15 April 2015

Socialist Scotland is sleepwalking to bankruptcy


“Full Fiscal Autonomy” (FFA) is a noble-sounding phrase, with a resonance calculated to appeal to CapX readers. It conjures an image of sturdy independence, of responsibilities squarely shouldered, of capitalist values boldly implemented. Unfortunately, in the hands of politicians, it degenerates into weasel terminology for disguised dependency and fiscal assumptions confected by sleight of hand.

When those politicians are Scottish separatists and their pseudo-Unionist appeasers, Full Fiscal Autonomy, the term used to describe the proposed arrangement by which Scotland should levy and spend all its own taxes, becomes just another instrument of deception, an excuse for the proliferation of pie-in-the-sky economic claims so extravagant as barely to deserve being dignified by the term fantasy.

During the recent independence referendum the Scottish nationalists indulged in fiscal falsification on a scale never before seen in the developed world. They were able largely to get away with this imposture because of the climate of fanatical partisanship they generated during the two and a half years of the “neverendum” campaign. Alistair Darling did sterling work in repeatedly exposing the absurdity of nationalist claims, but he had very little effective support.

Now, thanks to the cowardice of Unionist politicians, snatching defeat from the jaws of victory in the wake of the referendum, Full Fiscal Autonomy has become the focus of the Scottish debate. If you want to read a masterly exposition of the realities of FFA, written in response to a classically misleading column by Kevin McKenna in last Sunday’s Observer, the piece by Kevin Hague on his chokka blog Explaining the £7.6bn ‘FFA Black-Hole’ is a superb forensic refutation of nationalist/Devo Max wishful thinking.

Rather than attempting to paraphrase it inadequately here, I shall simply mention that Hague, using GERS figures, validates the IFS estimate of £7.6bn as the amount that would have to be found through tax rises or spending cuts in Scotland to match the expected deficit level of the rest of the UK. Crucial to the whole FFA issue is the collapse in oil prices. This and all the relevant calculations and implications are admirably rehearsed in the chokka piece – well worth reading.

The problem is that no amount of meticulously researched, logically presented arguments will avail against the separatist tsunami that has inundated Scotland, sweeping from its path rationality, objective fiscal scrutiny and basic common sense. Kevin McKenna, with his cut-and-paste fiscal fantasies, is just one citizen of the massively overcrowded village of Brigadoon that Scotland, formerly the nation in the forefront of reasoned, sceptical discourse, has become.

Welcome as informed contributions such as the chokka piece are, or the patient, factual reasoning with which Alistair Darling conducted the No campaign in the referendum, the challenge Unionists are confronting in attempting to turn Scottish public opinion is not principally fiscal, but psychological. Many Scots are in the throes of an emotional spasm. If the Union is to survive this crisis, its supporters must correctly understand its origins. They are not patriotic but ideological. This collective delusion is the product of seventy years of socialist group-think north of the Border.

From the advent of the Labour government of 1945, Scotland became marinated in socialist dependency. The land of Adam Smith and Andrew Carnegie, a nation of thrifty, proud, self-sufficient wealth creators, rejected capitalism and embraced socialism. This transformation was reinforced by the collapse of Scotland’s traditional heavy industries, sucking more households into the welfare culture. Scots lived under a regime of womb-to-tomb dependency.

When Margaret Thatcher came into office, Scotland had the largest percentage of population living in municipal housing of any nation in Europe, except the then East Germany. Thatcher tackled that by giving council tenants the right to buy. They duly purchased their homes – and continued to cling to political views that Leon Trotsky would have thought oppressively statist.

The Berlin Wall came down – but not in Scotland. While other countries embraced the free market, often enduring much initial pain in the process, Scots defiantly carried the Red Flag into the 21st century. By 2005 the public sector in Ayrshire, for example, accounted for 74 per cent of the local economy. Between 1998 and 2007 the number of public sector jobs in Scotland grew from 603,773 to 772,048, if the “para state” – firms relying exclusively on central or local government contracts – was factored in.

By 2009 Scotland enjoyed the dubious distinction of being the third most state-dependent country in the world, after communist Cuba and war-torn Iraq. Welcome to Alba-bania. But the most damning statistic and the one most relevant to the FFA debate is this: on the eve of the 2008 economic slump, out of Scotland’s 4 million voters only 2.3 million paid income tax. That figure is unlikely to have increased in the years of recession since then.

That is the crucial factor discrediting the supposedly free market, conservative argument that Full Fiscal Autonomy would make Holyrood politicians “more accountable” to the electorate. The fear is that it would, and since the electorate is dominated by the dependency culture and its middle-class ideological supporters, that accountability would enforce the ratcheting up of taxation and spending far beyond the present unsustainable levels. The template is local government where, until the council tax freeze, prodigal council spending was a vote winner, with overtaxed wealth creators carrying their fellow citizens on their backs.

Despite these realities, the Coalition Government reacted to the SNP victory in the 2011 Scottish elections by passing the Scotland Act, conceding to Holyrood additional powers over income tax, stamp duty and land tax. By 2013, under the direction of David Cameron and George Osborne, the Scottish Conservatives launched a drive for Devo Plus, or possibly Devo Max – a policy so favourable to separatism it had been one of the constitutional options in the SNP’s 2007 white paper.

Full Fiscal Autonomy means de facto separatism. If the Chancellor of the Exchequer is not sufficiently fiscally literate to realise that two tax systems are incompatible with a unitary state, it is a poor outlook for the UK. Meanwhile, Scots are sleepwalking into potential separatism, bankruptcy through falling oil revenues and Third World economic status for generations to come. When are these alarming realities going to be persuasively broadcast in the mainstream political arena during this election?

Gerald Warner is a political commentator and writer.