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Where sheep may safely graze

Douglas Fraser | 06:46 UK time, Monday, 19 July 2010

Ring-fencing - it sounds good if you're a shepherd, reassuringly secure if you're a sheep, and a bit of a nuisance if you're a wolf.

Likewise in public spending, it's attractive to those who get protected, much less so to those who are left outside, and an irritation if you're the finance director who wants budgeting freedom.

We've heard lots about ring-fencing already this year. Going into the Westminster election, Labour promised to put a fence, with a 'keep out' notice, around spending on schools, front-line health and policing.

Tories said they would do the same for front-line health and nuclear deterrence, while all the major contenders were committed to protecting Britain's obligations for overseas aid. (That's even though opinion polling finds public support for that has waned.)

Shifting the pain

We'll hear lots more about this as budgets are squeezed - with little apparent mercy - over the next few months. The Scottish parties have to decide what, if anything they'll commit to ring-fence when they make their pitch for our votes at next year's Holyrood election.

Indeed, they'll have to take a stand before then, as the Scottish Budget Bill makes its way through Holyrood this winter.

They're already seeing from Westminster the problem with ring-fencing - or at least, the obvious one. If the bulk of health spending is protected, as the Conservatives and Liberal Democrats running the Treasury are trying to ensure, and if you have a fixed amount of money you want or have to take out of public spending, then the cuts are going to fall much more heavily elsewhere.

Ministers want to limit the damage to education and to defence as well, so the cuts won't go as deep for those budgets. And that means deeper cuts for others.

This was illustrated for Scotland some months ago by economists at Glasgow University's Centre for Public Policy for Regions. They were then looking at merely cutting 8% out of spending over four years. (That seemed a lot at the time, but it's a modest assumption now).

They reckoned that if you ring-fenced health, it would mean 13% cuts for everything else. But what if you ring-fence the public sector pay bill too? And education, why not? That would require cuts for everything else of 40%.

And as it happens, that 40% figure is now the worst case scenario planning being required by the Treasury of Whitehall departments.

The road to more crime

Consider for a moment the spending departments that won't be protected by ring-fencing. If this is decided by party manifesto writers, they're bound to be the least popular and populist. Drug treatment, for instance, or social work or care homes - they tend not to get ring-fenced apart from some statutory duties placed on councils.

One objection is that the people who can speak least loudly get least protected in spending cuts. The other is that a cut in one department can mean increased pressure in another. Fewer social workers and less drugs treatment can lead down the road to more crime.

Fewer care home beds for people being discharged from hospital, and you return to that staple of 1990s headlines - bed-blocking.

And of course, with fewer public sector salaries to pay, expect more unemployment benefit pay-outs.

Efficiency pressures

Consider also what happens inside the ring-fenced area. If you're being told you're protected from spending cuts, where is the incentive to deliver more efficiently?

Aren't they now getting a signal from government that they won't face the same pressures as others across the public sector to work harder or smarter, or not to have a job at all?

Comments

  • Comment number 1.

    I wonder if Joel Barnett's formula for Scotland's funding is ring fenced from being brought into line with the local government and NHS support grants south of our border? That financial formula could be a tempting target for a government with only one Scottish seat.

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