Barnett Formula, you’re fired. Full Fiscal Autonomy, you’re hired.

It’s fair to say that the principle of Full Fiscal Autonomy has not been receiving a favourable press in recent days. But that does not mean that the idea of Scotland achieving it’s financial independence is an idea worthy of provoking economical armageddon. In fact, long term especially, it is not just an luxurious proposition, but absolutely essential for developing the economic future of Scotland.

Scotland is not a “region” of the United Kingdom, but a nation. One of the fundamental flaws of the constitutional make up of the UK is the fact that it’s financial affairs are so centralised at Westminster. A one size fits all solution is anything but that when it comes to determining the future direction of the economy. Scotland’s economic needs are fundamentally different from other parts of the UK such as the City of London for example. The UK capital is dependent on sectors such as finance and services,  whilst Scotland’s needs are more focused on industries such as fishing and oil and gas. But whilst it can be acknowledged that the Chancellor of the Exchequer does take into account the different economic aspirations and needs across all part of the UK, the main point is that decisions should, in principle, not solely made at 11 Downing Street.

This leads me on to the infamous Barnett Formula. It was devised 37 years ago by the then Labour Chief Secretary to the Treasury, Joel Barnett. This mechanism is responsible for allocating how much money Scotland, Wales and Northern Ireland get in terms of public spending. Nothing in legislation protects it’s status and the Treasury can do away with it at any moment if it so wished. And frankly, I wish the Treasury could start to phase it out and bring real reform to the table.

When I was once a unionist, I was in the view that Westminster should seek to completely revamp the infrastructure of the UK by devolving control to each constituent nation of the Union over many elements of tax and spending. Now as someone who favours independence for Scotland, I strongly believe that the need to implement Full Fiscal Autonomy (FFA) has never been greater than now. Nicola Sturgeon has been absolutely courageous in putting forward the case for FFA and should be applauded for being so forthright in her view. Unlike her opponents, she has encouraged the idea of enabling the Scottish Parliament to take full financial responsibility for the economic affairs of Scotland. It can only make sense – MSP’s should take the initiative when it comes to the levels of tax, what should and shouldn’t be taxed and what should be the level of spending and borrowing. What is the point of having a legislative chamber in Edinburgh when the bulk of economic decisions are made 300 miles or so down the A1? Frankly, this current state of affairs is a laughable farce.

Labour leader Ed Miliband stated earlier this week that the deficit for Scotland would amount to £7.6 billion. But how does he really know whether the deficit in Scotland will be as high as the figure he suggested? This represents the very problem that I was illustrating earlier – the whole ethos of the centralising governance of the UK connotes that none of us can be absolutely certain that Scotland would run up a deficit as high as that.  A Scottish nation with FFA would have different spending priorities and may not necessarily run up a deficit as high as the figure flown around by opponents of financial independence. In 2010, none of us predicted that the Conservative-Liberal Democrat UK coalition would reach nowhere near the desired target of eliminating the deficit – David Cameron and George Osborne won mine and many Conservative minded voters in 2010 on the promise that they would eliminate it. 

But they have failed. And it’s absolutely extraordinary that both men can try to take the moral high ground on the issue of the national debt when the facts strike a contrast to the rhetoric that they are coming out with now five years on. But this is beside the main focus of this article. The fundamental point is that we should honour the aspirations of much of the Scottish population and take FFA forward. The idea of continuously relying on a block grant, based on a formula hardly anyone warms to, is just silly and becoming more and more indefensible by the minute. 

It’s time to empower Scotland and empower the country now, plus shatter the myth that we are somehow a “subsidised” country.

2 Comments Add yours

  1. BillWalt says:

    “Labour leader Ed Miliband stated earlier this week that the deficit for Scotland would amount to £7.6 billion. But how does he really know whether the deficit in Scotland will be as high as the figure he suggested? This represents the very problem that I was illustrating earlier – the whole ethos of the centralising governance of the UK connotes that none of us can be absolutely certain that Scotland would run up a deficit as high as that.”

    Nobody can be certain about any future policy, but that isn’t a reason to ignore the evidence we have. In 12 of the last 16 years the best estimate of Scottish revenue/spending we have (GERS) indicates we’d have had a shortfall under full fiscal autonomy. In the very last year of GERS the shortfall amounted to roughly £4.3 billion. That was before the oil price drop so it’s not difficult to see why we ended up with a £7.6 billion projection for 2015/16 by the IFS.

    You can always make qualifiers about estimates being wrong, but what evidence is there to suggest full fiscal autonomy is a good idea for the country? Far too often the argument seems to operate from the principle that full fiscal autonomy/independence is justified on its own basis and that we should simply massage (or ignore) the figures until we get a situation under which it’s viable. I have no dog in either fight, what I care about is simply what’s best for the country – what gives us more spending, better public services, more money for investment, and so on. I find it genuinely impossible to look at the figures in GERS (all published on the Scottish Government’s website) and concoct a situation in which full fiscal autonomy gets us to that point.

    And let’s put it in perspective here. A £7.6 billion cut would be a reduction of about 11.5% of our public spending. In contrast the large cuts being proposed by the Conservatives at Westminster, which are with some justification being presented as a looming disaster for the country, only amount to about 4.1% of total spending. Worse, unlike the Conservatives’ cuts, which are aimed at removing the deficit, we’d have to cut 11.5% of our spending (or raise taxes) just to get to the level we’re at now. We’d have to cut even more if we actually wanted to tackle the deficit. That’s catastrophic and just saying “ah well, maybe all of the evidence is completely wrong, who knows?” really isn’t much of a counter-argument.

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