Paul Cairney looks at Full Fiscal Autonomy and how it could well backfire to cause the death of the union.This article was originally published on The Conversation.
Back on the agenda following the Conservative and Scottish National Party (SNP) victories in the UK election is full fiscal autonomy for Scotland, meaning the devolution of all tax and spending decisions. Early rumours suggest that David Cameron is ready to offer it in a “peace deal to save the union”.
This would see the Scottish government forming its own Treasury and Inland Revenue functions, raising its own revenues and making a contribution to the UK for shared services such as defence and foreign affairs. It would be easy to get the impression that the UK government need only click its fingers to make this so. In fact, there are four important political problems that make it rather more difficult in practice.
1. No party in Scotland wants it – not quickly, anyway
This may seem a strange thing to say – surely, at the very least, the SNP wants it? Yet Nicola Sturgeon’s language during the election campaign (and page 11 of the manifesto) was about full fiscal autonomy taking a long time, based on the fact that it took five years to introduce a modest devolved tax-and-spending regime (2007-12). By this calculation, the groundwork for something far more ambitious would take longer than a second independence referendum to materialise.
The other main parties in Scotland have described full fiscal autonomy as disastrous, generally drawing on IFS analysis. It is hard to overemphasise just how much they are against it, seeing it as a subject that weakens the SNP. Labour used the imagery of the bombshell and the Liberal Democrats described the “devastating impact” it would have on Scotland, but maybe it doesn’t matter so much since both parties are now out of the picture.
What certainly does matter, however, is the Scottish Conservative rhetoric: “The public deserve to know the full impact of what fiscal autonomy would mean for Scotland”; it would produce “massive spending cuts, a hike in taxes or radically increased borrowing”; and “almost no major employers back the SNP’s plan for full fiscal autonomy”. Only three weeks ago, Scottish Tory leader Ruth Davidson described it as a disastrous way to exploit Scottish taxpayers to secure independence “by the back door”.
2. Supporters are motivated by self-interest
Cameron and certain other senior Conservatives might be using the right language and describing the Scottish result as something that has to be respected, while ruling out Scottish fiscal autonomy. Others in the party have taken a different tack, seeing full fiscal autonomy as a way to stick it to the SNP, encourage centre-right politics in Scotland and satisfy an audience in England. Conservative MEP Daniel Hannan has said for example that the SNP is the Scottish equivalent of Greece’s Syriza and only able to use anti-austerity rhetoric because the Scottish government doesn’t raise its own budget.
This tactic is divisive and damaging. Playing politics with Scottish constitutional change just makes things worse. Portraying full fiscal autonomy as good for England and some much needed medicine for Scotland (or, perhaps confusingly, a poisoned chalice) goes against the idea that the Conservatives want to do what it takes to protect the union.
3. Key arguments against Scottish independence apply
Remember the sorts of issues that arose during the referendum, such as: you can’t have a shared currency if your tax/spending regimes are too different (No campaign); and independence is a way to get rid of Trident (Yes). Similar problems would resurface with full fiscal autonomy. The UK Treasury would want assurances that Scottish Treasury decisions did not have too much of a knock-on effect, while an SNP-led Scottish government would not want to transfer money to the UK for Trident.
The UK Conservative government would effectively be saying: “You can have full fiscal autonomy if you pay for the shared services we choose, and stick to our fiscal rules”. Calling this full fiscal autonomy would be rather misleading.
4. There would be very little to hold the union together
The economic argument was by far the biggest element of the No campaign. Full fiscal autonomy would largely remove that argument from any future independence referendum, since almost all warnings would be about powers that have already been granted to Scotland.
In short, full fiscal autonomy for Scotland looks like the ultimate cynical solution to the rise of the SNP, and it could well backfire to cause the death of the union.