This picture is a stark illustration that those who argued "vote SNP and get a Tory government" might just have had a point. Certainly if you buy the argument that Labour's woes in England were exacerbated by Tory warnings about the risks of an SNP influenced Labour government, it's hard not to conclude that the SNP have contributed to the Conservatives' success.
No matter; we are where we are.
Sturgeon is now able to negotiate on behalf of Scotland with the extraordinary mandate that the Scottish people have given her party. They have 56 of Scotland's 59 MP's at Westminster (in case you hadn't heard).
The very fact that the meeting took place in Scotland may have been relevant; was this a conciliatory decision on Cameron's part? Of course he may just have been wary of holding the meeting at Number 10 in case Sturgeon attempted to deliver on her promise to lock him out.
What is clear is that the debate about more powers is going to dominate our political discourse for some time to come.
I confess to a certain weariness with all of this. We had the referendum, we had the Smith Commission, we've had the general election, we are less than a year away from the next Holyrood election and of course we now have an EU referendum to look forward to. It would be nice to think that somewhere in amongst all of this electioneering, referendum campaigning and constitutional negotiation our politicians would be able to pay some attention to the small matter of running the country.
But the drip-drip water-torture of the Nationalists' demands for more powers isn't going to stop anytime soon. They've been at this for a while. I was perusing a rather well-stocked bookshelf the other day and was amused to stumble across this book published by "London Scots Self-Government Committee" nearly 75 years ago.
I confess it requires more stamina and patience than I possess not to be at least tempted to consider simply ceding to the SNP's demands for Full Fiscal Autonomy (FFA) - as long as it really is full autonomy, including the removal of any Barnett-style subsidy.
The SNP have back-tracked spectacularly on this demand of course. In a move that must surely have had many of the less well-informed Yes voters scratching their heads, SNP MP & economist George Kerevan went on record last week to say
"For Scotland to accept fiscal autonomy without inbuilt UK-wide fiscal balancing would be tantamount to economic suicide"Remember the transparently misleading economic claims made by the SNP during the Independence Referendum? Their declared determination to "kick the last Tory out of Scotland"? In that context it would be understandable if David Cameron adopted the position - voiced by many senior figures in his party - that he should give the Scots the Fiscal Autonomy they appear to have asked for and see how they like it. After all, it would help his desire to implement English Votes for English Laws and be economically beneficial to the rest of the UK.
So it is to Cameron's immense credit that his statement after the Bute House meeting was so unequivocal;
“I think the option of full fiscal autonomy is not a good option for Scotland inside the United Kingdom. I think it would land Scottish taxpayers with £7 billion of extra taxes or the Scottish people with £7bn of extra cuts. I believe in the solidarity at the heart of the United Kingdom, so it is an honest disagreement between the First Minister and me about this. But we will deliver a stronger Scottish Parliament. Be in no doubt.”As an aside: the "honest disagreement" wording implies that Sturgeon was in fact arguing for Full Fiscal Autonomy without "fiscal balancing" (because that's where the £7bn comes from). The implication is that she was arguing for what her own economist MP describes as "economic suicide". Either we have a kamikaze pilot in control of Scotland's economic destiny or Cameron is playing word-games. What's scary is I find either option equally credible.
"With great power comes great responsibility"
Whether you think that quote is attributable to Voltaire or Spider-Man's uncle Ben, it has resonance in this debate.
The reason why the FFA debate has become so confused is that when the SNP now argue for Full Fiscal Responsibility with "UK-wide fiscal balancing" they are in fact arguing for fiscal power without the associated fiscal responsibility.
As long as we continue to share a currency, a central bank and responsibility for our share of the national debt then our economic fates remain interconnected.
Given that reality it would clearly be unacceptable for a Fiscally Autonomous Scotland to continually run a higher deficit and to be contributing disproportionately to our national debt. Whether some of that debt is ring-fenced to Scotland is beside the point - if the ability of Scotland to bear its share of the national debt becomes compromised, the cost of that would fall back on the rest of the UK. If Scotland is unable (or unwilling) to control its own affairs such that its deficit is in-line with the rest of the UK (i.e. without the need for balancing fiscal transfers like those Barnett delivers), it is only reasonable that the rest of the UK retains control over the fiscal levers. You can't have the economic power if you don't take the economic responsibility.
This is of course why the Yes campaign floundered so badly on the issue of currency; you can't be truly independent and share a currency, you have to adhere to fair fiscal constraints. Ask Greece.
So let's move on assuming that FFA is off the table. This means we need to focus our attention on the debate that was reignited by the referendum and progressed through the Smith Commission: what further powers (in addition to Smith) should be devolved to Scotland?
Fortunately the SNP's written constitution is very clear on this matter
"The aims of the party shall be (a) Independence for Scotland [..] (b) the furtherance of all Scottish interests'"If the Independence Referendum taught us anything it is surely that for the SNP clause (a) trumps clause (b) every time. Nobody can now seriously believe that the SNP were not aware Independence would have made us poorer. Remember that FFA is effectively Independence without the associated independence downsides (most notably currency and potential job losses as businesses who serve the UK from Scotland relocate to avoid exposure to export risk). Even the SNP themselves now tacitly accept - or in Mr Kerevan's case explicitly state - that Scotland's economy is in far worse shape than that we share by being an integral part of the UK.
A simpler illustration of this point is a quote that I have heard attributed to a civil servant describing John Swinney's motivation: "You have to remember, John would live in a cave to be free".
If we're devolving power into the hands of Nationalists motivated by the destruction of the UK then some of us might conclude that devolving more power is not necessarily a good thing. If you think I'm over-stating this case, let me remind you of the written SNP candidate statement made by George Kerevan
".. After Home Rule, independence will follow as the UK economy implodes .."This is the same Mr Kerevan who the Scotsman recently revealed is the SNP member invited to help "draw up plans for a federal UK". Just think about that for a moment.
But it's not just about the potential for what some of us would see as malicious misuse of these devolved powers. After all, if you're one of those who believe the paranoid conspiracy theories about Westminster's vendetta against the Scots, you are just as likely to distrust how those powers are used now.
The more subtle point here is that devolved powers may create a situation where rationally self -interested behaviour could still be value destructive for the UK as a whole.
Take two of the issues that appear high on the SNP's agenda when they argue that the Smith Commission proposals do not go far enough; the Minimum Wage and Corporation tax.
I'm intuitively in favour of raising the minimum wage. We have a problem with in-work-poverty and shifting some of the burden away from the state and on to business doesn't seem unreasonable to me. But as I argued in the Smith Commission submission I contributed to: allowing differential minimum wage levels within the UK would be value destructive. A higher minimum wage in Scotland would damage competitiveness of Scottish businesses and cause some businesses (or entrepreneurs) to move South at the expense of Scottish jobs; a lower minimum wage would be be potentially damaging to social welfare by encouraging a regional low-wage economy.
I've also covered the corporation tax argument elsewhere on this blog. I'm a businessman who would benefit from lower corporation tax in Scotland but I think it's a bad idea for three reasons
- Using differential corporation tax rates to shift business activity around the country is value destructive to the UK as a whole - it simply reduces the UK's overall corporation tax take and hands money back to profitable businesses instead of targeting the less well-off in society
- It creates incentives for creative accounting within businesses to ensure profits are reported in low tax areas of the UK without necessarily needing to change any real economic activity. Just look at the tax avoidance strategies of Google, Amazon, Starbucks etc. - if they'll do that across international tax borders we can safely assume they would apply similar accounting strategies within the UK
- It places an additional reporting burden on UK businesses who would have to report (and audit) Scottish profit separately from rUK profit. Trust me that for many businesses this would be a non-trivial exercise.
There are strong, rational, UK-wide arguments against devolving the ability to set the minimum wage or corporation tax rates.
The Smith Commission may have been necessarily rushed but it seems to me they did a pretty good job. They defined a series of further powers and a set of principles that delivered against "The Vow" whilst limiting the risks of these powers causing UK-wide value destruction. Of course they didn't go far enough for the SNP; nothing short of full independence will ever be enough for the SNP.
So surely it would be appropriate at this stage to focus on delivering the powers already proposed and seeing how these are actually used before pushing for yet more devolution?
Without FFA the SNP may be spared from showing how their "anti-austerity" rhetoric would translate into action if they were actually accountable for the resultant debt ... but with Smith powers they should be able to demonstrate their progressive credentials by redistributing the tax burden.
It will be interesting to see how the SNP's popularity survives when they start demanding a little less and are forced to start delivering a little more.
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