Tag Archives: Scotland

The SNP’s strategic problem is that independence equals austerity

For much of 2010 a barrel of Brent crude oil sold for under $80.

Graphic from Nasdaq
Graphic from Nasdaq

Then it started to take off, so that in early 2011, it reached $125. Around this time, perhaps not coincidentally, the Scottish National Party (SNP) achieved a stunning victory in the Scottish parliamentary election, allowing them to govern on their own, in spite of the proportional voting system. In the following three years the oil price held at around $110, and it seemed quite reasonable for the SNP to assume that prices would stay there for its financial projections for Scottish independence for the referendum in September 2014. But by the time that referendum was held the price was in free fall. And, again perhaps not entirely coincidentally, the SNP lost the referendum. Now Brent crude trades at under $50. It may be stuck there for some time. Hold that thought in your mind; it is the most important thing to understand about Scottish politics. Scottish nationalism has always been closely linked to oil.

After reviewing the fortunes of each of Britain’s major parties after their Autumn conferences (and one minor one: my own Liberal Democrats) it is the turn of the SNP. Notwithstanding the loss of the referendum, the SNP’s dominance north of the border looks complete. The only way from here seems to be down, but when, on earth, is that going to be?

Commentators on Scottish politics from London, of which I’m one, are notoriously bad at understanding Scottish politics. As, indeed, are English politicians. But surely the same laws of physics apply on both sides of the border? We must try to understand what is happening, and where things might go.

First we need to understand how the SNP achieved its dominance. Nothing could be sillier that the narrative I have heard put about by English leftists that the SNP achieved its success through tapping a popular, anti-establishment mood, and in particular anger at “austerity” to become “a broadly based social democratic party” as one article put it. This is silly not because it is entirely untrue, but because it is so  incomplete that it might as well be. The SNP has achieved its success because it has convinced Scottish voters that it is the best party to look after their interests. This is not based on any particular policy stance, but through an appeal to national identity.

First they destroyed the Conservatives, who used to be a  major force in Scottish politics. They were aided in this by the complete ineptitude of successive British Prime Ministers, Margaret Thatcher and John Major. They managed to make the English look like an occupying power. The SNP were nicknamed the “Tartan Tories” by Labour, because of their appeal to right of centre voters. Their leader of the time, Alex Salmond, sounded distinctly neoliberal, with his wish to turn the country into a corporate tax haven, like Ireland.

But Labour fared better. In New Labour days, that party’s domination of Scots politics started well. The party delivered devolution and won the first two Scottish parliamentary elections, governing in coalition with the Liberal Democrats, who also performed respectably. It no doubt helped that one of New Labour’s architects, and its second Prime Minister, Gordon Brown, was very much a Scottish MP. But doubts were raised about the party’s commitment to Scotland. Its best politicians seemed much more interested in pursuing a career in Westminster than in Holyrood. The party struggled to find a convincing leader after Donald Dewar, Scotland’s first devolved First Minister, died in 2000. Labour’s Westminster “strategists” (as politicos like to call their tacticians) took Scotland for granted. The party’s seats in Scotland were mostly quite safe; there was little understanding of how to handle political competition.

The first cracks showed when Labour lost the Scottish elections in 2007 (by a single seat), allowing the SNP to form a minority government. But the party would not, or could not, understand the implications of giving the SNP such a lift in credibility. After all, Labour did well enough in the 2010 British general election in Scotland. But they should have understood the strategic implications when the party fared badly in Scottish elections of 2011, allowing the SNP to achieve that majority, and a mandate to hold an independence referendum. Labour continued to flounder. To be fair, the party was facing such deep strategic problems after losing power in Westminster in 2010 that it was difficult for them to do other than paper over the cracks and hope for the best. The party’s lack of political skill in Scotland, however, became evident to all in its incompetent leadership of the referendum campaign. The party really seemed to be only about providing careers for talented politicians in Westminster, local jobs for the others, and no use to Scots voters at all.

The SNP, of course, managed to use the referendum to generate a surge of interest in an optimistic brand of politics based on Scottish identity. Its leaders then made a brilliant switch. Mr Salmond stepped down as leader, and handed over to his deputy, Nicola Sturgeon, who had the reputation of being more left-wing. Ms Sturgeon duly turned the focus onto Labour voters. She used the mantra “austerity” in her messaging, to demoralise Labour activists, fed up by their leadership’s more careful line on economic policy. Labour collapsed to just one seat in Scotland (the same as the Lib Dems and the Conservatives) in May’s British general election.

The Labour left hoped that  Jeremy Corbyn’s ascent to the Labour leadership, amid a tide of new members, and his supposedly refreshing brand of “straight-talking, honest politics”, would change the party’s fortunes. Alas no. Scots voters deserted Labour because the party was useless to them. The party has merely turned itself from one form of uselessness to another. A chaotic debating society more interested in policy than power is not an improvement. The next Holyrood election is in 2016. Everyone expects the SNP to increase their majority, mainly at Labour’s expense (the Lib Dems were already crushed in 2011; the Tories have quite a robust core vote).

A further departure from the London lefties’ idealisation of the SNP is that the SNP conference was as far cry from the “new politics” they espouse. The Observer columnist Andrew Rawnsley said that it reminded him more than anything of a Conservative conference under Mrs Thatcher. The SNP are ruthless politicians, managing their message with discipline, and extending their hegemony to as many parts of Scottish life as they can. There is no open debate of party policy. This is not good for the quality of government there, but the party can and do blame any problems on the Westminster government. The SNP’s record is not all bad, though: the Scottish economy is more buoyant than any other part of the UK outside London and the English South East. Whether that arises from the SNP’s neoliberal tendency, or from its social democratic one, probably depends on who you talk to.

The SNP’s successful discipline arises from a clear, unifying purpose: their quest for Scottish independence. And therein lies their biggest strategic problem. That $50 oil price. That leaves little left to tax. It causes collateral damage to the oil industry based in Scotland.  It makes much of remaining oil beneath the North Sea unviable. This knocks a huge hole in the SNP’s economic plans for independence, which handed out goodies to all interested parties.

The low oil price is a product of America’s shale revolution, and increased energy efficiency. Meanwhile Iran will re-enter that oil market, and demand from China is tailing off. That $50 price could be around for quite a while. The “peak oil” theory is dead and buried. There is no sign that the SNP have any idea how to plug the gap in their plans for independence between $50 and $110.

And here’s the thing. In spite of this price collapse in oil, the Scottish economy is performing well. It is diversified, and the non-oil bits are doing taking up the slack. The tax revenue damage is being taken by the UK as a whole, which unlike Scotland would be on its own, is big enough to absorb it. You could not have a better illustration of why the Union makes such good sense for Scotland. It acts as a wonderful economic shock absorber. And, as Greece and others have shown, joining a currency union does not solve this problem. Before long, Norway will be providing a clear illustration of the challenge an independent Scotland would be facing. Independence means austerity.

Ms Sturgeon used the conference to manage down her party’s expectations of a second referendum soon. But with a low oil price and deteriorating demographics 2014 may have been their best shot. Unless Britain is mad enough to vote to leave the EU, the case for independence will be more difficult to make in future. It will take some time before the penny drops. But surely the SNP’s days of hegemony are numbered?

But for their different reasons, Scotland’s other parties are unable to exploit the SNP’s strategic weakness. Paradoxically, though they may have won the argument on independence, it may not help to make too much of their unionist views.  Just as England’s middle ground voters are not averse to austerity, Scotland’s middle ground clearly prizes its national identity, and isn’t scared of independence talk. Perhaps the tactic should be to concede the idea of a future referendum, especially in the absence of a proper federal settlement. That might clear the field to examine the SNP’s actual record. But that might take a higher calibre of leadership amongst Scotland’s opposition parties. For now the SNP does not face a serious challenge.

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Election issues: Scotland. Political chaos beckons. That could be a good thing.

I despair. My ambition was to do a weekly survey of important political issues relevant to this election. But after the economy and the NHS there seems to be little actual argument over policies. Housing and immigration do feature prominently in local hustings. But education, the EU, political reform: nobody seems interested. Instead the election news is dominated by Scotland. So that’s what I’ll cover this week.

The proximate cause of the fuss is the rise of the SNP. This surge was first evident in 2011 when they secured a majority in the Scottish Parliament, in spite of its proportional electoral system. But for some reason the Westminster parties did not appreciate the threat. The calculation may have been that unionists would easily win the referendum on Scottish independence which was to follow, and this would deflate the nationalist bubble. But the referendum caught the Scots’ imagination, and made the Westminster parties look flat-footed. The unonists won the referendum, but by a smaller margin than expected, and only through the use of negative tactics. The SNP bubble did not burst; new members flocked in, excited by its offer of hope and optimism.

The Lib Dems in Scotland had long been braced for bad things. Their association with the toxic Tories in Westminster turned a lot of their Scottish supporters off. But a collapse in the Labour vote took that party by surprise. They have offered nothing but negative campaigning and institutional inertia; it should have been no surprise – and it was certainly well-deserved. As a result the SNP seem certain to sweep Scotland on May 7, leaving Westminster with a problem. The party will surely hold the balance of power. and they have said that there is no way that they can support a Conservative government.

A flailing Conservative campaign has seized on this. It is stoking up English (and Welsh) voters with the idea a Labour government would be propped up by the SNP in a “coalition of chaos”. To stop this they are appealing to floating voters, especially those bending towards Ukip, to support the Conservatives to give them an outright majority and show the Scots who’s boss (they don’t actually articulate that last bit). Former Conservative Prime Minister John Major offered the English offered the country a stern warning.

So: what to make of this? My first reaction is exasperation at the Tories. They, more than anybody, and Mr Major, as much as any other leader, have created the situation where Scots and English and Welsh voters have diverged. Margaret Thatcher started it, with no comprehension of Scottish sensitivities. Mrs Thatcher “stole” the North Sea oil to prop up shaky English finances, and then dismantled much of Scotland’s old industry, creating mass unemployment. Well that’s how many Scots saw it, and still do, though whether Scotland would have been better off without her is another matter entirely. The final straw was piloting the hated “Poll Tax” in Scotland with no democratic mandate. Neither she, nor Mr Major, were interested in taking forward constitutional reforms that might give Scottish voters a greater say in their own government. Mr Major was quite passionate about this – he saw devolution as the start of a slippery slope. Well he wasn’t so wrong about that – but I hate to think what the state of Scottish politics would have been without devolution. The fact is that neither he nor Mrs Thatcher understood what was going on north of the border, and still less had any constructive solution. If the Tory brand was less toxic north of the border, the party would be much less isolated now, and the whole situation much more manageable. And if they truly believe in a democratic union, and the legitimacy of Britain’s electoral system (both core Tory beliefs), then they must allow that the SNP’s right to influence the British government is legitimate.

But the Tories are pointing to a real problem. The SNP have been setting out their stall on the UK-wide policies they would support. They want less “austerity” – i.e. more public expenditure unsupported by tax rises. They oppose Britain’s nuclear deterrent. They are also happy to vote on issues in the UK parliament that apply to England only – and in particular the NHS. Their justification for this is that Scottish public funding is based on the so-called “Barnett formula“, which ties it to levels of expenditure in England. The continued use of this formula represents a major strategic failure by the Westminster establishment. Unfortunately the three main Westminster political parties very publicly re-committed to it during the referendum campaign in a panicky “vow” in the last weeks. This gives cover for SNP MPs to make mischief. If only the Westminster politicians had thought about the matter more deeply, they could have found an escape route under the guise of giving Scotland more autonomy. But instead they simply put the matter on the “too difficult” pile, in classic Westminster style.

But how would a Labour-SNP partnership at UK level work out? The first point to make is not to underestimate the SNP leadership. Unlike the Westminster parties, they think strategically. They are unlikely to follow the playbook forecast by Mr Major, of demanding impossible things and storming off. A deal on economic policy is well within reach – the SNP vision actually sounds remarkably similar to Labour’s (bring the deficit down gradually; slowly reduce the level of national debt). A vote on the nuclear deterrent could well be engineered. SNP votes on selected English matters might well give the government a bit of stability. But two wider problems beckon.

The first is holding the Labour Party together. Many of the SNP demands will be popular with English and Welsh Labour supporters and MPs. This will exacerbate tension between Labour’s pragmatic leadership and its angry grassroots, its trade union backers, and its local mafias in key strongholds. To make matters worse, the party will be desperate to recover its standing in Scotland, and to fight back against the SNP. This is a toxic mix.

The second is just how SNP influence will play with the English public. The malign British press stand waiting to stoke up resentment. A backlash favouring both Conservatives and Ukip could well arise. This would be a lot worse if Labour has fewer MPs than the Conservatives, and yet are still able to form a minority government, because nobody will work with the Conservatives.

There are two ways that Labour might head off the problem, though. The first they will not like at all: and that is to form a minority coalition with the Liberal Democrats, so that they can securely outgun the Tories, and reduce their dependence on the SNP. They might then dare the SNP to bring this government down – along with some token concessions. This approach has the added advantage of a big block of Lib Dems in the House of Lords – which could be a key battleground for a minority government, but where the SNP are weak.

The second (and not incompatible) way is to quickly form a UK constitutional convention, to promote a package of political reforms for the UK. This is official Labour policy, though it ranks alongside their commitment in 2010 to introduce the Alternative Vote and reform of the House of Lords, both of which they torpedoed subsequently. It is official Labour policy to play for time – but they could start taking it seriously and giving it real political heft. This could, and should, provide cover to replace the Barnett formula, as well as portraying any partnership with the SNP as a stopgap while these bigger issues are dealt with in a properly democratic way.

Both solutions require rather more strategic insight than the Labour leadership has shown to date, however. But personally, I rather prefer the idea of a chaotic period of British parliamentary politics to a period of majority Conservative government. It might at last hasten the political reforms the country badly needs north and south of the border.

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The SNP are on manoeuvres. Westminster politicians should be afraid.

Scottish politics is an exercise in asymmetric warfare. The Scottish Nicola SturgeonNational Party (SNP) are steeped in the nation’s own political culture, and focus on their objective of obtaining its independence. The unionist parties are more concerned with the politics of UK as a whole, and push their policies concerning Scotland and the Union into the “too difficult” pile until too late. This has been stark in the last few years. The SNP won their referendum on independence (i.e. holding the referendum, rather than the outcome, which they lost). At first Westminster politicians did not take the campaign seriously, relying on comforting opinion polls. Then, as the No campaign went awry and they woke up to the implications, they panicked. The main party leaders made an ill-thought through pledge (referred to as “The Vow”) on devolving more powers. When the referendum was over, the main party leaders could only see the issue in terms of their own struggles for supremacy in Westminster. The Conservative sought to embarrass Labour with a call for “English votes for English laws”. Labour called for a Constitutional Convention to head this off, but offered no vision of how the thought the union should be run. The SNP are now about to make both parties pay dearly for their negligence.

The SNP lost their referendum, but far from being depressed and demoralised, they have treated the affair as a sort of reconnaissance in force preliminary to a longer campaign. They have made a sharp change in strategy. First their long-standing leader, and Scottish First Minister, Alec Salmond  stepped down, to be replaced by his very capable and popular deputy Nicola Sturgeon. Then Mr Salmond said that he would stand for the Westminster parliament in the May election, meaning that Westminster would have one of the party’s biggest hitters. Then yesterday Ms Sturgeon dropped a bombshell. She said that the SNP at Westminster would happily vote on the English NHS. Until now the SNP at Westminster have stayed clear on voting on matters, like the NHS, which have been devolved to the Scottish parliament. The reason offered is that Scotland’s funding formula (“the Barnett formula”) means that their funding might be affected by England’s health policies. There is practically no aspect of devolved policy that this argument could not be applied to. The SNP are now offering themselves as a fully fledged coalition partner to the Labour Party, should the latter fail to win an outright majority. The three main Westminster Parties hadn’t seen this coming, and they are in utter disarray.

For Labour this is unmitigated disaster. The SNP’s sudden interest in Westminster politics makes a large number of their MPs in Scottish seats vulnerable. The current polling is awful; the party could lose 30 seats. Labour has taken Scots voters for granted ever since the Conservatives’ Scottish presence collapsed under Mrs Thatcher. Their ineptitude was on full display during the No campaign. They have no idea how to construct a persuasive, coherent message and stick to it: their preferred method is just crude menace.  Their campaign message so far is to threaten Scots voters with another Tory-led government. “Don’t worry,” say the SNP “if you vote for us instead we can stop the Tories too.” Labour are left with just emptiness in return. They have no vision of Scotland’s place in the union beyond panicky responses to nationalist pressure.

Intelligent Tories (there are some) should be troubled too. The purpose behind the “English votes for English laws” idea was simply to embarrass Labour in England by pointing out how much they depended on blocks of Scots and Welsh MPs. There is no coherent, workable model of a well-functioning UK constitution behind it. But it carries the risk of destabilising the Union by stoking up English resentment without offering an answer. The SNP have just made that much worse. What about the fate of England’s NHS being dictated by SNP MPs? Conservatives (mainly) support the Union. Scottish independence would be seen as national humiliation and a bitter blow. And yet they are playing into the nationalists’ hands.

Things aren’t much better for the Liberal Democrats. Their main problem is political weakness, resulting from a backlash for going into coalition with the Conservatives. This is at least as strong in Scotland as it is elsewhere in the UK. The party has thought through its vision of the UK constitution more than the other parties, and its solutions are much more robust. But its softly-softly approach to devolution within England, and rejection of the idea of an English Parliament and government, look constructed for a gentler pace of politics than is in prospect if the SNP do well. Still there are some silver linings to the very dark clouds. Labour are retreating from seats they were hoping to take from the Lib Dems, in order to face off the SNP in their own backyard. And Christine Jardine, their feisty candidate in Gordon, the seat Mr Salmond hopes to win, will be no pushover, as she rallies the anti-SNP vote.

But each of the main unionist parties need to take a step back, and form coherent ideas on how the constitution of the Union should look. It isn’t enough to call for a Constitutional Convention; each party must spell out a clear vision that looks sustainable in the face of mischief-making by the SNP. Even if such ideas have short-term political costs. The people of this United Kingdom deserve no less.

 

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Real devolution is about taxes

The Scottish referendum was supposed to change everything. It was supposed to have created a constitutional crisis that Westminster politicians could not ignore. Well, the Labour and Conservative party conferences have been doing their very best to resurrect a different narrative, with a rapid return to the usual political nonsense. But before long the House of Commons will have to consider further devolution to Scotland, which will bring matters back into focus. It is still worth thinking about the practical issues of devolution. And the biggest issue that needs clearer thinking is tax.

Politics is not just about creating, changing or abolishing laws. It is about balancing revenues and expenditures. In fact, in modern politics, this latter is probably the most important job of politics. How much to tax? Where to spend the money? Unfortunately, the British model of devolution shies away from the taxation side of things. Central government passes on cash grants to the devolved authorities, who have very limited tax-raising powers of their own. Devolution is about spending priorities, not about how much to spend overall. To get more money, a devolved authority has to apply political pressure to the central government, who may or may not grant it. This creates a very unhealthy tension between the various levels of government. Or, to put it another way, if the devolved government finds itself short of funding, it can just blame the central government.

And the Scottish National Party (SNP) has been skilfully exploiting this tension to undermine the union. Scotland does have a rather fudged right to vary the rate of income tax – but is has never used it. Instead, it is blaming the UK government, and hence the union itself, for imposing “neoliberal” policies on Scotland. In the referendum there was a highly mendacious, but effective, claim that the NHS would be safer in an independent Scotland – in spite of the fact that the local NHS is already run by the Scottish government.

But the ability to raise taxes is one of the essential things that defines what a government is. Meaningful devolution, whether to the British nations, regions or local authorities, must involve the freedom to tax. There are many ways in which this is done in the various systems across the world. The most extreme is in the United States, where the states have almost unlimited freedom to tax, and where local taxes are clearly separate from federal taxes. That latter point is very important to achieve democratic accountability. In other countries the freedoms of devolved authorities is much more tightly defined. It is well worth thinking about what sorts of tax it is practical to devolve.

The classic economic answer to this is that the more geographically tied a tax is, the easier it is to devolve. So taxes on property are good to devolve; taxes on financial investments and capital are not. Let’s look at the British tax system in this light.

There are four main types of property tax. Council Tax, Business rates, Stamp Duty and Capital Gains Tax (CGT). The revenue from Council Tax already goes to local authorities, but its structure is set at national level, and powers to vary it are heavily constrained (though the Scottish government has fewer restrictions). Business rates were highly centralised, but this is being released back to local authorities in the typical sort of fudged British way that makes accountability unclear. Stamp Duty and CGT are tangled up with the same taxes on highly mobile assets, and are centralised. It would be quite easy to disentangle Stamp Duty on property transactions and devolve them – but much more difficult for CGT. But we have to be careful; financial engineers can blur the distinction between property and financial investment (the property can be held by an investment trust, for example), so anti-avoidance provisions would need to be designed.

At the other extreme we have capital taxes. These are Income Tax on the income derived, Stamp Duty and CGT again, and Corporation Tax. I will come back to Income Tax. Corporation Tax is the most contentious issue. Both the Scottish and Northern Irish governments want to be able to set their own rates. But this is usually dismissed as being impractical, or leading to tax avoidance in a sort of negative-sum game. Nothing is more mobile than capital, after all, and Corporation Tax is a quintessential tax on capital. This line of argument is overdone. One idea might be to determine profits at a UK level, but allocate using some variation of the “Massachusetts formula” using property, employment and sales as the basis of regional allocation. This works well enough in the USA, and I have long advocated its use internationally too. If all a company has in Scotland is a brass plate on a registered office, the Scottish Government would not be able to tax it.

In between capital and property we have people – or more properly income earned through employment, whether directly or deferred, though pensions. These are taxed through Income Tax and National Insurance. Income Tax is the most politically accountable of all taxes, and so it is quite natural that most debate centres around how this might be delegated. But this is very messy. It is also levied on investment income, and then you have the complexities associated with rate bands and tax free allowances. It would be much better to devolve National Insurance, either just that paid by employers, or including the Employee tax too. It could be renamed “Local Income Tax”. The tax was originally set up to fund social benefits such as pensions and unemployment benefit – but the Treasury has long since broken that link. There is one important issue with it though: it is not levied on pensions. But pensions should be a UK issue that is not devolved. Regions with a high density of pensioners would suffer from a low tax base: but this can be equalised – and I don’t think it is unhealthy for regions and localities to have an incentive to encourage employment, rather than just property ownership.

Two other areas of taxation are important. First is VAT (and theoretically, any sales tax). This could be localised, but there are two difficulties. First is that with the development of online sales, it is increasingly difficult to locate a sales geographically – something that has become a big problem in the US. The second is that VAT is tangled up in European Union treaties and law. It is best left alone. The other area of taxation is natural resources, and especially oil and gas. This can be geographically isolated, though most oil extracted in English waters is landed in Scotland. This is the biggest bone of contention between Scotland and Westminster. But I would be tempted to call the Scots bluff and devolve it. After all most of the issues of infrastructure that go with resource extraction fall on the Scots government.

So what is my straw man for Scotland, or any other devolved region? First, I think a diversity of sources of revenue is a big help.  I would create a new Local Income Tax in place of or alongside National Insurance, that would initially be structured in the same way. Next I would allow Corporation Tax to be split according to the Massachusetts formula, with variable rates. I would give devolved authorities more powers over Council Tax and Business Rates. I would devolve oil taxation. I would consider establishing a new property gains tax in place of CGT on property.

A fantasy I am afraid. The UK Treasury remains the most powerful force in British government. It has no intention of conceding any of this – and would feel the state would be fatally undermined if it did. It would rather fudge something around Income Tax – the one tax that I think should be entirely “Federal”.

 

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#indyref – now is the time for more democracy, not political manoeuvres

So Scotland voted No to independence, and by a margin of nearly 11%. That’s a big relief. A Yes vote would have ushered in three or more years of hard negotiation and uncertainty that would have served no very useful purpose. But what next? There are signs that the political elites both sides of the border are on manoeuvres. But I am backing the Electoral Reform Society’s call for a Constitution Convention. There is a link where you can sign up here – though this is confused by a focus on just Wales; I hope they get their act together o this.

The story so far. Though Scotland voted No, this was only after the main Westminster party leaders, and the hero of the No campaign, former UK Prime Minister Gordon Brown, all promised to deliver Scotland further devolution and protect their funding settlement. Some refer to this off as Devo Max – but others say it falls short of this ideal, whereby the Scottish parliament would be responsible for everything but defence and foreign relations. This promise has to be delivered – but it destabilises the constitution of the UK as a whole.

In particular the Prime Minister, David Cameron, has said that reforms must take account of English government. By this he means the problem that Scottish (and Welsh and Northern Irish) MPs vote on domestic English matters, while having no equivalent powers for their own regions. The Conservatives spy an opportunity to embarrass the Labour Party, who may depend on Scottish and Welsh MPs to deliver their party programme in England. Many Tory MPs are talking a lot of sense (for example John Redwood in the FT) – and this not something I say lightly. But opportunism is not a solid basis for a robust constitutional settlement. Most thinking is half-baked, because we have not had a proper period of deliberation on the matter.

It is right that MPs are asking about the wider constitutional settlement. But it is wrong to neglect the process of democracy. One of the energising aspects of the Scottish vote was that it involved voters in an important decision. The turnout was very high (85%) by our normal standards – securing a level of political engagement that has been most unusual. Any constitutional settlement for the UK needs to similarly democratic, even if it cannot hope to reach such heights. There needs to be a deliberative process that draws people in, a Constitutional Convention, followed by one or more referendums across all of the UK. The Westminster elite don’t seem to want this; the Edinburgh elite seem no better. They don’t want a process that they can’t control. They want a platform for point scoring, not a process of consensus building.

But these are hard questions, which are not susceptible to quick political fixes. If we don’t opt for a proper deliberative and democratic process we are in danger of lurching from one constitutional crisis to the next.

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As Scotland decides, the recriminations in Westminster begin

I make no apologies for the third post in a week on Scotland’s referendum next week. A political story this big is rare. This time I want to consider Westminster’s reaction to the episode. There is, of course, shock. The story has departed from its script. And with that shock comes recrimination. This sort of reaction is only human, of course – but the reactions miss the point. Britain, with its unwritten constitution, is uniquely vulnerable to this kind of sleepwalking disaster.

The most extreme reaction comes from John Major, who was Prime Minister from 1990 to 1997, at a time when the move towards devolution in Scotland developed unstoppable momentum. He is basically saying “told you so”. He said that the whole devolution idea was a mistake, as he said at the time, and it is ending just as he forecast. Well, he is right that simply devolving power to Scotland (and Wales and eventually Northern Ireland) without considering the impact on the wider United Kingdom constitution was asking for trouble. But the resentment felt by the Scots over remote rule from Westminster was overwhelming. Something had to be done in the name of democracy. Besides, devolution seems to have been a success, for Scotland at least. Outside London and the South East Scotland is the most successful region in the UK. This kind of success is about a lot more than public subsidy. No doubt the oil industry has helped, but Scotland has seen the sort of economic dynamism that is sadly lacking in other regions of the country.

But Mr Major’s is a lonely voice. Many more are saying that it was foolish of David Cameron, and the Scottish Secretary of the time Michael Moore, not to agree to Alex Salmond’s wish for a three-way referendum, with “Devo-max” as a third option. But almost nobody outside the SNP thought that a three way referendum was a good idea at the time. I personally could not get my head around it. Referendums are a blunt instrument, not suited to complex questions. The whole thing looked like a sly manoeuvre on the part of the SNP to get more devolved powers, from which to launch a future bid to independence. If they had wanted Devo-max rather than full independence, they should have negotiated that explicitly.

A third line of recrimination, and the loudest, is against the No campaign. It is accused of being lacklustre, pessimistic and negative. It focused too much on the practical problems of separation. This is true. But negative campaigning is the Westminster way. Our politicians, advised by sophisticated professionals, find negative messages more useful than positive ones when it comes to campaigning for votes. They have two basic types of strategy: one is to rally the core vote, and the other is to swing marginal voters. Nothing rallies the core vote better than distrust of the other side. And swing voters are often cautious types who make up their mind on small things. This was certainly the view of the No campaign, which went for the second strategy, sensibly given the likely high turnout. Their polling showed that it was worries about the practicalities that was bothering the swing voters – so it addressed its energies to them. Such negative tactics worked triumphantly well in the referendum on the Alternative Vote in 2011; the No vote campaign was simply doing things the Westminster way. But that left the feeling that the argument for union was hollow at its core – something that besets Westminster’s other campaigns.

Of course what the critics are unwilling to do is look at the wider picture, and recognise the vulnerabilities of the British system of government. Our highly centralised ways are bound to cause disaffection at the periphery. Devolving spending powers faster than taxation powers is not a stable solution to this: it just sets up a tension between the central government and the devolved one. And asymmetric devolution, favouring some areas over others, creates further tensions – tending to focus the tension in some areas rather than across the country.

There is a tried and tested method for containing and managing such tensions, that almost every other democracy uses. That is a written constitution, which defines the powers clearly at each level of government, and sets out clear ways of how the balance of these powers can be changed. The constitution usually has its roots in a process of consensus building at an important, nation-defining moment, giving it moral authority.

But Westminster dislikes written constitutions. It loves the flexibility of Britain’s looser arrangements, whereby Parliament adopts the powers of a Renaissance monarch, bolstered by a sort democratic myth in place of the divine right of kings. And indeed such flexibility has its advantages. But it has vulnerabilities too. The constitution becomes a plaything of ordinary short-term politics; small changes are made that create further tensions that require more short-term changes. Or some constitutional problems are deemed too difficult, and not addressed, allowing very destructive tensions to build. Devolution to Scotland is a case of the former. Devolution within England is a case of the latter. The country sleepwalks into constitutional disasters. Scottish independence is one such potential disaster; departure from the European Union is another.

It requires some kind of national shock to give momentum to comprehensive constitutional change. The referendum in Scotland, whatever the result, is a big enough shock to set such a movement in motion. Time for a Constitutional Convention.

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As Scotland debates, what about England?

The referendum in Scotland is the most interesting thing to hit British politics for a long time. Last night the unionist side wheeled in former Prime Minster Gordon Brown. Mr Brown vindicated my judgement of him last week as being a cut above our current, mediocre political leaders. But how is this drama playing down here in England? After all the outcome involves us too.

The first point is that we are bit late on the game. The Scots have been arguing about the matter intensely for many months. The English, taking their cue from their politicians and media, have largely treated the matter as a foregone conclusion for the union. Only now is the terrible truth dawning. That lack of debate has left thinking very underdeveloped. But I have detected some new trends, at least in the rather non-typical, liberal circles that I inhabit.

Firstly there is envy. People in Scotland are having a real debate and vote on something that clearly matters. If they vote Yes it will make a real difference to the ruling political elite. Usually all that seems to be at stake is the recycling of the same group of usual suspects. Scottish people are talking about the country they want to be. It’s no wonder people are registering to vote and a high turnout is expected. We aren’t getting that here. And the thought of giving that elite, not just the politicians but the media pack, civil servants and lobbyists that cling to them, a bloody nose is distinctly tempting. It becomes rather less tempting when you think that it empowers an Edinburgh political elite, who, to say the least, do not look a trustworthy bunch. But that’s another matter.

The next thing is a common hope. Surely, after a Yes vote, or the near-death experience of a narrow No vote, a shake-up will follow in England? This referendum could be good for all of us. But that will only be true if a grassroots movement, from outside the Westminster elite, demands it. That is possible, though I see no sign of it yet. That movement needs something to ask for – some sort of constitutional change – but I see no evidence of the English developing enthusiasm for that. Without a grassroots movement, Westminster will simply drop back into its usual complacency.

A further response is a rather depressing one. Without the Scottish MPs the House of Commons will be weighted much more towards the Conservatives. There is a much greater chance of a referendum on Britain’s future in the EU. For many this is just the sort of constitutional change that will shake things up – even though its outcome will be to concentrate more power amongst the Westminster elite, rather than take them down a peg. The odds of the country leaving the EU will surely rise. Actually we should be a little careful here. The environment after a Scottish Yes vote will be so different that we cannot make predictions about how political attitudes will shift. The Conservatives may not find it so easy to win in the rump UK.

But what if Scotland stays in the union? The Westminster leaders are already promising the country a greater level devolution on our behalf. But they are silent about how this will affect the rest of us in England. That is no doubt because they are hoping people won’t care enough create much of a fuss. But it leaves us with the English Question. This is referred in Westminster pompously as the “West Lothian Question”, after the very pompous former MP for West Lothian, Tam Dalyell. This is no doubt their way of trying to minimise its significance and I refuse to accept this nomenclature.

The English Question is this. If Westminster has devolved powers to Scotland, along with Wales and Northern Ireland, it means that Scottish MPs can vote on a whole range of important questions of English policy, without English MPs being able to influence the same issues in Scotland (or Wales or Northern Ireland). It is a very awkward conundrum for Westminster types, because it is difficult to deal with without undermining their own power. Their typical reaction, when it is posed, it to mutter something about it being very difficult, and then to change the subject.

How might the English question be solved? There are three lines of attack The first is to somehow stop non-English MPs from voting on English matters. This is invariably the way Westminster politicians think of solving it. But it gets very messy. How do you, precisely, differentiate between English and British affairs without an explicitly federal constitution? What if the British PM does not command a majority in England? The second appraoch is to devolve powers to local governments in England. But, to be anything like equivalent to the Scots or Welsh devolution, there would need to be some kind of regional level of government. This only exists for London, though other metropolitan areas are inching towards such structures. The regions defined for European elections and statistical purposes have no resonance with public identity and are not fit for this purpose.

The third approach it to set up a separate English parliament, and English government, leaving a federal government to govern the residual issues of the UK itself. To me this looks the most promising way forward. But it raises many questions.

But the most important point for now is that there is no consensus in England about the right way forward, and the issues have not been aired enough. The next step, surely, is to convene a constitutional convention to develop proposals, which can then be put to the whole country in a further referendum or referendums. This convention could be convened either at the English level, or for the whole of the UK. The latter, of course, is the only way of dealing adequately with how a federal level of government could work, and what to do with such institutions as the House of Lords. But the big requirement is political momentum – and it may be easier to get this at the English level, and to deal with the wider consequences later. After all this whole process was set in motion by a Scottish Constitutional Convention in the 1990s.

It is, of course, unutterably depressing that our political leaders, including the Liberal Democrats leader Nick Clegg, who should know better, are not calling for such a convention. But we English should be demanding it.

 

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Why neoliberals will be voting Yes to Scottish separation

Scotland votes for independence or not from the rest of the UK in just ten days time. Until now the complacent Westminster establishment, politicians and media alike, hasn’t taken the debate seriously. In the last week more opinions polls have been commissioned for the Clacton by election than on the referendum question – one reason that it is hard to tell how opinion is shifting. But the Yes campaign now seems to have the wind in its sails, and Westminster has to take the issue seriously. They are completely unready. Westminster types understand why a Scots breakaway is bad for them, but are struggling to understand why it should be bad for the Scots. Or to show that Westminster complacency has been dented by anything more substantive than temporary panic. The latest idea is to promise Scotland more devolution within the UK if it votes No; but the idea of a constitutional convention for all of the UK still seems to be off limits.

And yet there is muddle on the Yes side too. Independence supporters are making real headway with the argument that separation is the best way to preserve the Scots’ social democratic heritage. Scottish people have tended to be more left leaning than the English, and treasure such institutions as the NHS and social security. But this is under threat from “neoliberals” in Westminster, who want to shrink the state and run Scotland more like Texas. A Yes vote means No to the neoliberals.

At first sight this line of argument looks plausible. Most neutrals think that separation would be financially neutral; the extra social security transfers that Scotland gets compared to England will be made up for by extra oil revenues. This being so, an independent Scotland should have little difficulty in keeping the current level of state generosity going. And anyway, look at Sweden, Denmark or Norway, notable for very generous social security, in spite of being of similar size to Scotland.

All this follows the popularity of deciding political questions on “facts”. But there are two problems with factual analysis. First factual analysis is backward looking, when political decisions must be based on the future; second is that our usual factual analysis is based on aggregates and averages – concealing important fluctuations and details within. Both issues affect any analysis of Scotland’s future prospects.

The first point is that bigger ships make for a smoother ride. Look at northern Europe’s smaller nations, from Ireland in the west (or we could include Iceland) to Finland in the east. Their economic history of the last 40 years has been marked by deep economic crises, striking deeper than anything that the UK has experienced (Denmark may be an exception, admittedly) – even as they might experience headier booms. This rougher ride makes generous provision of state services more difficult to manage over the long term. During periods of crisis governments find it difficult to borrow and they are forced to make deep cuts.

But the Scandinavian countries have achieved a generous welfare state, haven’t they? Yes, but at the cost of much higher levels of tax. According to the Heritage Foundation, the UK tax take in 2012 was 39% of income; in Finland and Norway it was nearly 44%, in Sweden nearly 46%, and in Denmark it was 49%. Funnily enough Scotland’s First Minister Alex Salmond’s main idea for economic growth is to reduce taxes, modelling his policies on Ireland (2012 tax take nearly 31% and a weak welfare system to match). Danish welfare based on Irish taxes doesn’t add up.

But can’t Scotland just follow the Danes and Swedes and ratchet up taxes? Ignoring the economic issues with this (which these states have managed to overcome), the political tide in Scandinavia is rightwards. It seems that the higher taxes were acceptable to homogenous, inward-looking  societies where people were less worried about freeloaders – but that the pressures of a modern economy undermine that. Surely Scotland will find it impossible to recreate the conditions of a past Scandinavia;  it will be politically hard to raise taxes.

And meanwhile Scotland faces the same demographic challenges of an aging population, and rising healthcare costs, as the rest of the developed world with the added challenge of having to reallocate jobs, infrastructure and taxes as its oil resources are depleted.

Scotland faces a much more bracing climate as an independent country than within the UK. This is not a bad thing in itself, of course. It will help the Scots break out of a victim culture, where too often problems are blamed on the English. But the political movement that will most welcome this state of affairs is that despised breed: neoliberals. Independence would give them a shot in the arm. Scotland’s cherished social democracy depends on being part of a larger system of taxes and transfers that absorbs shocks more easily, and makes financing on world markets easier. Big states are more sustainable in big countries.

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Scotland: the problem is English complacency

The temperature is steadily rising in the debate over Scottish independence on 18 September this year. Today the three main Westminster parties will say no to a currency union between an independent Scotland and rump Britain. Last week the UK Prime Minister David Cameron made an emotional appeal for the union. But still not enough searching questions are being asked by the English on what this all means for them.

At least Mr Cameron’s remarks were directed towards the English, though the British media ignored this and only sought reaction from Scottish politicians and voters. He urged the English to support the union and tell their Scottish contacts that they did not want them to go. Unlike Mr Cameron, I have no Scottish family heritage. But I love Scotland and, like him, feel that if it went its own way an important part of my national identity would be diminished. But if such sentiments are to cut any ice north of the border, we English have to ask some searching questions as to how it has come to all this.

The problem is that Mr Cameron’s (and my) feelings don’t seem to be shared by many of our fellow English. Many seem to have a rather sour attitude towards the Scots, who should be less hostile and more grateful. This is all of a piece with hostility towards the European Union. Many English want to blame foreigners for their problems, and to inhabit a world where the English can ignore them except to the extent that they provide beach holidays (not something that Scotland scores on…). This reveals a paradox at the heart of the English identity. We see ourselves as an island nation, who should be control of our own destiny. And yet any greatness that the nation has aspired to has been achieved by the country playing a full part in the wider world.

We might ponder this as we approach the centenary of the 1914-18 war. There was a definite view in 1914 that we should just let the “Continentals” fight it out amongst themselves. And yet most people understood that German domination of Europe would imply German domination of Britain too. And so this country played a full part in a European continental war for the first time since the days of Marlborough 300 years ago (if you discount the largely naval and economic contribution o the Napoleonic wars), with results that can be seen in war memorials in practically every village in the country.

What has this got to do with the Scots? The Scots have always shown a better understanding of their place in the wider world – a sensitivity that comes from being a smaller nation, no doubt. They have contributed to the British nation as a whole, and still do. Can a lesser Britain, without Scotland, aspire to be treated as equals with France and Germany? Or will we take our place with the next tier, Spain and Poland? Or just be lame duck major power like Italy? It would not just be a loss of resources that would diminish the country, but a loss of prestige.

And yet Scotland is a very different place to England, with a separate identity that far outweighs that of any region of England, and which is more coherent than that of other parts of the Union: Wales and Northern Ireland. (Even if some Scots nationalists exaggerate these differences and their own coherence). The English nevertheless have a tendency to treat the place as a simple extension of England. This was at its most egregious under Margaret Thatcher in the 1980s and 1990s, when she used Scotland to pilot her pet Poll Tax idea. This problem persists, as we see from the imposition of the Coalition government’s benefit reforms (aka benefit cuts), to which Scots feel they have not consented.

Devolution has not a stable answer to this tension, though it has helped. The problem is that it is not symmetrical. There is no equivalent devolution of power to England, which is run directly by the UK government. Scottish (and Welsh) politicians aspire to run parts of the English government, like health and education, and they are thus drawn into English domestic politics rather than their own. This simply feeds English confusion and resentment as well as diminishing Scottish and Welsh domestic politics.

A new constitutional settlement is needed for the United Kingdom. I have already described what I think this should be (Time to Think of England: an English government and parliament meeting somewhere other than London). It is depressing that such ideas are not getting an airing. The biggest threat to our union is English complacency and conservatism.

 

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Time to think of England

This week it was St George’s Day, a time when we in England reflect on what it is to be English – a few of us do anyway, especially when St George himself was so un-English. There was also a small flair in the ongoing campaigning over Scottish independence, when the British government poured cold water on the idea of a currency union between an independent Scotland and the what is left of the UK (which would no longer be a united kingdom…). As I have written before, it is a conceit that there is a Scottish problem for the UK. The issue with Scotland is just an aspect of the English problem. England so dominates the union that governance of England and governance of the UK get confused. We need to look at remaking the constitutional arrangements for the whole UK if Scotland, as expected, decides to stay in the union at their referendum next year. But how?

At this point it is all to easy to craft elegant new constitutional solutions to solve the problem. Alas, that is not how the British constitution works. We are deeply conservative. Any proposed change throws up a series of opponents, who are able to stoke up fear of change. The AV referendum in 2011 was a very painful experience for people who thought that sensible constitutional reform, or even sensible debate about reform, was an easy matter. So where does that get us?

First there must be a crisis. Most people must think that the current situation is intolerable. The crisis is presented by the Scots. Of course, if they vote to stay in the union, most English politicians will want to think that it is an end to matter, and we can go on as before. I don’t think many Scots think this, though. Even holding the referendum is a shocking event, showing that consent for the current British constitution is breaking down. Most think that if they lose the referendum, the Scottish National Party (SNP) will respond by pressing for “Devo-Max”, which will then look like a sensible middle way. Devo-Max implies a much greater level of devolution to the Scottish Parliament, leaving the UK responsible for just defence and foreign affairs in some readings, like Gibraltar, perhaps. Why, then should Scottish MPs have so much say in who governs England? This question is an irritant now, but it would become a much bigger deal. We need to head this problem off with a new constitutional settlement for the whole of the UK.

Second, messing with the sacred sovereignty of the House of Commons is to be avoided. To some people, including me, this is pompous twaddle. A parliament’s fitness for purpose is not derived from history, but from what it actually does. The people should be sovereign. But the sheer weight of traditions and interests that centre on the Commons is not to be trifled with. This body needs to rule all of the UK. Restricting its scope to England, for example, and having a new Federal Assembly is going to get nowhere.  And after the AV fiasco, changing the electoral system is off the agenda too.

And thirdly, there needs to be something for everybody in any new settlement. Each of the three main British political parties, and their backers should see at least some benefits, to weigh against inevitable threats. There will not be a consensus, but any new proposal must have broad support from a cross a wide spectrum.

And so to the English problem. In order to balance out devolution to Scotland (and to Wales and Northern Ireland) there must be an equivalent devolution to England. To many the sensible thing to do would be to establish English regional governments, of the same sort of size as Scotland, to give an overall shape resembling Spain or Germany. Elegant an idea as this may look, though, it has no legs. Local traditions in England have been so hollowed out over the centuries, unlike in Germany or Spain, that there is little in the way of tradition to build on. The English administrative regions, used for things like elections to the European Parliament are mostly named after points of the compass. London and Yorkshire, may be viable, but it ends there. Either identities are too diverse (the Celtic Cornwall compared to the Saxon Devon, for example) or else there is very little identity at all (where does Northampton belong to?). Constitutional change is hard: this is too hard.

Which leaves us with an English Assembly. I used to dismiss this as a nonsense, but it is growing on me. This should have equivalent power to the Scottish Parliament, whatever those are. That means an English First Minister and cabinet, control of education and the NHS, and, surely, over large chunks of tax. The bold, but necessary, step is to say that the capital of England should not be in London. Having it in the same city as the UK capital will make its identity and authority harder to establish, especially since London has its own mayor, making the  layer of government very crowded. Moving the UK Parliament and the paraphernalia of government out of London is too much as well. Besides there is a real grievance in much of England that too much of the establishment is based in London. Where? Geography points to Birmingham or Coventry; others may have better ideas. An old and grand but under-utilised Victorian classical building would be good to use as a base. Building a brand new building is asking for trouble. Like the Scottish Parliament and Welsh Assembly, it should be elected under proportional representation (PR).

So what would be left in London? The House of Commons would stay, but needs to be shrunk. It probably doesn’t need more than a couple of hundred MPs, but no doubt a compromise of 400 or so would have to be settled on. It is difficult to get turkeys to vote for Christmas. The House of Lords should be reformed too, though it is tempting to let it collapse under its own absurdity after last year’s reform fiasco. The UK cabinet would be shrunk. The Treasury, Foreign Office and Defence would stay much as is, as would much of the Department of Energy and Climate Change. But others would need to be shrunk down.

So how to sell it? To those in the north of England or Midlands, breaking the Whitehall stranglehold would be an advantage. Frankly this is a big attraction to me, even in London. Even under PR, the Conservatives would have a good stab at dominating the English government. Both they and Labour would benefit from PR giving them a political base in large swathes of the country where they are in danger of extinction – as PR has saved the Tories in Scotland and Wales. The Lib Dems would benefit from PR too, though they might lose out badly in the bigger and redrawn constituencies for the House of Commons. This losing out of the Lib Dems might be an attraction to both Labour and Conservatives, though – they might feel that they have a better shot at an overall majority for the UK if minor parties would struggle in the larger constituencies. Such are the sorts of calculations upon which British politics turn.

Food for thought, anyway. The next step, though, is to start talking up the idea of a UK Constitutional Convention if the Scots vote to stay in the union. The idea of an English assembly does have opinion poll support, though no doubt iti s very soft. But in small steps the idea can grow momentum.

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