Budgets and discretionary budgets

Kevin Hague in his blog (http://chokkablog.blogspot.co.uk/) suggests that the Scottish budget next year is slightly – only “slightly” – above where it was, in real terms in 2009/10 and 2010/11 before austerity really began to bite, so all this guff about Westminster austerity is just being put about by Nats. Here is his diagram to prove it

Facts as they say, are “chiels that winna’ ding”, and I have had to read Hague’s blog a couple of times to work out how he managed this, particularly when McLaren and Armstrong found just a couple of years ago (see http://fiscalaffairsscotland.co.uk/wp-content/uploads/2014/11/Long-term-Scottish-budget-projections.pdf) that, as I wrote in my letter in today’s Herald – http://www.heraldscotland.com/opinion/letters/15009794.Letters__Making_the_best_of_a_bad_job_when_the_block_grant_is_cut/ – in reply to Councillor Alex Gallagher

“starting from 2009-10 to 2018-19, there will be an overall cash terms cut to the Scottish budget of just over -4 per cent and a real terms cut of almost -20 per cent.

Thus, by April 2019 the Scottish block grant can be expected to be, in real terms, one-fifth less than it was at the beginning of this decade.”

Now there are a lot of things that one can say about John McLaren and Jo Armstrong, but hardly that they are a pair of Nats. While I don’t always agree with their conclusions, I would not challenge their expertise as researchers. However, in this case, they and Hague are totally at odds. How has Hague done this?

Then I found this little nugget

“The second step they take is to bury this Total Budget information deep in an Appendix on page 169 of the report. They use the up-front summary tables to instead focus on a few sub-totals that exclude things like Annually Managed Expenditure (AME) which, for example, pays for NHS and teachers’ pensions”

The government’s own definition of this is (https://www.gov.uk/government/publications/how-to-understand-public-sector-spending/how-to-understand-public-sector-spending)

“Total government spending

The total amount that the government spends is also known as Total Managed Expenditure (TME). This is split up in to:

  • departmental budgets – the amount that government departments have been allocated to spend; this is known as Departmental Expenditure Limits, or DEL.
  • money spent in areas outside budgetary control – this is all spending that is not controlled by a government department and includes welfare, pensions and things such as debt interest payments.; this known as Annually Managed Expenditure, or AME.”

The continue with regard to AME as follows

“Annually managed expenditure (AME)

Annually managed expenditure, or AME, is more difficult to explain or control as it is spent on programmes which are demand-led – such as welfare, tax credits or public sector pensions.

It is spent on items that may be unpredictable or not easily controlled by departments, and are relatively large in comparison to other government departments.”

Some points from this:

  1. First, contrary to Hague’s specific claim, AME is not spent on hospitals – in fact the document I refer to specifically includes hospitals under Departmental Expenditure Limits (this in paragraph 3, thus “Things that departmental budgets can be spent on include the running of the services that they oversee such as schools or hospital, and the everyday cost of resources such as staff).
  2. Secondly a great deal of AME for the Scottish government is basically just acting as a delivery person (I might have said “boy”, but that would be sexist?). For instance, I am the recipient of a teachers’ pension, but as I paid my contributions to the Westminster government, the liability is theirs, and while the payment might be made by the SPPA in Galashiels, it is doing no more than administering the obligations of the UK government. So, by excluding AME – which for instance will rise because the number of retired teachers rises (just one example for the avoidance of doubt – as the document referred to says, they are “demand led”) – allows a focus on the discretionary budget. AME rising reflects no credit on either the Westminster or Holyrood governments – they are demand led!

Or at least that is the polite version. For Hague to have said, as he did, that “They [the Scottish Government] use the up-front summary tables to instead focus on a few sub-totals that exclude things like Annually Managed Expenditure (AME) which, for example, pays for NHS and teachers’ pensions”. Those “few sub-totals” are in fact those areas of the Scottish budget on which the Scottish Government can in fact make their own decisions – AME is simply passing on money for and on behalf of Westminster. One, I think might have legitimately expected someone of Hague’s experience, not to say expertise, in such matters to have known this? Or perhaps he hopes that we don’t?

In short Hague’s graph is not only of little assistance to anyone wanting to understand the discretionary budget available to the Scottish Government, it is actually misleading, directing our attention to total quantum of spending, where not all of it is in the control of the Scottish Government. But, as always, Hague’s fan club piles in and laps this up totally uncritically (which is quite ironic as he often argues this is an indy-minded vice – one of them even refers to him as a god), which in turn will no doubt be repeated and might one day even become “the truth”, when in fact it’s not even an over-simplification – it’s just a lie.

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