Reform Scotland manifesto fails to convince

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by James Maxwell

Edinburgh based think-tank Reform Scotland launched its manifesto last week with the aim of addressing the “long-term structural problems” that it believes will confront Scottish society over the next two decades and beyond.

Its central policy proposals include:

 

  • The full devolution to Holyrood of the power to appoint civil servants

 

  • A reduction in the levels of taxation across all government departments

 

  • Enhanced tax powers for the Scottish Parliament in order to create a more ‘fiscally responsible’ political culture

It also calls for the state to withdraw from its traditional role as the principal provider of key public services in favour of the market.

While its proposals for taxation and the devolution of the civil service will fall comfortably within the mainstream of Scottish political opinion, its enthusiasm for greater consumer choice in education and health will be met with considerable skepticism by Scotland’s social democratic majority.

Writing in the manifesto’s introduction, Reform Scotland chairman Ben Thomson states, “[We] need to shrink the public sector’s proportion of the economy.  Government needs to facilitate the infrastructure to allow a solid economy, it needs to protect its citizens and ensure proper competition.  It does not, however, need to run all the services it currently provides and in many cases provides inefficiently.”

Broadly speaking Thomson attempts to articulate a coherent Blairite vision for Scotland, in which private finance replaces the state as the main source of capital for social utilities and market competition develops a network of services customised to suit individual consumer preferences.

In the primary and secondary education sector, for instance, he advocates the introduction of a voucher system which would see parents handed a monetary ‘entitlement’ by the government equal to “the value of the average cost of educating a child in their local authority area which could be used to send their child to any school which costs the same as the entitlement or less”.

The intended effect of this proposal – which was floated first by the last Labour administration at Westminster before being discarded – is to concentrate power in the hands of parents and create a competitive incentive for under-performing schools to improve their standards.

The likely effect, however, will be that the most ‘ambitious’ or ‘motivated’ parents from disadvantaged communities would choose not to enroll their children in failing local schools and opt instead for institutions located in more affluent catchment districts, thus starving the local schools of funds and creating educational ghettos in poor areas.

A similar criticism could be directed at Thomson’s proposals for reform of the health service, the deficiencies of which he attributes to “the top-down management of a public-sector monopoly”.  He argues that the NHS in Scotland should be organised around the model of “insurance-based systems in other countries” and that patient choice could be enhanced “by allowing money to flow through the system based on the choices of patients with the NHS tariff following the patient to the provider of his or her choice”.

Again, the likely consequence of this will be for funds to become concentrated in a handful of the most effective modern hospitals while those which have been neglected or under-funded in recent years would be left to stagnate or decline.

These, like all of the manifesto’s recommendations, rest on the assumption that Scotland’s economic competitiveness is undermined by levels of public spending that rank among the highest in the European Union.  Thomson maintains that Scotland’s total general government expenditure as a percentage of GDP in 2009 was at least as high, if not marginally higher, than any other EU nation and that it should be reduced because “there is a link between lower taxes and economic growth”.

But for two reasons the figures on which this assessment is based are not totally reliable.

Firstly, they are drawn from Douglas McWilliam’s Centre for Economic and Business Research, a commercial economics think-tank whose impartiality is open to challenge because of its close association with the private sector and consistent advocacy of market deregulation and liberalisation.

Secondly, and more substantively, they do not class revenues from North Sea oil and gas production as part of Scotland’s overall annual economic output and as a result inflate the level of public sector expenditure as a proportion of GDP relative to that of the private sector.

If North Sea oil and gas were included in the calculation of Scottish output, Scotland’s public expenditure would probably not exceed the OECD average and would almost certainly be lower than that of the Scandinavian social democracies.

Although many will congratulate Reform Scotland for challenging the soft social democratic consensus that has developed in Scotland over the last five decades, others will find that the manifesto fails to present a persuasive alternative.

Others still will identify the manifesto’s defining flaw in seeking to overturn what it considers as the discredited political orthodoxy of 20th century European welfarism with a set of fashionable policy prescriptions whose own neo-liberal ideological origins have themselves been recently discredited.

The recent experiences of Ireland and Iceland – especially when compared to those of, for instance, Norway and Denmark – reveal that countries the size of Scotland are more likely to navigate successfully the rapids of a globalised economy when they don’t cede too much ground to highly volatile market forces they can never hope to control or exploit.