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The Herald Scotland

Ian Blackford: SNP must offer Scots a bold economic plan

Mr Blackford warned that the dire state of the UK's public finances would have direct consequences for Holyrood, whose budget is heavily dependent on decisions taken at Westminster. Read more: 'For the SNP Government, whose budget is largely based on Barnett consequentials, it means an ongoing squeeze on real-terms spending,' he wrote. 'The 2026 election will largely focus on devolved responsibilities, but the capacity to deliver over the next Parliament will be constrained by the UK financial settlement.' Mr Blackford said the scale of the UK's fiscal challenge was stark. The tax burden continues to rise, with the UK Government's own forecasts suggesting the tax-to-GDP ratio will hit 37.7% by 2027–28 — the highest level seen in peacetime Britain. The Office for Budget Responsibility has said this could rise to 38% later in the decade. Yet despite the record tax take, the UK Government is still struggling to balance the books. Public sector net debt now stands at £2.87 trillion — around 96.4% of GDP — the highest May debt-to-GDP ratio in modern times. Servicing that debt costs more than £100 billion a year, or roughly 3.9% of GDP. All of this is adding to the pressure on Chancellor Rachel Reeves, who has committed to not borrowing to fund day-to-day public spending, and to get debt falling as a share of GDP by 2029–30. She has limited choices following last week's U-turn on the welfare bill, which wiped out a projected £5bn saving. Labour has insisted it will keep its election promises not to increase income tax, National Insurance or VAT, but Ms Reeves has reportedly told Cabinet colleagues further hike may now be necessary in the Autumn Budget. According to the Institute for Fiscal Studies, the Chancellor may ultimately need to find an additional £25bn to £30bn by 2028 to avoid imposing deep cuts to public spending. Mr Blackford said there little chance of Ms Reeves scrapping her fiscal rules, and borrowing more. 'The financial markets will punish the Chancellor if she tries to increase borrowing, and she knows this,' he wrote. 'Put simply, the financial markets will largely determine the fate of the Chancellor and our fiscal future.' The prospect of a new Chancellor who might change the borrowing rules has already spooked the markets. When Ms Reeves was seen crying in the Commons at Prime Minister's Questions — after Sir Keir Starmer refused to back her — the pound fell against the dollar and the euro, while gilt yields soared. Rachel Reeves wipes away a tear during PMQsMr Blackford, a former investment banker, said: 'International comparisons make clear that investors impose a risk premium on UK debt. The current 10-year UK Government gilt yield is 4.5%. In Germany, it is 2.6%. In Switzerland, a modest 0.4%. Our neighbour Ireland has a rate of 2.8%. 'We are paying a price for the perception of investors of a lack of financial competence. We make jokes about Liz Truss and her cataclysmic approach to financial management, but her predecessors and successors hardly earn an A-plus.' Mr Blackford said the result would be a period of sustained pressure on public services across the UK, including in Scotland. 'For the public, the catastrophic failure to deliver an economic policy that supports sustainable growth has meant declining living standards,' he wrote. 'The last Westminster Parliament was the first in the post-war period during which living standards fell. I would not bet on this Parliament delivering a different outcome.' He also warned of the UK's limited ability to cope with any future economic shocks. 'Heaven help us if we face another external shock, given UK PLC's balance sheet. I shudder to think how the UK could finance another Covid-style crisis.' However, the bleak picture, he said, presented the SNP with an opportunity. 'Politics ought to be about hope. The SNP can seize the opportunity to paint a landscape showing how things could be different in Scotland,' he wrote. 'I have previously argued for the establishment of an industrial council. It is much needed. Or, if one is not to be established, the SNP at the very least needs to set out how it will drive a step change in investment, jobs and growth. 'We have the opportunity to drive economic opportunity from our massive potential in green energy — not green energy in itself, but using that power to create a sustainable green industrial future, building on our strategic opportunity to create a competitive advantage from affordable green energy. 'Doing our bit for net zero while creating the circumstances for a sustainable increase in economic growth.' Ian Blackford called on the SNP to look at establishing an Industrial CouncilMr Blackford argued that Scotland's ability to achieve this economic renewal was inextricably linked to the case for independence. 'When we talk about independence, it is not about an abstract concept. It is about transforming life chances. More of the same within the UK — low growth and public services under pressure — can be broken. 'The SNP needs to spell out how it can change the landscape and unlock economic growth by harnessing our natural resources and, of course, our human capital. There is a better way. It is up to our leaders to chart it.' Read more: Currently, around one-third of Scotland's budget comes via the Barnett formula, meaning UK Government spending decisions directly influence Holyrood's funding envelope. Last month, Ms Reeves set out her spending plans for the next three years, with the Scottish Government due to see a £9.1bn increase in funding during that period. A breakdown of the spending, released yesterday by the UK Government, showed that included a £5.8bn rise in health spending. Education consequentials were worth £2.1bn, while justice spending added £451m, housing and local government £380m, and transport £807m. Scottish Secretary Ian Murray hailed the increase, saying: 'The UK Government's Plan for Change has delivered the largest real terms settlement for the Scottish Government since devolution began in 1999, and ensured a definitive end to austerity in Scotland with £9.1bn more for the Scottish Government until the end of the decade. 'That's £9.1bn over and above record real terms budgets. 'That's more money than ever before for the Scottish Government to invest in Scottish public services like our NHS, police, housing and schools. 'It is for the Scottish Government to determine how it spends this money. 'It is notable, however, that almost £6bn of additional funding has been generated by health spending, and over £2bn has been generated by spending on education. 'Many Scots will expect to see better outcomes in their schools and hospitals given this record funding.' However, Scottish Finance Secretary Shona Robison said the settlement still left Scotland short-changed. 'The UK Spending Review document sets out in black and white that our funding for day-to-day spending is set to grow by only 0.8% over the next three years, compared with 1.2% average growth for UK Government departments,' she said. 'This will short-change us by £1.1bn. 'What's more, we face an estimated £400m shortfall from the UK Government's failure to fully fund their employer National Insurance increase.'