Labour and SNP are irreconcilable

 

 

The SNP’s idea that they will lay siege to Westminster is somewhat Medieval – crude to say the least.  Especially because reasonable representatives should be able to negotiate a better arrangement.  But the SNP are neurotic about Independence. If they had any sense they would recognise that the circumstances which banjaxed them the last time – no currency and no central bank – are still relevant.  Even more so now that the North Sea has crashed and renewable energy is more uncertain.

 

I can empathise with the SNP wanting more fiscal autonomy.  If for no other reason in future Spending Reviews Scotland’s population share will continue to reduce as it has done each time since 1996.  But I don’t think it is the answer, at least not in the short term.

 

In my mind “Total or Full Fiscal Autonomy” means Scotland is entitled to all taxes collected in Scotland (including from the North Sea) and makes a payment to the UK Government for providing non-devolved services – effectively Barnett in reverse. 

 

To deal with timing first.  In a recent BBC Scotland interview Ruth Davidson referred to the outcome of the Smith Commission. She thinks it unlikely that it will be in force before April 2016.  In a way I hope she is right because I think there needs to be more change if it is to satisfy us here in Scotland.

 

But she didn’t mention the previous Calman Commission.  Calman’s recommendations have been built into the 2012 revision of the Scotland Act and replaces the old (unused) Scottish Variable Rate by a new provision.  From 1 April 2016 the Scottish Parliament has to replace 10p of income tax with a rate they decide. It can be more than 10p or less, but not less by more than 10p.  And, it applies to all bands.

 

So when John Swinney comes to draft his 2016 – 2017 later this year he has to set a new Scottish Income Tax Rate.

 

So let’s hypothesise that we get a majority Tory Government in Westminster.  Two things will certainly happen:

 

  • No increase in income tax; and
  • Cuts in public spending. 

    Added to which the Spending Review should cut the appropriate population rate factor in Barnett – I think from 10.03% to 9.93%.  So we can expect a cut in the Block Grant to Scotland.  A Scottish Government of whatever colour would have to deal with this until the next UK General Election.

     

    Ask yourself – what tools does the Scottish Government have?

     

  • It can raise taxes.
  • It can cut spending. 

    The Scottish Government has no other levers to hand.  Moreover it is tightly ruled by Treasury Policy which is based on long standing convention – convention which pre-dates devolution.  On top of which they are permitted in any one year to borrow a miniscule amount of its spending commitments.

     

    In my opinion Devolution is proving as big a political blunder as the Poll Tax and I do not wonder that there are many Scots who feel frustrated that Holyrood cannot deliver what they want for.  The truth is it can’t and never will be able to unless it is given more levers – more flexibility.  Let’s be honest Scotland is only a small part of the UK and is getting smaller.  The population is only growing at half the rate of the UK and the North Sea crash is a tremendous loss of influence.

     

    So a Scottish Government is between a “rock and a hard place”.  Do they increase income tax or do they reduce public spending unless they can get the rules changed.

     

    The OBR can calculate Scotland’s GDP and share of debt.  The ONS should be able to, but for some unknown reason doesn’t, calculate Scotland’s inflation.  Surely Scotland can be set targets for containing debt/GDP and inflation within acceptable levels over the length of a Parliament.  It would be up to the Scottish Government to argue for enhancement to meet special needs.  How much more damage could they do over and above the damage uncertainty does to the UK as a whole?

     

    Frankly I don’t think Scotland should have more tax raising powers.  Look what has happened to Stamp Duty and APD.  The Chancellor has trumped the Finance Secretary on both.  How will new businesses think about Scotland who may raise – if not they have the powers to raise – income tax when the UK has frozen it?  The tax systems between Scotland and the rest of the UK must be aligned not competing.”

     

    So let us hypothesise that we get a Labour/SNP coalition with a slim majority – say 5 seats.  It would only need 3 Labour Rebels to oppose any measure that was not palatable to their own convictions and those of their constituents.  There aren’t many voters in England who are gagging for more power and more funding to Scotland.  There are many who the SNP have turned against Scotland.

     

    Ask yourself: “Why has Miliband been so whimsical about working with the SNP?”  There can be only one reason.  He not only cannot count the number of Labour MP’s until 8 May, even then he won’t know how many he can count on.

     

    SNP’s will do as their leader tells them – the Labour leader will do as his MP’s tell him.  Styles which are irreconcilable.

     

     

     

     

     

     

     

 

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