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The Cost of Living in Yesterday

Robin McAlpine – February 10th, 2022

It can be hard to keep up with the crises – financial then austerity then Brexit then climate then Covid now the cost of living. Given that they all seem to last for about two or three years before the next one comes and we forget about the last one, we’ve got a lot more to hear about the cost of living crisis.

So is there anything we in Scotland can do about this? Or shall we just spend another two years complaining about Westminster?

The Scottish Government has made a decent start with the doubling of the Scottish Child Payment to £20 a week. This will make a major difference to those who receive it – but it is also worth being clear on the scale of this. It is for about 100,000 children aged under six and that’s only half of the children living in absolute poverty in Scotland.

And the point about the cost of living crisis is that it hits people who are not categorised as living in poverty, people on modest, currently-manageable incomes. Some of them will be pushed into poverty and others into financial duress.

So let’s immediately rule out one option; Scotland cannot bail everyone out. It has cost £180 million to increase the Child Payment for 100,000 children and there are already something like a million people in poverty in Scotland (about one in five of those who live here). You could spend £2 billion, deliver very modest assistance and still not get beyond those already in poverty.

A second option that should be touted with great care is cutting local authority budgets further, which is what a Council Tax freeze would do. It isn’t really possible to ‘fully fund’ that cut since we don’t know what local authorities will deem a necessary increase. Plus where is that money to come from? Those in poverty rely on local services the most, so cuts exacerbate the crisis.

All this is made much worse because the Council Tax is a terrible tax that hits the poor about five times harder than the rich [LINK: PROPERTY TAX PAPER]. Subsidise Council Tax, you give five times as much benefit to the rich as to the poor.

So what can we do? Unfortunately one of the most useful things to do is to be furious that devolution has done so little to create the conditions in which we could cope with periods of inflation. The almost total lack of structural reform in key areas means we are living in yesterday’s world, pressing the buttons and pulling the levers left to us by Michael Forsyth and the Tories.

It would be possible to fund local authorities without hammering the poor if only Council Tax had been reformed many years ago. Everyone knows it should have been but it has been maintained as a perk for the wealthy.

Another area where over the devolution years Scotland has done next to nothing is housing. One of the most bizarre media narratives at the moment is that it is terrible that there is a cost of living crisis but at least there is a silver lining because house prices are rising. It is difficult to know what to do with such a crazy sentence.

In 1996 (when house prices were already well on the way on their upward spiral) the average UK housing costs were about three times average salary. Last year that reached nearly seven times average salaries – and there is no sign of that trend slowing.

Scotland has run housing policy in the interests of big corporate developers, has maintained a Council Tax that positively encourages price inflation in the top half of the housing market and stubbornly refused to invest properly in affordable, high-quality public rental housing.

Another component of the cost of living crisis is energy. Here there are sometimes unrealistic expectations of what is possible, partly because the Scottish Government announced (and then abandoned) a National Energy Company intended to deliver cheap bills. It wouldn’t have done that, and there must be serious concern that the Scottish Government was not aware of that.

Energy prices are driven by charges levied at the National Grid level and by regulation of energy markets and both are set by Westminster. There is only ‘so low you can go’ on price inside that market.

But if there had been a focus on public ownership of generation rather than a populist mirage of easy, cheap energy it would have been possible to achieve much. There isn’t space here to explain how energy markets work but big purchasers can cut deals with providers in ways that can make a difference and this is even easier if energy generation is in public ownership.

Then there’s our reliance on imports; the clogged-up supply chains are a major reason for current inflation levels and the UK (and Scotland’s) lack of domestic manufacturing capacity makes us particularly susceptible. When the SNP took over as the Government in Scotland it promised to reindustrialise the country. That would have made an enormous difference – but didn’t happen.

The recent Scottish Climate Assembly proposed (with overwhelming agreement) that Scotland should establish a policy of presumption against imports wherever possible to promote green reindustrialisation in Scotland [LINK: https://www.climateassembly.scot/full-report]. The Scottish Government rejected this out of hand and seems tied to an aggressively neoliberal vision.

There is much more that can be said about this, but it all amounts to the same thing. If you cannot raise your ambitions above living in yesterday and tomorrow brings a crisis, you are poorly equipped to deal with it.

Scotland has been desperately complacent about its economy, its tax, its housing, its foreign-owned energy and so much more. We have adopted a ‘model globalised capitalism’ approach to government and since we’re on about our third recent crisis of model globalised capitalism with more to come, failure continues to be inevitable.

Scotland justifies its failure now on the basis that it failed to act in the past and then fails to act in the present because that wouldn’t fix the current crisis then refuses to act after the crisis because there’s ‘no need’, until the next crisis.

And round and round we go, scratching our heads and asking ‘oh dear, something bad has happened, whatever can we do?’. Every one of these things is therefore more urgent than they already were and we need an end to the excuses for not getting on with them

6 thoughts on “The Cost of Living in Yesterday”

  1. Ian Davidson

    Agreed. Sadly, nothing positive likely from Holyrood and just more fertiliser compound from No 10?

  2. How would the ScotGov have been able to bring energy generation into public ownership under the conditions of devolution within the Union?

    1. Robin McAlpine

      Hi Jim,

      Energy generation is a free-for-all – anyone can own energy generation in the UK subject to getting a grid connection. The Scottish Government licenses all of the generation in Scotland so could have taken ownership via a National Energy Company. It has no powers over distribution (the grid) nor pricing (the market) and obviously has no power over what happens with generation south of the border (nuclear etc.). Big renewable energy producers cut deals with big energy users to ‘bulk buy’ energy at a cheaper price than the grid. When you see a company advertising ‘all renewable energy in this product’ that’s what’s happened – they’ve bought a direct purchase deal with a big renewable generator (they’ve not installed their own turbines etc.). That still comes through the grid and of course it’s totally notional because when the renewable generator isn’t generating they’re keeping their factories going with whatever electricity there is (like everyone else).


  3. Hi Robin
    I have had previous involvement in community owned renewables. Generating requires investment in the equipment (wind turbines, solar arrays, hydro installations, whatever) as well as a location to site the kit, and a grid connection, so my question was really about how the ScotGov could invest in the large amount of expensive kit required under the existing devolved position within the Union.

      1. I don’t think the answer is in Craig’s article Robin. The SNIB is a pea shooter in its current form. My reading of Craig is that he recognises the lack of borrowing powers are impeding investment, including via the SNIB. We will be able to sort all this out once independent but there doesn’t seem to be a way forward just now. TBH I don’t think nationalisation of generation is necessary anyway – an alternative is to create a Scottish Energy Company, which is a government owned “energy supplier”, along with state control of the electricity transmission network. Private sector generators (including community owned ones) would then have to negotiate contract prices for supply and the SEC sells at the “basket average” to consumers – and even sells below that average if government policy is to set a subsidised consumer price. The contract price for each producer would reflect the capex and opex costs in each case and allow a modest margin for profit – there would be no need to tax “excess profits” then.

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