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Friday, March 07, 2014

 This article now up on ThinkScotland. Please put any comments there.

Ending foreign aid? What if we ended Scotland's "aid"?

by Neil Craig

I READ an article in Der Spiegel recently by an African economist calling for an end to “aid” to Africa, and it got me thinking.

"Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need.

As absurd as it may sound: Development aid is one of the reasons for Africa's problems. If the West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid....

“A portion of the corn often goes directly into the hands of unscrupulous politicians who then pass it on to their own supporters to boost their next election campaign.

“.....our politicians were overwhelmed with money, and they try to siphon off as much as possible.

The late tyrant of the Central African Republic, Jean Bedel Bokassa (pictured), cynically summed it up by saying: "The French government pays for everything in our country. We ask the French for
money. We get it, and then we waste it."

Which, shamefully, strikes home here. Turning down money isn't exactly easy but the comparison between Emperor Bokassa and our own politicians is fairly obvious as is the demand that ever more money be available for the special interest groups that our ruling cartel support. If the billions spent on windmills, quangos, anti-smoking officers and campaigns – and on our NHS, which spends 25 per cent more per head than in England but with worse health outcomes – normal Scots wouldn't notice either.

Rather than the hairshirt option of turning it down, how about simply not letting it rest in the bureaucrat's hands and pass it on to the people? This would allow the economy to grow (only the Greens publicly admit they want recession). As Scotland grows to be the richest and not, coincidentally, lowest taxed part of Great Britain we would see accounts moving into balance.

Thinking of “aid” I also recalled this article in The Scotsman:

SCOTS enjoy £1,300 more spending per head on public services such as the NHS and schools than the average UK citizen, official figures have shown.

Which reminded me of that Der Spiegel article and how it could be adapted for Scotland.
"Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted.... If [Westminster] were to cancel these payments, normal [Scots] wouldn't even notice.
Only the functionaries would be hard hit.”

It is a matter of fact that our education system is now, for the first time in 700 years, not better than the English. Our NHS has considerably worse results than the UK average.

Despite the Scotsman article automatically starting off invoking NHS and schools the fact is that we spend an awful lot on more per head on the quangos that Jack McConnell and others promised a "bonfire of" and on ecofascist parasitism.

£1,300 per head – to nitpick that is the UK average which contribute to - for a pure rest of the UK, without Scotland that is a £1,420 differential. With a population of 5.3 million that gives us £7.5 billion to spare if we decided, as a nation, that we could get along with the same state spending they do south of  the border.

There may be an argument that in some departments we need a bit more (pensions for example because we have a more aged population) but that should inevitably be generally balanced by correlated patterns (schooling because we have a more aged population), though the departments involved and their sock puppets never seem to make the latter arguments. Still - £7.5bn must be close to the mark.

We could do that simply by deciding that any Scottish department which costs more per capita than the southern average has a hiring freeze and a freeze in increased payments until the entire government is matching the UK average. That would mean a roughly 5% average cut in employees, as retirees are not replaced, and a cut in other costs matching inflation – we would get down to average costs well inside one parliament. This would also give those in the more competent government departments an incentive to point out wasteful spending elsewhere since the sooner waste is cut the faster the balance point is reached.

So what to do with £7.5 billion?

We will soon be able to cut income tax by 10p rather than the original 3p "tartan tax". That comes to
about £3.5 billion.

Though Scotland doesn't have the direct power to change corporation tax Professor R. Macdonald sometime ago wrote of "Scotland's hidden tax cutting power – that we do have the power to provide rebates on taxes. The UK raises £43bn in corporation taxes so Scotland must be about £3.6bn. Corporation Tax, because it is a tax directly on wealth creation (not for example on wealth possessed) is the most directly destructive of such creation. Giving a rebate of 50% would make our economy as attractive to investors as Ireland’s was during its two decades as a "Celtic Tiger" economy growing at 7% a year. That rebate would cost us £2 bn.

Let’s say a 20 per cent cut in business rates. Again that gives us a substantial economic competitive edge. About £500 m.

That's £6.0bn out of £7.5bn.

Maybe we don't cut completely to match UK averages. Maybe my figures turn out to be wrong but that still leaves wriggle room. Maybe we put it into a £200 per head payment (as Alaska does). Conceivably we put it into some of the technologically progressive things I have suggested before (X-Prizes, educational prizes, the Scottish Tunnel Project, automating railways).

Does anybody doubt that "normal Scots" would notice a 10p cut in their income tax. Or in being part of a successful fast growing economy? Or indeed, that we would not notice the decline in the number of governmental busybodies telling us what to do.

The one fly in this ointment is, as has sometimes been pointed out though not quite in such terms – that if we spend our bonus in a way which actually makes us better off and grows the economy the English would notice and take the Barnett formula bonus away from us. But who cares – if we had the successful fast growing economy that is being paid for we would be paying enough tax to match, or exceed the differential we now get via Barnett so there would be no "bonus" for us to fight over.

And by proving that even a little free marketism (this article says nothing about cutting the fuel poverty government has created or the massive costs of regulatory parasitism) we would give an example to the rest of the country and once again be admired as go-getting Scots, as we were for most of the last three centuries, rather than whinging Scots as our present political class have made us.

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