There is surely something surreal about watching the vanquished dictate terms to the victors. Yet that is what is happening as the SNP, recently defeated in Scotland’s independence referendum, dictates a new constitutional and fiscal settlement to the rest of the United Kingdom, using the so-called Smith Commission – authors of the most irresponsible document in recent constitutional history – as the blueprint for Scotland under Devo Max and the rest of Britain in an incoherent shambles of lopsided fiscal arrangements. The chairman of the commission, Lord Smith of Kelvin, described himself as “Santa’s little helper” and that is true: for the SNP, Christmas has come early.
Out of Father Christmas’s sack has tumbled a cornucopia of goodies for Scotland’s implacable separatists. All income tax on earnings will be devolved to the Scottish parliament – a package worth £11 billion – but tax on savings or dividends will be retained by Westminster. Members of the Scottish Parliament will be allowed to dictate tax bands and rates, though personal allowances will be retained by Westminster. That will introduce asymmetry and incoherence into the core fiscal instrument of United Kingdom revenue.
Scotland will receive half of all VAT receipts and will have the power to borrow on the international markets, within a “prudential borrowing regime consistent with a sustainable overall UK framework”. Prudential? The Scottish Left, with its hands in the cookie jar? There you have just one of the combustible elements in the Smith settlement – you can already smell it smouldering. Holyrood will also control air passenger duty out of Scottish airports – bad news for Newcastle. Onshore oil and gas licensing will be devolved; the state, north of the border, will be allowed to bid for rail franchises – a mechanism inviting nationalisation.
Well, many English voters might say, at least we will be rid of those outrageous anomalies such as the Barnett Formula and the West Lothian Question (Scottish MPs at Westminster voting on issues in England over which the Westminster Parliament has no power in Scotland). Not so. The Barnett Formula, the unjust financial arrangement which last year ensured Scots received £10,152 per head in public spending compared with £8,529 in England, stays. Likewise, despite control over income tax being devolved to Scotland, Scottish MPs at Westminster will continue to vote on tax rates and bands for English taxpayers.
The Scottish Left will be granted its ambition to erase Iain Duncan Smith’s welfare reforms north of the Border. Scotland will be given powers to top-up benefits payments, thus cancelling out the so-called “bedroom tax”, to set a raft of other benefits and (yippee!) power to create new benefit payments. What’s not to like, if you are an unreconstructed Scottish socialist, as most MSPs are?
Apparently, the rest of the United Kingdom is expected to watch this destabilisation of the Union in open-mouthed admiration, then shut up and pay up. The primary constitutional concern must be that voiced by Alistair Darling, whose hard-won victory in the independence referendum is being squandered away, that such fiscal asymmetry will damage the Union. He is right. Two fiscal systems (for that is what it amounts to) are incompatible with a unitary state. It can work in the United States because it has been part of the constitution, in a fully federal polity, since the 18th century. That is very different from scribbling proposals on the back of an envelope, with ludicrous emotive deadlines, such as St Andrew’s Day and Burns Night, for implementation of a radical new settlement affecting the whole United Kingdom.
The other major concern must be the devastation this will wreak on Scottish business, already suffering from the deterrence of investment caused by years of uncertainty during a ridiculously prolonged referendum campaign. That campaign was opened by the SNP with a platform party including extreme leftist parties and dinosaur trade unionists, but excluding business. As early as five years ago, CBI Scotland, the Institute of Directors Scotland and the Scottish Chambers of Commerce accused the SNP government of endangering investment through its anti-business policies. Its 2012 budget included proposals for a higher tax rate for larger retailers selling alcohol and tobacco, against the protests of the business community.
A return to the 50p tax rate – a Scottish leftist totem – will only affect around 13,000 individuals, but if half of them migrate south the economic consequences will be disproportionately adverse. The Scottish Left hates business. In Scottish political discourse the term “profit” is regarded as obscene. The SNP is the most left-wing party in power anywhere in western Europe. Now, thanks to the cowardly “Vow” made by David Cameron, Ed Miliband and Nick Clegg – three rabbits in the headlights – during a failure of confidence days before a Unionist referendum victory by a handsome margin of 10 per cent, the whole United Kingdom is being distorted and unravelled by the residents of socialism’s Jurassic Park.
The “Vow” had nothing to do with the Union’s victory: the Scottish electorate had assessed the economic consequences of separatism and rejected it. Now three craven political parties have snatched defeat from the jaws of victory and the United Kingdom is the victim of their cowardice.