Osborne’s £25bn public spending cut planned post No vote

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  By Owen O’Donnell
 
UK Chancellor George Osborne’s proposal to make £25 billion worth of cuts after the 2015 election – mostly targeted at the welfare budget – will mean Scotland losing hundreds of millions of pounds should they vote No in the independence referendum.
 
Speaking yesterday, Osborne pledged further austerity in an effort to bring down the UK deficit levels, stating that the “job was not even half done.”

In his speech he said that “2014 will be a year of hard truths” and suggested cutting housing benefits for under-25s in addition to restricting council housing for those who earn over £65,000 a year.

Deputy Prime Minister Nick Clegg voiced his disapproval of the plans, insisting that he has “a very different vision” from the Conservatives on how to reduce the financial deficit during the next parliament; saying that he believed that the wealthy should pay more in tax.  He commented that the targeting of the young working class was “extreme…unrealistic and unfair.”

However Mr Osborne’s Labour counterpart Ed Balls conceded that Labour would also be implementing cuts if they win the 2015 general Election, although he insisted his party would implement the cuts “in a fairer way”.

“What is clear is that there are going to be tough choices in the next parliament after 15/16. The next Labour government will have to face a very difficult situation where we will be cutting public spending.” Balls told the BBC.

Mr Osborne suggested that only through reducing the amount spent on welfare, could a future UK government avoid having to make cuts in areas such as education, “big tax rises”, or increasing borrowing.

SNP Treasury spokesperson Stewart Hosie used the announcement by Mr Osborne in order to highlight the threat to Scotland of a No vote in the independence referendum. 

He said: “No matter how hard they try to hide it, it is becoming increasingly clear what a No vote means for Scotland. More welfare cuts, more spending cuts and more years of economic mismanagement.  Osborne is claiming the economy is recovering well, yet his cuts will continue to hit the most vulnerable in our society.
 
“And we know Osborne has already threatened to cut the money Scotland receives from Westminster in the Barnett Formula to the tune of £4bn a year.
 
“Scotland needs to escape from the financial strait-jacket imposed by Westminster, which is why we need the full financial freedom of independence – a Scottish parliament and government with real economic powers so that we can make the right decisions for Scotland.”

The Barnett Formula, used to set public spending levels in Wales, Scotland and Northern Ireland, is unpopular amongst the Tories with senior Conservative figures calling for it to be scrapped.

Mr Osborne himself said the Tory government would have “an open mind” to scrapping the Barnett Formula in favour of a needs-based formula.

In 2008 he told The Western Mail: “If we’re going to have a debate about Barnett, let’s start with the facts. Nobody has done a needs-based assessment of how much each part of the UK would get if there were changes…I don’t think we can have a debate about Barnett without that. I did ask Alistair Darling to commission a needs-based assessment and I’m still waiting.”

David Cameron speaking to the Herald that same year, said: “This [formula] cannot last forever, the time is approaching … If we replace the Barnett Formula with a needs-based formula, Scotland has very great needs and Scotland will get very great resources.”
 
Asked if, therefore, the formula is coming to the end of the road, he replied: “Yes, that’s right…”

A 2010 poll published in the Daily Telegraph found that the vast majority of the Tory party wanted the amount of funding given to Scotland to be reduced.  72% of Conservative MP’s said that they felt that England was “losing out” because of devolution to Scotland and Wales.  74% said that the current system of distributing money throughout the UK was unfair on England.

Tory MP Priti Patel, one of David Cameron’s ‘A-list’ candidates, caused outrage in a speech to the Institute of Economic Affairs in November 2012, saying: “Scots are basically getting a better deal than the rest of the country…These are considerable sums of money which should be reduced as part of the deficit reduction plans.”

Even Scottish Conservative leader Ruth Davidson is on record appearing to call for the Barnett Formula to be scrapped. She told the Sun in March: “Barnett [formula] was only supposed to be temporary… I do think that there will be a review of Barnett after 2014.  The ground has shifted since devolution.”