The SNP Government in Scotland has done remarkably well since its election success. A combination of Alex Salmond’s personal charm and a well-prepared programme for its first 100 days means that many of those who were sceptical about the SNP’s ability to run a viable alternative government have been won over. However, the new government now faces its sternest test – getting a budget through parliament. Given the limited amount of extra money from the UK Treasury, and the wide ranging promises made by the SNP over the last few months, cuts will have to be made somewhere. The choices that the SNP make will reveal whether they are at heart Celtic social democrats, prepared to steer a very different course from the previous Labour/Lib Dem coalition, or merely Tartan Tories.
The budget process also represents a huge challenge to the devolution ‘settlement’ of the last 8 years. Many of the big spending responsibilities – health, education, local government, transport and the environment – have been transferred to the control of the Scottish Parliament in Edinburgh. The responsibility for taxation remains with the Chancellor in London. The Scottish Government is funded by a block grant from London.
The tensions that arise from this are very obvious; especially as the UK Chancellor for the last decade has been a Scottish MP. If the Chancellor gives more money to Scotland, it is the Scottish Government that gets the political credit for the new hospitals, schools or railways that are built. If the Chancellor raises taxes in Scotland, he or she gets all the blame. It has been argued that, as the UK Government gets no political credit for spending on devolved matters, it will always try to minimise the amount it gives to Scotland. Equally, it is in the interests of Scottish Ministers always to demand more cash from the Treasury, without having to worry where it comes from. To some extent this tension has been abated by the fact that Labour was effectively in charge in both London and Edinburgh, so a Scottish Labour member of the UK Parliament (like Gordon Brown or Alistair Darling) could claim some of the credit for the actions of Labour members of the Scottish Parliament. Now, however, we have the SNP in charge in Edinburgh.
The results were predictable. The SNP claimed that the Comprehensive Spending Review announced by Alistair Darling last week ‘squeezed and short changed Scotland’. They claimed that, because the Treasury had re-jigged the baselines for spending, Scotland would therefore receive only £135 million extra next year, compared to increases that were often worth over a billion in previous years. The UK Labour Government responded by arguing that the SNP had got their sums wrong and were looking for an excuse to scale back some of their promises. But this argument is, in many ways, irrelevant. What’s important here is not the current squabbling, but the fact that the system makes it very likely that there will be similar squabbling every year unless the party in government in Edinburgh happens to be the same as the one in control in London.
So the current settlement cannot continue. The tension between the Treasury and Scottish Ministers is too strong. The Scottish Government will have to have greater tax raising powers. There are models the SNP can point to – the Catalan Government last year won the right from the Spanish Government to increase the share of income tax and VAT collected locally from around 35% to 50%. And, inevitably, with these tax-raising powers will come tax-varying powers.
All of this could represent a tremendous opportunity for the left. The Scottish Government has used its limited autonomy to resist marketisation of the NHS, to avoid school league tables, not to sell off the water companies and to build new railways (while railways are being closed in England). A Scotland with greater fiscal autonomy would have greater political autonomy, and could use this to set a very different course from that followed at Westminster. However, it doesn’t follow that this different course would be necessarily less neo-liberal than the UK Labour government. These new powers could be used progressively, to improve public services and economic democracy, or they could be used to set Scotland on a desperate race to compete with low-tax economies around the world, as some in the SNP have argued.
That is why the budget the SNP set over the next few months is so important. By showing us how the SNP use their existing powers, it will give a good indication as to how they might use wider powers.
The SNP manifesto for the 2007 election was a very effective piece of populist propaganda. It promised something to everyone – and it helped the SNP win votes from both the Trotskyite SSP and the Tories in the Scottish election.
But the big question they now face is how they pay for the promises, from scrapping student debt to more police on the streets, from smaller class sizes to business rate reductions for small business.
The SNP manifesto says this will be done by streamlining government and using government spending more efficiently. As you might imagine, this greatly concerned the civil service unions, but the SNP were at pains to reassure people that there would be no compulsory redundancies. However on 2 October it was revealed that plans are being drawn up for the Scottish Government to reduce the number of civil servants it employs centrally by 14% over the next 3 years. It will simply not be possible to achieve this without a reduction in the quality of service to the public and forced job cuts.
The SNP also made a commitment to freeze council tax levels at 2007-08 rates until their planned local income tax is put in place. Finance Minister, John Swinney, has no power to compel local authorities to do this, but he is also well aware that local authorities across Scotland are having real difficulties paying for the ‘single status’ wage agreements that will be required to ensure councils meet equal pay requirements. If he imposes a council tax freeze, without offering more central cash to make up the deficit, there will be a massive impact on jobs and services. We have already seen proposals by the SNP/Lib Dem coalition running Edinburgh Council to save money by shutting down 22 schools reversed after massive public opposition. Is Swinney prepared to force a spending freeze on local authorities whatever the cost?
The SNP also made a manifesto commitment that, “Transport policy must be
designed to meet the strategic needs of Scotland’s wealth creators”, which is why they are pressing ahead with road schemes like the M74 in Glasgow, a second Forth road bridge and the Aberdeen Western peripheral road. This cannot be sensibly reconciled with their commitment to 3% CO2 reductions. But by committing vast expenditure to roads, the opportunity to invest in world-class sustainable transport will be missed.
So the SNP will be faced with a series of strategic choices – cut business rates for small and medium-sized business or increase education spending to reduce class sizes? Press ahead with massive road building plans supported by the CBI and Road Hauliers or support local authorities to avoid massive cuts in jobs and services? Reject job cuts for the central civil service or increase the number of police by 1000?
There is already a struggle going on within the SNP over whose pet policies will have to be scrapped. The results of this struggle, which will be evident in the budget documents to be presented to the Scottish Parliament in a few weeks’ time, will tell us much about what kind of party the SNP truly is, and what impact greater fiscal powers for Scotland could have.
As Rector of Edinburgh University I was invited to preach the sermon at the University Service at Greyfriars Church on 23rd September 2007
