91Èȱ¬

The Ledger has taken a bit of a break. Happily, this coincided with me doing so too. Even more happily, nothing much happened in Scottish business while we were away - unless, that is, you count the threat of resignation from the entire board of the Royal Bank of Scotland.

Overlooked in much of the furious "call their bluff - let them walk" reaction over their determination to press ahead with large bonuses for senior staff was that the board now at RBS is the board the Government, as chief shareholder, wants there. If they go, it takes away the credibility of the Government's turnaround strategy for the Royal.

Perhaps some have forgotten one lesson from last year was the importance to banking of confidence, and it's hard to overstate the potential consequences on confidence in RBS if the entire board walked.

Underlying the threat was a reminder of the arm's length requirement from Stephen Hester when he accepted his "battlefield promotion" to chief executive in October last year. The condition placed on this was that he had to be able to run the bank on commercial terms.

With the Pre-Budget Report, the Government's crackdown on bonuses has been spread across the entire bank sector, which suggests the RBS board has won that confrontation.

There may be more to come, but one of the dangers of what's happened is the expectation that the Government will feel forced to ignore the arm's length relationship again if it comes under sufficiently intense political pressure to do so.

___

On the Pre-Budget report, the Old Grey Whistle Test applied in the 91Èȱ¬ newsroom - that's to say, the bit that chimes best and most memorably with those listening - was the proposal to give grants to home-owners to replace their old central heating boilers.

On that very limited evidence, this is one green measure that could be a big hit. The downside is that it's only going to reach around 125,000 homes, and none of them will be in Scotland - not, unless, the Scottish Government chooses to use the consequent, and rather paltry £2m of added block grant funds to implement the same scheme north of the border.

___

And how much money will that total extra be? The official line was another £23m heading towards Holyrood for next year, as a result of the PBR reckoning. That's what it said in a Treasury press release. But another press release from the Treasury yesterday said there would be "additional provision of £104m for the Scottish Executive (sic) as a consequence of additional provision for UK Government departments".

That's a big difference. The smaller figure seems closer to the real thing. One clue is that the £104m figure has been amended today.

The much bigger number now reverberating around Scottish politics is £814m - the calculation by Holyrood's statisticians of the fall in budget available to Holyrood for 2010-11. The big fall results partly from the £392m fall in block grant consequences from squeezes on Whitehall departmental spending.

Then there is the effect of bringing forward lots of capital spend to this year, 2009-10, raising capital expenditure by £294m this year. But because of the (hotly disputed) decision not to keep that profile going through the tough times, there is a drop in capital spend by £347m starting next spring.

The PBR figures are far from clear about what the consequences will be for the following year, but it looks like next year's figures are a mere taster of what will hit in 2011, and even mores in 2012 and 2013.

The latest from the Institute of Fiscal Studies, looking at the UK picture, is that there will have to be cuts of 6.4% per year in budgets, if health and education are to be protected. The respected think tank can't make much sense of the financial consequences of the Chancellor's promise to protect policing, or at least police numbers.

And if that fall in capital spend looks bad next year, there's little sign of it picking up. Such infrastructure spending is on a downward path from more than 3% of national income before the recession crunched, to only 1.3% in the toughest years of the public finances getting patched up.
____

I'm not the first to make the point, but it's worth emphasising, that the more significant budget delivered yesterday was in Dublin's Dail. It's grim for Ireland, and it looks like it may signal the direction of travel for Britain's public finances, after the Westminster election.

Unable to adjust to its financial crisis, as Britain can, by devaluing its currency, Ireland has to be explicit about the country becoming much poorer. Slashing £3.6bn is only the latest of cuts packages, this time requiring the lowest paid public servants to take a 5% pay cut, and the highest paid to lose 15% off their salaries, while (previously generous) welfare grants have also been sharply reduced.

Are the bond markets duly impressed? Not yet. They're indicating there's more pain where that came from.