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Blogs Coffee House

David Cameron is going to have to give the SNP what it wants

15 February 2016

6:39 PM

15 February 2016

6:39 PM

All Westminster might be agog with the latest shenanigans vis-a-vis the got-to-happen-at-some-point EU referendum but most sentient folk in this blessed land are magnificently uninterested in the matter. Not even this morning’s Telegraph splash – ‘Attorney General may back Brexit’  – can stir them from their slumber. At best the majors will have asked, over their E&B this morning, ‘Who is the Attorney General these days?’

North of the border, matters are just as quiet even though another great question remains unsettled. As yet, you see, there is no agreement on the terms of a ‘fiscal framework’ which will underpin the relationship between the finances of the devolved parliament in Edinburgh and the mother-parliament in Westminster. And if there is no agreement soon, if the Scottish government rejects the current proposals emanating from HM Treasury, then the new (or, rather, latest) Scotland bill will collapse and with it the entire rickety, jury-rigged, Heath Robinsonesque apparatus that was supposed to reaffirm and consolidate Scotland’s place within this blessed Union. How now Brown Vow? 

It is, as it often is with Scotland, about money. The financial details of the matter are sufficiently complex that they need not overly concern us here. Suffice it to say that the arguments over future adjustments to Scotland’s funding, taking into account the devolution of income tax and other matters, are technical enough to defy easy explanation. Few hostelries host vibrant discussions over the merits, or otherwise, of per capita indexation. Nor has anyone yet written arias hailing the principle of ‘no detriment’.

But, like most negotiations about money, it’s really an argument about politics. Which means some familiar heuristics still apply. Chiefly, which side has more to lose? Who has more skin in the game and, by virtue of that, begins from the weaker position?

A superficial analysis might conclude that it is the Scottish government that cannot afford to walk away from a deal. True, if that happened, Unionists would scoff and titter at the Nats. Look at them! All these years campaigning for more powers for Scotland and, when those powers are granted, do they accept them? Do they hell. They up-skirts and scamper away. What a shower! Don’t they look ridiculous now?

Well, maybe. This is the sort of thing that might seem persuasive in Whitehall. It won’t work in Scotland.

In Scotland, you see, the story will be rather different. It will be a simple, if familiar, refrain: Westminster is screwing Scotland again. The British government promised, via Gordon Brown, ‘nothing less than a modern form of Scottish Home Rule’. It promised that we would be better-off if we voted No; that we could count on all that ‘pooling and sharing’ that was such a ballyhooed part of the case for giving Britannia one more go. And what happened next? The British government proposed a fiscal arrangement that would have cost Scotland as much as £3bn. Some Union; some Unionist dividend.

That, I assure you, is a stronger message than anything the UK government will be able to deploy. It is one that will resonate with voters, not least because it confirms what many of them already – if erroneously – suspect. No wonder, then, that the Scottish Labour party has decided to back the SNP’s position.

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Viewed from England this might all seem like yet another example of cross-border blackmail. Why, the cry will go up, this deal must be fair to all parts of the UK, not just Scotland. And so, in an ideal world, it would be. But in this world things are different. The English, if only for their own peace and quiet, will be obliged to buy-off the Scots again.

Which is one reason why I would suggest, albeit with only tepid confidence, that there will be a deal. At Prime Minister’s Questions last week David Cameron was full of the (I paraphrase) ‘it’s time for the SNP to govern, time for them to put-up or shut-up’ blarney. And that’s fine and dandy. But that can only happen if there is a deal on the fiscal framework. And that leaves the ball in the UK government’s court. If the SNP say No, what are you going to do? Walk away from your own objective? Come on. Let’s get real here.

Would the SNP really walk away? Well, some nationalists would certainly love them to. They consider Smith and the Scotland bill a pig in a poke, handing largely illusory powers to Scotland that will, in practice be hard to actually use. (Hence, for instance, the SNP’s reluctance to increase rates of income tax except, probably, for the very rich.) These Nats – the New Fundamentalists, as you might call them – think the Scotland bill is a trap.

Very well, suppose it is a trap? Suppose it really is a means – this time for real! – of using devolution to kill independence stone-dead? All the more reason for the UK government to close the deal, even if that means giving the Jocks more than the Treasury might really like. Such a bargain would, from a (Scottish) Unionist perspective, be cheap at twice the price. The English might grumble, but ‘levels’ indexation is not going to cause a run on pitchforks and torches south of the Tweed.

In truth, the divide between the respective government positions is vastly narrower than generally assumed. That £3bn figure of which the Scottish government complains? What they don’t want you to know is that it’s £3bn (and probably actually less than that) over ten years. It’s less than one percent of the Scottish government’s current budget. It is about the same as a prudent annual underspend. It is about what the Scottish government currently spends subsidising flights from Scottish airports and ferries to the Scottish islands. It is, in the grand scheme of things, chickenfeed.

 

So, really, is the UK government going to allow this to fall because it wouldn’t close a gap that’s not much more than the annual subsidy to Caledonian MacBrayne? Come off it. Or, to put it another way, such a failure would be as grotesque as it would be reckless. If the UK government believes in its own arguments it cuts a deal even if that allows the SNP to claim a short-term tactical and PR victory.

The Scottish government, whether you agree with their fiscal analysis or not, has no incentive to move or make a counter-offer to close the gap between the two sides. On the contrary, their incentives lie in not moving. Not moving is ‘Standing up for Scotland’ which means that moving is capitulating to Whitehall. By contrast, as we have seen, Whitehall has every incentive to move.

Granted, there is a splendid irony in seeing the SNP implicitly accept that the current budgetary arrangements are actually, despite everything you’ve heard from the Nats since the time before time began, pretty damn good for Scotland. Better, certainly, than some of the alternatives (this – whisper it to your children – includes independence), but no man can live on irony alone. Not even irony of the ‘We are all Unionists now’ variety.

And, sure, there might be some schadenfreude to be enjoyed in saying to the Nats, ‘You wanted the ball, here’s the damn ball. Now play with it’ but even schadenfreude has a half-life and, in any case, the Scottish government will simply say ‘This isn’t the ball we wanted. Give us a better ball.’ And when they do that, most people in Scotland will agree with them. Because, regardless of party persuasion, Unionists and Nationalists agree that a better financial deal for Scotland is nicer than a less attractive deal.

The Treasury might have fairness and logic on its side but those are, when you get down to the dirty political reality, only small-arms. Emotional responses to politics trump dispassionate analysis. Squaring the fiscal framework circle might well, as the IFS has suggested, be impossible. In which case the thing to do is to make it a square, not a circle.

And, look Mr Cameron, if it is a trap then spring it; if it’s not a trap, make the deal anyway. Will Smith work and will it prove sustainable? In truth, no-one knows. But the Prime Minister made the bet that it would be; now he has to honour that bet even if the price is not one he would have hoped for. Which is why there will, I think, be a deal. Probably.

 

 

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