Full Fiscal Detriment

On Monday the committee stage of the Scotland Bill starts in the House of Commons. This stage will run over four days during the coming weeks, giving MPs the chance to scrutinise the Bill line by line, clause by clause. It is the principal “amending stage” of Commons legislative process – last week’s “second reading” debate on the Bill was on its general principles (a Bill cannot be amended at that stage).

Much of Monday’s proceedings will focus on clauses of the Bill that recognise the permanence of the Scottish Parliament and that place the Sewel convention on a statutory footing. These are important matters, but it’s hard to see them making the lead item on the six o’clock news.

More eye-catching, if you know where to look, is amendment 89 on page 17 of the Notices of Amendments. Put down in the names of six SNP MPs, including their leader in the Commons Angus Robertson and the deputy leader of the party Stewart Hosie, the amendment provides that the Scottish Parliament should have the power to modify any UK law relating to: taxes and excise in Scotland; government borrowing and lending in Scotland; and control over public expenditure in Scotland. In other words, the amendment paves the way for Holyrood to deliver the Scottish Government’s consolation policy of full fiscal autonomy.

It is hardly a state secret that the Scottish Government has not given up on its long-term goal of securing independence for Scotland. While that ambition was thwarted by the Scottish electorate on 18 September last year the next-best-thing, as far as the Scottish Government is concerned, is “full fiscal autonomy” (FFA). This is defined, in the Scottish Government’s own words, as follows: “the Scottish Parliament should raise all its own revenue and make payment to Westminster for reserved services”. FFA would mean that all taxes and excise duties in Scotland would be raised by and paid to Holyrood, and that all public spending in Scotland would be Holyrood’s responsibility save for spending on defence, intelligence and security, and some aspects of foreign affairs. The United Kingdom would be responsible in Scotland only for these matters, for the currency and for certain aspects of citizenship (but not, apparently, immigration).

FFA was once known as “devo-max” but I’m glad that phrase has fallen out of favour, for FFA is no scheme of devolution at all. It is a form of independence-lite. It would destroy the Union as we know it. It would mean an end to the pooling and sharing of risks and resources upon which the Union is based. And it would mean an effective reversal of last year’s referendum result.

The Scottish Government likes to remind us that, shortly before the referendum, Gordon Brown said that a No vote would deliver “home rule” or something as close to federalism as was possible in the UK. As a matter of fact, in his book published in the summer of 2014 Mr Brown had said that what was on offer from the pro-UK parties was “close to the idea of home rule” but not home rule “in the strictest sense” and, certainly, was no “federal solution”. But never mind.

Of more interest is that FFA goes way beyond federalism. The USA, Canada, Australia, Germany and Switzerland are all federal countries. None operates a system of full fiscal autonomy. Even the world’s oldest and most successful federal countries use systems of fiscal grants to transfer revenues from the centre to the nations/regions/provinces that make up the state. As the experience of these (and numerous other) countries demonstrates, federalism can produce both stable government and prosperous societies. FFA would produce neither. It is a recipe for instability and economic hardship that would bring disaster to Scotland.

I do not believe the Scottish Government are serious in their pursuit of FFA. I believe it is a stunt. Certainly, at the Smith Commission last autumn, Deputy First Minister John Swinney did not push for anything close to full fiscal autonomy. Yes, he wanted more than Smith delivered, but he was as relieved as anyone that he was not about to become responsible for delivering the state pension, for example, to Scotland’s pensioners. (FFA would mean an end to the UK pension: the pension in Scotland would have to be paid for from taxes raised only in Scotland.)

Likewise, I do not believe that the SNPs’ FFA amendment to the Scotland Bill is serious. I believe it is a stunt. Even the Scottish Government’s own policy documents condemn it as irresponsible and unworkable. In their October 2014 submission to the Smith Commission, More Powers for the Scottish Parliament, in which the Scottish Ministers set out their case for FFA, the Scottish Government recognised that even after a policy area has been devolved there remain “common interests” with the rest of the UK, that the Scottish and UK Governments work together “to benefit the people of Scotland and the rest of the UK”, and that new “co-operation agreements” will be needed between the two governments as more powers are devolved. I agree. Yet look in vain for even a hint of any of this in amendment 89.

In More Powers for the Scottish Parliament the Scottish Government recognised that, despite their rhetoric about FFA, some taxes and excise duties could not be devolved to Holyrood compatibly with EU law. VAT cannot be devolved, for example. That’s not because of any rule of UK law, but because of EU law. Yet look in vain for recognition of such truths in amendment 89.

In More Powers for the Scottish Parliament the Scottish Government recognised what it called “the importance of a sustainable overall fiscal position for public finances within Scotland and the UK”. Quite right, but amendment 89 includes no reference to any such thing. There is no reference to the economic well-being of the United Kingdom, no reference to the inter-governmental management of public finances, and no reference to “protecting monetary stability, promoting the single market and safeguarding fiscal sustainability”. Last October these were all matters that the Scottish Government accepted would have to be part of any scheme of full fiscal autonomy; yet each has now vanished.

The FFA amendment to the Scotland Bill is plainly not designed to be taken seriously. This isn’t full fiscal autonomy, but full fiscal irresponsibility. You could even call it full fiscal stupidity, or #FFS. It’s also profoundly undemocratic. Two million Scots voted only nine months ago to preserve our Union and the pooling and sharing of risk and resource upon which it is founded. Yet amendment 89 seeks to undo all this in a single clause – with not so much as the whiff of consulting the public. Isn’t it time for the Scottish Government to stop playing games with devolution, to stop their stunts, and to show some respect to what, after all, is the settled will of the Scottish people?