Saturday, June 13, 2015

FFA or and bust

Following their remarkable win, the SNP is now pushing for Full Fiscal Autonomy (FFA) for Scotland. Broadly speaking, this means that Scotland runs its own economy—being able to spend cash and raise money as they please.

The supposed driver for this is that Scotland is a "more socialist" country, willing to pay more tax in order to stave off the tyranny of austerity. This narrative is, of course, bollocks: were it not, the SNP (also the dominant party in Holyrood) would already have used the tax-raising powers that the Parliament has—up to 3p in the pound extra in income tax, if I recall correctly.

Instead, when these powers were granted at devolution, the proposal to use them was attacked as "a Tartan tax". Indeed it may be but one that, if the SNP and other Scottish commentators are to be believed, one that would be welcomed by the austerity-loathing Scottish people.

The fact that the extra tax has not, actually, ever been levied leads one to re-examine that old economics truth of "revealed preferences", i.e. watch what people do, not what they say.

Of course, raising income tax by an extra 3% probably would do little to help the Scottish budget—the projected deficit under FFA is nearly £8 billion (around 10% of Scotland's GDP). In fact, most commentators think that Scotland's Full Fiscal Autonomy would be as disastrous as HP's adoption of Autonomy (yeah—that was a tech world joke (if an old one)).

So, why on earth are the SNP lobbying for FFA—a policy that will, as Alex Massie points out, surely lead to cuts in Scottish public spending that make "austerity" look like the most extravagant fiscal splurges of the more insane Roman emperors?

A clue to what the SNP might be thinking comes from SNP MP George Kerevan, in an article for The National [Emphasis mine—DK].
It is now inconceivable that David Cameron can reject Scottish demands for greater home rule, given that all three mainstream Westminster parties – Tory, Labour and Lib Dem alike – have minimal legitimate authority in Scotland in the wake of May 7. The general election was not a mandate for a second referendum – a point reiterated time after time by Nicola Sturgeon, whatever contrary hares are set running by the battered and bruised Westminster establishment. Nevertheless, the SNP’s electoral success is undoubtedly a mandate for going far beyond the hastily conceived ragbag of new powers contained in the Smith Commission documents.
The SNP maintains that the Smith Commission does not actually give Scotland enough powers (although many English people might argue that the Smith Commission gives the Scottish Parliament a great many powers, with very little responsibility). The Grauniad has summed up the main points, which I reproduce below.
  • The Scottish parliament will have complete power to set income tax rates and bands.
  • Holyrood will receive a proportion of the VAT raised in Scotland, amounting to the first 10 percentage points of the standard rate (ie with the current standard VAT rate of 20%, Scotland will 50% of the receipts), but cannot influence the UK’s overall UK rate.
  • It will have increased borrowing powers, to be agreed with the UK government, to support capital investment and ensure budgetary stability.
  • UK legislation will state that the Scottish parliament and Scottish government are permanent institutions. The parliament will also be given powers over how it is elected and run.
  • Holyrood will have power to extend the vote to 16- and 17-year-olds, allowing them to vote in the 2016 Scottish parliamentary election.
  • It will have control over a number of benefits including disability living allowance, the personal independence payment, winter fuel payments and the housing elements of universal credit, including the under-occupancy charge (bedroom tax).
  • The Scottish parliament will also have new powers to make discretionary payments in any area of welfare without the need to obtain prior permission from department for work and pensions.
  • It will have all powers of support for unemployed people through employment programmes, mainly delivered at present through the Work Programme.
  • It will have control over air passenger duty charged on people flying from Scottish airports.
  • Responsibility for the management of the crown estate’s economic assets in Scotland, including the crown estates’s seabed and mineral and fishing rights, and the revenue generated from these assets, will be transferred to the Scottish parliament.
  • The licensing of onshore oil and gas extraction underlying Scotland will be devolved to the Scottish parliament.
  • The Scottish government will have power to allow public sector operators to bid for rail franchises funded and specified by Scottish ministers.
  • The block grant from the UK government to Scotland will continue to be determined via the operation of the Barnett formula. New rules to define how it will be adjusted at the point when powers are transferred and thereafter will be agreed by the Scottish and UK governments and put in place prior to the powers coming into force. These rules will ensure that neither the Scottish nor UK governments will lose or gain financially from the act of transferring a power.
  • MPs representing constituencies across the whole of the UK will continue to decide the UK’s budget, including income tax.
  • The Scottish and UK governments will draw up and agree a memorandum of understanding to ensure that devolution is not detrimental to UK-wide critical national infrastructure in relation to matters such as defence and security, oil and gas and energy.
Your humble Devil submits that this is very close to FFA, whilst admitting that there are some constraints on how the Scottish Parliament may act. One might argue that a great many of these constraints are there to stop the Scottish Parliament bankrupting its country. Your mileage may vary.

However, the SNP is arguing for Full Fiscal Autonomy. That means that Scotland is entirely responsible for its own economy, right?

Well, you might think that: and now we'll return to George Kerevan's comment [Emphasis mine, again—DK]...
The constitutional ball is well and truly in David Cameron’s end of the field. Cameron’s opening gambit may well be to offer Scotland fiscal autonomy, in return for termination of the Barnett Formula (a mechanism that matches per capita spending changes across the UK constituent nations). We all know that in present UK economic circumstances a fiscally autonomous Scotland would face a significant budget deficit.

For Scotland to accept fiscal autonomy without inbuilt UK-wide fiscal balancing would be tantamount to economic suicide. However, all federal systems have mechanisms for cross subsidising regions in economic need by regions in surplus. To deny that to Scotland suggests a disingenuous Mr Cameron is hoping to derail any move to Scottish Hole Rule within the UK.
Wow. Yes, that's right: George Kerevan—and, we must assume, he is a proxy for the SNP—is seriously suggesting that Scotland be given Full Fiscal Autonomy except when it doesn't have the money to afford it.

Just sit back and admire the chutzpah—George is saying that the Scottish Parliament should be given free rein to run things as it likes. Except that when the Scots overspend, rack up debts, or just go batshit wild with the cheque book, the rest of England should have to bail them out. Kerevan is proposing that English taxpayers chuck another £7 billion a year at the Scots before they've even started turning on the spending taps (because who, genuinely, thinks that they won't?).

What the SNP are holding up—as an expectation—is a total lack of any responsibility. Kerevan is proposing is that no matter how much the Scottish government screws up—no matter how fecklessly Holyrood runs the national finances, or shamelessly its parties bribe their voters—the people of England should be expected to bail out the Scottish nation regardless.

There really is only one answer to this, and its very simple: fuck off.

David Cameron, in concert with Miliband and Clegg, has already betrayed England by his shameless capitulation—a.ka. "the promise"—to the Scots after the Independence Referendum: it is entirely possible that this spineless Buttered New Potato will sell us down the river by agreeing to this shit too.

If he does, we might finally see the anger of the English people burn hot enough to march down Whitehall—parading Cameron's massive, shiny head on a fucking stick.

And not before time, frankly.

UPDATE: have the SNP been monitoring the Kitchen for suggestions...?


Blue Eyes said...

I agree with most of this. Luckily, there will be no English marches down Whitehall because we have an electoral system that works. Scotland has *already* been told to fuck off.

Man with Many Chins said...

Did they forget the reason they are in the Union anyway was because they spent everything they had, and didn't have 300 years ago and we had to bail the cunts out then?