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Wednesday, 10 October 2012

Politics And Opportunity Cost

I have spent a life time arguing for the end of the Treaty of Union of 1707, for the return of sovereignty to the Scottish people; in short, for Scottish independence. Like the vast majority of Scottish Nationalists of my generation and those who came before, there were always a number of different reasons for our desire to see Scotland sever the Union with England but economics was never the main or the most important factor. We could always argue the economic case if required to do so but generally, it would be in response to economic questions which had been raised by those of our fellow Scots, who were either luke-warm to the idea of independence or openly hostile. Circumstances dictated the type and substance of the political debates of that era, that is, prior to the discovery of oil in the Scottish sector of the North Sea. The Nationalist case would always include an element of economic argument, inevitable in any discussion about the future of any country, but our desire for independence was never predicated on whether or not we would be economically better or worse off. In fact, I know of no other independence movement anywhere else in the world, where the economic argument has played such a prominent part.

Unfortunately the SNP was forced/persuaded to make the economic case occupy centre stage, after the discovery of oil, and no other issue has been the subject of so much inaccurate analysis, propaganda, half-truths and outright misinformation and lies. We are hardly into the campaign for the vote on the referendum on independence, to be held in 2014, but hardly a day goes by without some prominent politician on either side of the debate, issuing some statement either in favour or in opposition to independence, which is quite clearly a collection of half-truths or out and out lies. Assertions are trotted out without even a modicum of evidence, some of which would stretch the credulity of a ten-year-old. Both sides are equally guilty and Scots are being forced to wonder if the speaker actually understands what they have just said. Given the level of intelligence of some of the people involved, intelligence which has been tested in other ways and in other fields, it is difficult not to conclude that the speaker is bound to understand what has just been said. As some of the statements are so obviously untrue or, are shown very quickly to be untrue, the only other conclusion we are forced to come to is that both sides are setting out to deliberately mislead.

One of the very first lessons for anyone who takes economics as a school subject, is the relationship between resources and scarcity, the allocation of resources and the concept of opportunity cost. Even the most befuddled drunk, digging deep into his pockets in the hope of finding enough change for one last pint, knows that the same pound can't be spent twice on different drinks. He can have either another pint or...? Every housewife, every parent, soon learns that income can go only so far and the opportunity cost of new school uniforms can be the school trip perhaps, or some item of household equipment. Everyone learns very quickly that the opportunity cost of spending time on one activity, is the time that might have been spent on another activity. In other words, it is no more than common sense that resources, of whatever kind, are limited and many of them have alternative uses.

Johann Lamont has been both lauded and derided in equal measure, for her speech calling for the end of universal benefits. Her call for a re-examination of the Scottish government's priorities and her reference to the "something for nothing society" was bad politics and she provided an easy target for Nicola Sturgeon. It was not even good economics because her assumption was that Scotland could not afford the benefits which are currently on offer. The only time such an assertion would be true, would be if Scotland did not have the resources to pay for the benefits in absolute terms, nor the ability to borrow in order to pay for the benefits. Neither situation is true. A nation's willingness to allocate resources in such a manner that those least able to look after themselves, the very young, the old and weak, the ill, the disadvantaged, is what defines the nature of that nation. If Scots choose to allocate its resources so that the least able in our society are cared for, that is no one's business other than our own. Scots have been accused of trying to provide Scandinavian benefits on the back of American taxation.

When Nicola Sturgeon asked Labour MSPs to raise their hands if they wanted to remove free bus travel or free prescriptions, she was touching a chord in those in the Labour ranks who could still remember when the Labour Party actually believed in such things. When free prescriptions were introduced in Scotland, Jackie Baillie, Labour's then health spokesperson supported the measure, which had been in place in Wales since 2007 and was introduced in Northern Ireland in 2010. England is therefore out of step with the rest of the UK & Northern Ireland and they would be better to address their own situation, rather than spend time worrying about what the rest of the UK does. There is no doubt that universal benefits, both in economic and political terms,  needs to be addressed. When free care was introduced in 2003-04 it cost £86 million and has risen to £108 million in 2010-11. Free prescriptions cost £57 million, home care cost £133 million in 2003-04 and £342 million in 2010-11. Free travel cost £173 million in 2006-07 and £199 million in 2010-11 but is estimated to rise to £537 million by 2025. That last figure is being used to frighten the horses and is based on assumed annual increases of 6% every year until 2025, therefore may never happen. The travel system also costs £42 million to administer but that figure could be reduced if an alternative system is introduced.

The English media and Unionists in Scotland - in other words the Tory, Labour and Lib/Dem political parties and their supporters - far too readily assume Scotland is the most naturally impoverished part of the UK and, if it were not for the largesse emanating from England, we could not possibly enjoy the standard of living we do. Ruth Davidson is only the most recent Tory politician to produce figures to show how much Scots depend on English subsidies. The fact she is talking tosh, has been shown to be talking tosh, admitted by even her own party members, will be largely ignored by the Unionist press as they move to the next smear. Davidson should be made to either justify her claims or apologise but I expect neither to happen. The latest figures for taxation in Scotland, show that Scotland produces an excess of £2.7 billion per annum over the amount spent by government, in Scotland or on behalf of Scotland. The current total spend on the universal benefits that Lamont et al claim we cannot afford is £742 million therefore it is hardly rocket science to determine that we can afford the benefits in terms of simple arithmetic. That situation could be improved more in an independent Scotland if we decide to cut back on defence spending and tailor our defence budget to meet our ambitions.

The problem that Unionists like Johann Lamont have is that the Union means more to them than whether or not Scotland can afford the benefits we choose to give. The argument that it is ludicrous that millionaires are entitled to free care or free travel, totally ignores the reality that they would be hard pushed to find a millionaire who has a bus pass or who would choose to spend their last days in a care home where they would be drawing their free personal care. The Union is at stake here and just as the Euro fanatics will force the Greeks, Spaniards, Irish and Portuguese to suffer any level of austerity in order to save the European dream, so Unionists in Scotland will use every spurious economic and political argument to preserve the Union with England and the rest of the UK. None of the economic arguments that Davidson and Lamont use, take any account of the potential of an independent Scotland with control, complete control, of its own resources. A look at what Norway has done with its oil should tell every Scot just how much they have missed because they chose to believe the lies told by successive UK governments. Is there any reason to believe their successors are telling the truth now? The McCrone Report should be compulsory reading for every Scot because they would then see that the gulf between what UK Governments told them and the reality of the resources they could have had, would have made an independent Scotland one of the richest in the world.

So, the argument is about politics, it is not about economics. We could wipe the slate clean and abolish taxation completely, thereby absolving government of any responsibility for providing any kind of service to the nation. That is a ludicrous argument but when politicians start to unravel the state, we are dealing with matters of degree, not of principle. The Coalition has already cut £billions from the public sector, plan to cut another £10 billion and Ed Balls refuses to commit the Labour Party to reverse them. It is accepted that one of the first duties of government is to protect its population, therefore defence of the realm is a must and has to be paid for, and although there is no comparison with the level of UK involvement in world affairs now and in the days of empire, our presence in Afghanistan is testimony to government ambitions that greatly outstrip our resources. Thatcher and her colleagues decided that any kind of state involvement was anathema and privatised just about everything in sight. Are the railways being run either more cheaply or more efficiently now, than when it was British Rail? Would the politicians who get so exercised about millionaires being entitled to free care or free prescriptions, be willing to have a top rate of tax of 50% or 55% so that those self-same millionaires would pay through the tax system? Of course, we would have to ensure that they actually paid the tax and could not take advantage of the various advoidance schemes which have been allowed to proliferate, for the benefit of BBC employees and footballers. How many of them would have the courage to suggest it or would the threat of all the millionaires threatening to flee the country be too much for them?

No matter what choices are made, there will be an opportunity cost. What is important is the nature of the choice AND the opportunity cost. Hands up those (few?) Labour MSPs who would be quite happy if the opportunity cost of providing universal benefits was Trident and the war in Afghanistan?

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