuts agenda”. It wants spending by Government departments to increase by 0.5% above inflation every year after 2015-16.

Former Conservative Prime Minister John Major will warn in a speech today of the “mayhem” which could result from a Labour government reliant on the SNP in the next Parliament, including the risk that the SNP will push Labour into more spending and more borrowing.

Setting the scare mongering to one side for a moment: could Labour accommodate the SNP’s demands and still meet its own manifesto pledge for securing the public finances?  The SNP proposal to increase departmental spending by 0.5% a year would mean current departmental spending going up by around £1.7 billion a year. This would leave departmental spending around £7 billion higher a year in real terms by 2020, compared to the first year of the new Parliament.

However, tax revenues are forecast to rise by around £20 billion to £23 billion a year over the course of the next Parliament. This means that the next Government can raise departmental spending and still eliminate the current deficit (Labour’s target, which excludes investment spending) by 2020 – just. The deficit would also be falling in every year.

Admittedly, Labour would not be able to meet the mandate in the Budget Responsibility Charter, that it voted for earlier in the year. That requires the Government to be on track for the current deficit to be eliminated by the end of a three year period. Currently, that’s 2018-19. But because it’s a rolling timetable, it allows for the flexibility to change the timing of the deficit reduction programme.  And Labour makes no reference to it in its manifesto, suggesting it does not see the Charter as its primary target.

Labour has already left itself considerable room on its deficit reduction plans: because it is targeting the current deficit, that is, excluding borrowing for investment, by 2020, it could have around £30 billion extra in annual spending to play with compared to the Conservatives. It also looks like it has enough room to accommodate the SNP. There is also remarkable agreement between the two on ways of raising money to pay for extra pledges – the mansion tax, the 50p rate of income tax and the bank bonus tax make an appearance in both manifestos.

In fact, the real risk is not so much that the SNP drags a Labour government in to more spending; Labour may be pretty much already there. The bigger risk is that all parties are making plans based on a very uncertain five year forecast.

The tax revenue figures in the OBR report rely on GDP growing by 2.3% to 2.6% a year. The IMF is less sanguine, expecting UK growth to plateau at around 2.1% a year by the end of the decade. Even that forecast implies that the UK’s dismal productivity performance will pick up substantially in the next five years. Previous OBR scenario analysis shows that deficit forecasts could be out by tens of billions if productivity does not pick up, as set out in the Social Market Foundation’s A Deficit of Growth. On current plans, that would leave the Conservatives unable to meet their target too. The gamble on tax revenues to fix the public finances is one that all parties are making.

 

Nida Broughton is Senior Economist at the Social Market Foundation.

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Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.