All the signs are that the incoming Tory government is going to pander incontinently to the Scottish National Party (SNP) and grant ever greater devolved powers to Scotland, viz Cameron saying post-election “In Scotland our plans are to create the strongest devolved government anywhere in the world, with important powers over taxation”, while the newly appointed Scottish Secretary David Mundell speaks of the possibility of powers for Scotland greater than those recommended by the Smith Commission after the NO vote in the Scottish independence referendum. There are even hints that full fiscal autonomy – the ability to set and collect all taxes in Scotland and decide how to spend the money raised – might be on the cards with Nicola Sturgeon saying the SNP would vote for it if it was offered and the Tory ex-Scottish Secretary Lord Forsyth has advocated a White Paper on the subject.
The problem with appeasement is that it can never be a strategy only a tactic to buy time. This is because any concession is viewed as a sign of weakness and encourages the appeased to demand more and more. What Cameron and his fellow supposedly pro-union appeasers of Scotland do not give any sign of understanding is that each granting of extra powers to the Scotland is preparing the country for eventual independence, because the more power a devolved government has the greater confidence the politicians in the devolved region will have that they can go it alone. As things are going, there will quite soon come a point where the SNP will be able to say to fainthearted voters , look, we are virtually independent now so there is nothing to fear from independence.
The reasoning of those unionists who support new tax raising powers for Scotland is that if the Scottish parliament has to raise much of the money their government spends it will cause the attitude of both politicians and the public in Scotland to change, with the politicians behaving prudently or facing the wrath of the electors, who would cease blaming the UK government and become disenchanted with the SNP.
This is pie-in-the-sky. If the SNP get anything short of full fiscal autonomy they will continue to blame the UK government for underfunding Scotland. The massive preferential Treasury funding which Scotland receives compared with England (currently worth around £9 billion pa) will show this to be a lie, but SNP supporters and Scots more widely will eagerly swallow the lie. Moreover, it will be easy for the SNP to fudge the matter in public debate, because if Scotland gets substantial powers to raise taxes, the Barnett Formula (which creates the higher per capita Treasury payments to Scotland) will be adjusted to reduce the amount of UK Treasury funding that Scotland receives. The SNP will inevitably claim any reduction is unfair. They will also dispute how much taxpayers’ money goes on what might be termed UK spending, things such as defence and foreign policy.
If full fiscal autonomy is given to Scotland the same general problem would arise, but in an even more extreme form because the Barnett Formula would be scrapped. This would result in a considerable revenue shortfall for the Scottish government. Not only would there be arguments between Scotland and Westminster about what would then be de facto federal measures – defence, foreign policy, the financing of the national UK debt, the management of the Pound and so on – but disputes over Oil and Gas revenues and things such as the distribution of public money to pay for the administration of the domestic UK national civil service.
The dangers of devolved public debt
Devolving serious tax and spending powers to Scotland would carry grave risks for the rest of the UK. A Scottish government might well be reckless in its spending and run up large debts. This could happen even if no formal further borrowing powers were given to Scotland because policies for Scotland would be based on estimates of future tax revenue. These estimates could be seriously wrong if the SNP’s absurdly optimistic predictions over North Sea Oil and Gas tax revenue are anything to go by. If serious formal borrowing powers are given to Scotland the risk of overspending and large Scottish debts would be even greater .
These are not fanciful fears. Spain stands as a salutary example of what can happen when devolved power allows regional governments to run up debts. A significant part of Spain’s present economic problems stem from the huge debts the 17 regional governments in Spain ran up prior to the present Eurozone crisis.
The Smith Commission proposals for further devolution to Scotland (see p 23 onwards) provide for a good deal of Scottish control over fiscal matters. These proposals have been broadly accepted by Cameron’s government. They include the following borrowing proposals:
(5) Borrowing Powers: to reflect the additional economic risks, including volatility of tax revenues, that the Scottish Government will have to manage when further financial responsibilities are devolved, Scotland’s fiscal framework should provide sufficient, additional borrowing powers to ensure budgetary stability and provide safeguards to smooth Scottish public spending in the event of economic shocks, consistent with a sustainable overall UK fiscal framework. The Scottish Government should also have sufficient borrowing powers to support capital investment, consistent with a sustainable overall UK fiscal framework. The Scottish and UK Governments should consider the merits of undertaking such capital borrowing via a prudential borrowing regime consistent with a sustainable overall UK framework.
There is untold opportunity for reckless behaviour there. The danger is that Scotland will run up debts they cannot service let alone pay off and in those circumstances as happened in Spain, the central UK government (effectively the English taxpayer) would have to bail Scotland out.
Nor would the dangers for England stop there. The effect of less UK control of taxation and Scottish borrowing would have a depressive effect on the international credit worthiness of the UK as a whole because the rest of the world would see that an element of new potential risk and uncertainty had been introduced to the UK economy.
Leave the SNP to twist in the wind
The comprehensive way to deal with the SNP threat would be to set up an English Parliament. That would immediately dissolve SNP influence over the rest of the UK both for now and the future. However, there is no realistic prospect of an English Parliament in the near future. (The Conservative proposal for English votes for English laws is no substitute for an English Parliament although it is a stepping stone to one). Short of an English Parliament what could be done to nullify SNP influence? The answer is ignore them because the great enemy of the SNP is time.
There is a kind of collective madness amongst the Scots at present. Not all Scots by any means, but at least half of the adult Scots population. From England it may seem that Scotland is a land of milk and honey because of the incessant reports of the Scots getting heaps of public goodies denied to England, such as no university tuition fees and free personal care for the elderly. But the truth is that the SNP is struggling to fund such things even with the £9 billion or so extra they get from the Treasury each year. Look at any of the Scottish national papers and you will find every day a litany of complaint about poor public service or the incontinent waste of money on projects such as the Edinburgh tram system fiasco. Importantly, the Institute for Fiscal Studies (IFS) has calculated that the SNP manifesto contained larger spending cuts than Labour. If true, those are rather nasty pigeons coming home to roost in the next year.
The way to tackle the SNP is to give them nothing and plenty of it for the next few years so that there is time to allow the economic mess that the SNP is creating in Scotland to come to its full fruition, time to allow the many disturbingly authoritarian measures they have put in place such as the centralisation of Scottish Police in a single national police force, the creation of a state guardian for every child in Scotland and the banning of Auld Firm chants and songs to begin to seriously worry people. Sooner or later the Scots will start blaming the SNP for their policy failures and misrepresentations and begin chaffing against the growing restrictions on their liberty. That will be the beginning of the end of the SNP as a hugely dominant political force in Scotland.
The really angering thing about the dangerous course the Cameron government seems set on taking is that it is completely unnecessary because the SNP are powerless in the present House of Commons. It smacks of political masochism.