A real test of the desire for independence

London-based Dan McCurry is chair of the Labour Party Economic Society. Here he argues that fiscal autonomy for Scotland could be delivered within the union as part of an incremental process to enable Scots to assess the real impact of dividing the UK.

Labour can resist a Scottish referendum while supporting incremental steps towards independence. This would place the SNP in a position that would test the true level of support for independence. 

The first step is fiscal autonomy. The problem for Scotland is that this would end the Barnet Formula and bring about a 10% reduction in revenues. On the face of it you would expect the Scots to howl in objection, but much of the debate in Scotland is not about money but about identity and the need to run one’s own affairs.

Fiscal autonomy therefore acts as a test of the commitment to that goal. If the Scottish people clearly indicated their desire to chart such a course, then Westminster would have to support them. It would be an act of tyranny to oppose.

Fiscal autonomy does not close borders or restrict freedoms, it is simply a necessary step in the process of independence. Foreign affairs, membership of the EU and military commitments can all be on a later agenda.  So too can radical policies such as a Scottish currency, which could provide an economic advantage through a lower currency valuation.  Every one of these incremental steps could be reversed if the Scottish people changed their mind in a future election.

The problem with a binary referendum is that it is divisive and commits the country to unknown and irreversible outcomes, as witnessed by the Brexit vote. 

Nicola Sturgeon persistently calls for a referendum but not full fiscal autonomy, a curious position which demands analysis. If she was serious about the country rather than just the politics then autonomy would be her goal. But her call for a referendum is resisted by Westminster, which allows her to occupy a position of national champion against foreign oppression. The question is whether she is motivated by the defence of Scotland or the advancement of her own position.  

Keir Starmer could make fiscal autonomy dependent on the electoral success of the SNP while at the same time calling for Scotland to remain within the union. This would place the SNP in a position where they would have to choose whether to adopt the policy of fiscal independence and the consequent 10% drop in revenues and then argue for it to the electorate. 

Scottish Labour could passionately campaign for remaining within the union and Keir Starmer could be fully supportive of this position. If Scottish Labour fail to gain traction in the election, then they would have to accept the wishes of the people to take that first incremental step and end the subsidy of the union. 

The Labour Party Economic Society is holding an online event with Jonathan Portes on 23 July: Immigration policy at a time of mass unemployment.

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16 thoughts on “A real test of the desire for independence

  1. Nobody can deny that fiscal autonomy “COULD BE” delivered within the Union the problem is with INTENT to deliver it. NOBODY ANYWHERE believes any Pro Union English run political party would support the idea of allowing full fiscal Independence within this “Union” for any of the satellite member states of the unbalanced and unequal influence opportunity power control and authority of this “Union”. Those who “COULD” deliver dont want to because they would lose far too much.of that power authority influence opportunity and inequality which all lies in their favour.
    If Labours answer to their decent is to deliver yet another “Vow” of intent then oblivion is their only destination. Why are they the only ones who cant see it?

  2. Fiscal autonomy counts for nothing if it not accompanied by macroeconomic powers to allow the country to grow its tax base. It would not be acceptable to be offered the power to spend the taxes raised in Scotland with Westminster retaining the power to set those tax rates.

  3. Good article but too late in the day. Labour has been hinting at or promising ‘devo max’ or ‘as near to federalism as possible’ for years but then doesn’t deliver when it has the opportunity. I will never forget how Labour stood with the Tories arguing against devolving a huge range of powers during the Smith Commission’s work after the 2014 referendum, totally in opposition to the fine words they had spoken during the referendum. Labour has lost all credibility on the constitutional question and whatever they offer will not be believed. The only line that could gain support and help rebuild credibility would be a Labour commitment that they would support the right of the people of Scotland to another referendum on Scottish independence if such a measure was supported by a majority of MSPs – if they can not do this, they deserve electoral annihilation.

  4. But Dan, what I as a traditional Labour supporter don’t understand is why all this scheming is justified in order to protect a union in which progressive policies in Scotland are always going to be at risk from a right wing UKIP/Tory government such as the current one. It comes across that what matters is the Union and everything else is a means to that end. I’m genuinely puzzled this and I think our voting base generally in Scotland is too. It makes Labour come across as supportive of the establishment, ermine gowns and all. Not a good look and I don’t see why it is necessary. I’d be grateful for an explanation

  5. Yet another curious opinion piece by a London-based commentator who, rather foolishly, seems to believe whatever nonsense he is briefed by arch-unionists and barely relevant Labour apparatchiks in Scotland.

  6. Interesting read, thanks.

    I’m not qualified to comment on the economics, but I wonder how this proposal would be deployed and perceived politically. One of the great successes the SNP have had is in focusing attention on Westminster and the UK Government policy and decision-making, as being the cause of Scotland’s issues – this has been the case even in policy areas such as health, which are wholly devolved at present. Their argument is that only full independence can solve this.

    I’m a bit sceptical, therefore, that even the further practical powers and responsibilities inherent in full fiscal autonomy, would shift this perception hugely – in essence, that even with FFA, ways would still be found to blame WM, and not really provide a counter to the political drive for full independence.

    1. The means to pay for Health isnt Devolved its Reserved hence labour need to pretend it wants to deliver the means to pay for it as well.

    2. While Westminster largely determines the revenue Scotland has to spend and many of the policies it has to follow, nothing is truly “fully devolved”. Until a country has full control over ALL revenue and spending it will always be constrained in EVERY area of government; whether nominally devolved or not. That is just simple reality.

  7. Latest poll shows 54% in favour of independence with 37% of Labour voters also indicating they support independence. Does the Labour Party plan to continue to fight shoulder to shoulder with the Tories against the majority who want independence or are they going to have the courage to be neutral and allow party members to campaign for either side?

  8. Scotland will do well enough managing ourselves with independence, rather than having to rely on handouts from a Westminster Labour government to so called prove ourselves to their satisfaction.

    Scotland has no need of Labour’s numpty ideas, check the polls.

  9. Dan,
    Please stop it. We know that you know that full fiscal autonomy = independence. We know that you know that you cant get one with out the other, so cut it out.
    You might get away with that in London, but not up here.

  10. Full fiscal autonomy would have to be exactly that—-setting and racing all taxation within Scotland, with our own Treasury and civil service. It would not be a case of just giving Scotland 10% less out of a supposed UK pot. All our revenue would then be spent, not on our behalf elsewhere, but actually within this country.
    If London wanted a contribution for, say, a new generation of Trident, how would they frame it? We want to design, build and refit every component (bar the borrowed missile) in England, but we want Scotland to pay £12.6 billion?
    And we will borrow billions to build HS2 in the southern half of England, refit Westminster and the usual billions for London infrastructure—but you get a per capita share of the subsequent debt.
    You will have no say on the currency: on trade policy or objectives: on alliances: on acts of war: on international Treaties: on espionage: and so on.
    I don’t believe this fairy tale could come true anymore than Gordon Brown or Alister Darlings “promises”.
    No, I will look forward to Scotland becoming a normal, self governing country again.

  11. What Westminster giveth Westminster can taketh away. If ever the fantasy were to become a reality what mechanism could be put in place to make it permanent and prevent any future UK Governments from taking back powers and revenues? Technically any actual delivery of FFA would only be good for a single term of office. Thats just one of the major flaws in this disunion of unequals.

  12. Gavin (July 10th 9:32pm) and Dave (July 11th 6:17am) have pointed out the fatal flaws in the Full Fiscal Autonomy (FFA) “trap” that I was going to mention.

    What Mr McCurry has proposed here can be described as “independence but ….. “. We would have full power over revenue collection “but” Westminster gets to decide how much of that revenue it wants for its policies, whether or not Scotland agrees with those policies. Scotland would effectively become a vassal state that was compelled to “render unto Caesar” (in this case, Sir Kier Starmer but possibly Dominic Cumming) what he considers his due.

    Having said that, it could backfire on the rUK. Much, if not all, of the current alleged “Scottish deficit” is comprised of paying off interest on the UK’s almost inconceivably humongous national debt and letting the North Sea off with next to no taxation. In the case of the former, Professor Brian Ashcroft (Emeritus Professor of Economics at Strathclyde University …. and Unionist) published a paper in 2012 called “Has Scotland Already Spent It’s Oil Fund”. In it he finds that ….

    “I estimate using 19 years of Government Expenditure and Revenues Scotland (GERS) that Scotland’s share of UK debt interest amounted to £83 billion at 2001-12 prices. Subtracting this from total estimated Scottish spend of £1,440 billion we get a debt interest adjusted estimate of spend of £1,357 billion. Total estimated tax revenues are £1,425 billion. This means that Scotland was in overall surplus by about £68 billion. To put this another way Scotland had returned to it in spending for the Scottish people 95% of the tax revenues it generated”.

    In other words, Scotland had contributed not one penny to the UK’s national debt but was still having £bns added to its so-called deficit in interest payments on that debt. With a fair FFA settlement (and we know the likliehood of that) Scotland would only pay interest on any debt it actually accrued prior to FFA which, in all likelihood, would be £0 Or even a rebate.

    Similarly with North Sea revenue. Gordon McIntyre Kemp (an Indy) wrote a paper in 2018 called “Why UK’s oil and gas revenues are dwarfed by Norway’s”. In it, he found that if the UK’s oil and gas policies were run like Norway’s Scotland would have a multi billion pound surplus. For example, in 2015-16 (during the depths of the oil price slump Unionists gleefully revelled in) Norway accrued revenues of over £29bn from the sector while the UK actually GAVE the sector £23m!!! With a fair FFA settlement (caveat as above), control over the North Sea could see more realistic policies implemented that would more than compensate for the loss of Barnett consequentials.

    I somehow doubt Scotland would actually be offered a “fair FFA settlement” though. Anything offered would be designed to disadvantage Scotland in order to “teach us a lesson”. The flaw pointed out by Dave would then come into play when, in the fevered imaginings of Unionists, a beaten Scottish nation would plead on bended knee for a beneficent Westminster government to relieve them if the burden of governing themselves and abolish devolution. This, I believe, is the only reason Mr McCurry puts this distraction forward for consideration.

  13. This sounds more like a fiscal prison than fiscal autonomy. Scotland faces a huge demographic problem worsened by the Conservative’s immigration policy, it’s facing a hit from Brexit, it’s spending way too much on defence, has a currency with the wrong value and is unable to access funds from its central Bank.

    These things are manageable within the Union because funds are transferred from London. But you couldn’t possibly cut off the funds without dealing with any of these issues.

    A much more sensible policy for Scottish Labour to adopt would be to support democracy. Stop being a committed Unionist party and simply say that the party will support an independence referendum if support for Yes reaches 60%.

    Nationalist voters would see this as a reasonable position and only the most dogmatic Unionists would be against a referendum if 60% or more of the Scottish public supported independence.

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