Scottish Budget 2024-25

 There were no big surprises in the draft Scottish Budget published today. I set out the background to the Budget in a briefing for the Jimmy Reid Foundation, and it was always going to be challenging given the economic environment and the appalling UK Autumn Statement. 

There was little cash to spread very thinly. The NHS and social care budget predictably got the lion's share, although even that is well below what it needs. Within that budget section, social care did best, which is the right priority given the impact of delayed discharge on our hospitals. However, welcome though £12 per hour is for workers, it is unlikely to bring significant numbers of new staff into the sector. We need £15 per hour, and we need it quickly, along with funding for sick pay. Mental health, drug, and alcohol services are going to have a difficult year.

NHS staffing will remain a big problem in the coming year, as growth in staff numbers is likely to continue falling behind the rest of the UK. 

The Scottish Child Payment is at least being uprated but short of where many organisations felt it should be to maintain progress on tackling child poverty. As the Scottish Fiscal Commission's (SFC) report shows, Social Security payments with no equivalent in the Block Grant are the biggest additional cost to the Scottish Budget.

On income, changes to Income Tax are a welcome progressive change to the banding structure. Again, the Deputy First Minister was urged to go further on tax reform by a coalition of over 60 organisations in a letter I signed on behalf of the Reid Foundation. Tackling Scotland's key challenges requires long-term thinking rather than more sticking plasters. 

There is also a shocking lack of consistency. Progressive Income Tax changes must be contrasted with the regressive Council Tax freeze. If fully funded, the resources could be better targeted to support public services and the cost of living crisis. This chart from the recent FoA budget report is a reminder of falling real terms local government spending, particularly on non-statutory services, over the last decade.

As with the UK Budget, I am more interested in the Scottish Fiscal Commission report, which gives a longer-term perspective. Their fiscal forecast is summarised in this chart. Revenue will be up 8% by 2028/9, but capital will be down by 20%. Our crumbling infrastructure is about to crumble some more! The Scottish Government is heading towards the capital borrowing cap, strengthening the case for the same prudential borrowing powers as local government.

The SFC also highlights the drop in living standards between 2021-22 and 2023-24 as the largest reduction since Scottish records began in 1998. They are unlikely to recover to 2021 levels until 2026. 

The SFC also assumes average devolved public sector pay growth of 4.5% in 2024-25. This includes an average basic pay award of 3.0% and pay progression and churn. They also forecast a fall in Scotland’s public sector employment from 2023-24 onwards. Overall, the SFC indicated slightly higher wage growth in Scotland than in the UK, plugging the current gap. Some sectors are doing better than others this year. 

In conclusion, the report card would have to say, could do better. Some steps in the right direction with progressive income tax changes and spending priorities. However, that has to be balanced by only modest tax reform and limited support for alleviating child poverty, coupled with the absurd council tax freeze.

Pharmanomics - How Big Pharma Destroys Global Health

If you read one book this year about the economics of health, Pharmanomics by Nick Dearden should be it. The Director of Global Justice unpicks the way Big Pharma does business and rips us all off. This may not be unique in a capitalist society, but in the health sector, it costs countless lives. 

The COVID pandemic started to open the eyes of governments to this particularly rapacious form of capitalism. As Nick puts it, ‘They got to dictate who lived and who died in the most serious public health emergency in living memory.’ They prolonged the pandemic and entrenched global inequality for a generation with a vaccine that was invented mainly using public money. Corporations like Pfizer, Johnson & Johnson and Moderna  – used taxpayer support to get the vaccines that bear their names ready. Then, they privatised the  know-how  behind these vital medicines and refused to share it with the many countries that could have  joined the global manufacturing effort. Even AstraZeneca, whose Oxford vaccine was almost entirely funded by the public purse, turned what should have been a 'People's Vaccine' with an open license into an exclusive license, which prioritised rich countries. A practice they had undertaken before when they closed down early research into tuberculosis and malaria in favour of drugs for diseases affecting richer countries.

This book shows, page after page, how Big Pharma has been doing this for years. The patent system that underpins their profits delivers returns that manufacturing companies can only dream about. In the 1990s, Big Pharma discovered that their most significant asset wasn't research and development but intellectual property. So they lobbied in the USA and fought court battles to extend their patents and keep their data secret. This culminated in a trade deal known as TRIPS that enforced monopoly protection everywhere - described by one journalist as ‘a brute and profoundly undemocratic expression of concentrated corporate power.’ It is now a core part of the World Trade Organisation rules.

Examples include OxyContin, the drug behind the opioid addiction epidemic that has probably killed more than 300,000 people. You can watch how they encouraged overprescribing in the Netflix miniseries Painkiller. The drug generated $35bn for the company Purdue. They are now using the same discredited tactics to market opioids in China and other countries.

We are often told that these profits are essential to develop new drugs. However, Big Pharma does very little research into new medicines. They spend between five and eleven times more on advertising than on research. The drug is created by smaller companies, often funded by the public sector, and then bought out by a big drug company for the patents. They close down competitors and make small changes to drugs to extend patents. They are also one of the most financialised industries in our heavily financialised economy – stashing cash in tax havens to buy up companies and enrich shareholders. Medicine costs are entirely unrelated to research costs; they are hard-wired into the financialisation of the industry. As a Congressional investigator put it, 'The big Pharma fairy tale is one of ground-breaking R&D that justifies astronomical prices, but the pharma reality is that you spend most of your company's money for yourself and your shareholders.'

When you read the techniques that these companies use, it could drive you to despair. However, that is not the author's intent. He wants to open our minds to the possibility of change. We created the NHS, so why not the medicines they administer? 'If our healthcare is too important to be left to the market, then that must include the research and development of the medicines that keep us well.' It would save the NHS billions in the inflated costs that drain NHS funds. The purchasing power of the NHS has resulted in some small progress in regulating costs compared to the USA. Needless to say, the drug companies are a big part of the lobby trying to privatise UK healthcare. 

Governments need to stop being embarrassed about their role in the economy. There is a long list of technologies invented in the public sector whose ownership is transferred to the private sector and then rented back to us at enormous cost. We also need to reform the patent system to be shorter and more narrowly drawn. The pandemic and the profiteering of Big Pharma should be a wake-up call for governments in the Global North as much as it has been for the Global South. We should pressure governments to change.