Respect Holyrood? Then let them raise their own cash

The Conservatives are vulnerable to the charge that in power they would undermine devolution. David Cameron’s response has been his ‘respect agenda’. Tory opposition to a Scottish parliament is deep rooted and there are many in the party who still see it as a dangerous folly. Convincing the Scottish public that devolution would be safe under the Tories has not been easy and will become much more difficult were the Conservatives back in power.

Mr Cameron has been pursuing his respect agenda in an effort to convince voters north of the border that he has no plans to undermine the parliament, which retains exceptional levels of support. He has made some symbolic commitments to signify this respect. If the Tories win, he is committed to visiting the Scottish First Minister within a week of the UK general election.

In his speech at last year’s Scottish Conservative conference, he put more policy on the bones of his rhetoric. He said ‘we support devolution, we back it heart and soul, and we will make it work for everyone’ and offered to ‘come to Holyrood once a year and answer questions from MSPs on any subject — from Scotland to the wider’ if the Scottish Parliament ‘so wishes’.

In a Tory government his Treasury ministers ‘will explain to Holyrood, in person, what the Budget and Pre-Budget Reports mean for Scotland’ and his Scottish secretary ‘would seek a meeting with the First Minister every month — and explain the implications of the Queen’s Speech for the devolved areas at the start of the parliamentary session’.

He also noted the importance of the ‘values’ of thrift and responsibility but did not elaborate what this meant in practice, ‘Thrift — because money that is spent closer to people is money that is spent wiser. And responsibility — because when people know they have real power over the decisions that affect them, the bigger and better part they play in their community.’ The institutional form these values take, especially in the age of austerity, will determine whether a Cameron government provokes a similar reaction in Scotland to that witnessed the last time the Tories were in power.

Mr Cameron and George Osborne would have their work cut out dealing with the fiscal consequences of the economic crisis. There are options available to Mr Osborne in how he allocates spending cuts. The Barnett formula can be used to impose cuts as well as increase spending,but Barnett has no statutory basis and so the Treasury is free, within the limits of political acceptability, to adjust devolved budgets in the context of major changes in spending priorities across Whitehall.

The fairness or otherwise of spending allocations has not been a major issue in British politics in the first decade of the millennium when public spending has been on the rise. Rivalries between spending departments or regions are less significant when all gain unless allocations are grossly inequable.

However, even the smallest differences become politically salient in times of austerity. When money is tight, every penny counts and every penny is counted. This is true whether it is a pressure group looking after the interests of some sectional group, a Whitehall department arguing its case with the Treasury, a local authority making the case for resources for its area or devolved government arguing its case.

Competition within a declining overall budget results in fierce competition. Managing budgetary politics is difficult enough in good times but is extremely testing when times are tough. Mr Osborne has been reported as saying that he expects to be the most unpopular man in Britain within six weeks of winning the next election. In Scotland, he might then become the embodiment of anti-Scottish Conservativism.

Mr Cameron’s proposals to answer questions in Holyrood annually and have his Treasury ministers explain budgets and pre-budget reports to Holyrood signal a change from Gordon Brown’s imperious attitude towards devolved government but would not improve relations between London and Edinburgh.

It would do nothing but create a battlefield on which the Conservatives’ austerity package will be attacked. Occasions when the British prime minister and his ministers come to Holyrood will be major public events in the Scottish political calendar. The idea that these would be anything other than a deeply unbalanced version of prime minister’s Question Time, noted more for drama than accountability, is as naïve as the promise that devolution would usher in a new era of consensus.

The small band of sixteen Tory MSPs (the seventeenth elected in 2007 is now Presiding Officer) will do their best to defend a Cameron government in London but will confront 47 SNP, 46 Labour, 16 Liberal Democrat, two Green MSPs and one Independent who will compete to be its most vehement critics. Mr Osborne and his Treasury team would find, as Conservative ministers in the 1980s and 1990s before them, that arguing that Scotland was getting its fair share will not work.

Responsibility and thrift will be pious hopes unless there are changes in the funding arrangements. At present, the devolved system provides Scotland with an authoritative voice within the British system of government but it is a system in which the Scottish government has no responsibility for raising what it spends. It is a system that encourages grievance politics. In respecting devolution, David Cameron is acknowledging the legitimacy of demands made by the Scottish parliament.

In an interview with the Scottish Sun in October last year, Mr Cameron said, ‘We would kick out the politics of gripe and grievance that has been the hallmark under Labour and bring in a new type of leadership which the people of Scotland are crying out for — responsible, honest and genuinely radical.’ He did not explain how this would be done.

Mr Cameron faces a dilemma. On the one hand he promises ‘respect’ for devolution, the equivalent of the nineteenth century Tory policy towards Ireland of killing home rule with kindness. But this would be extremely costly and provoke a backlash elsewhere. The alternative is to cut the Scottish parliament’s budget. Even if it could be demonstrated that Scotland was only playing its part in the UK’s public spending contraction, it would fuel the kinds of demands that saw support for devolution strengthen in the 1980s. His ‘respect agenda’ would be in tatters.

But there is a third option. It would require bold leadership but would be consonant with much else that the Conservative leader has been saying. It would involve giving substance to his demands for responsibility and thrift. In essence, it would involve devolving the dilemma. If Scotland wants to maintain generous public policies such as care for the elderly then it should pay for these.

Giving Scotland substantial fiscal autonomy would involve a far bolder policy than that offered by the Calman Commission. Calman was a Labour Party initiative in response to the SNP’s election in 2007. Its modest proposals have all the hallmarks of a political response rather than a serious effort to engage with the deficiencies of devolution. Labour produced a white paper that watered down an already weak set of proposals then further diluted its commitment by ruling out implementation until after the general election.

This gives the Tories an opportunity. Offering a substantial measure of fiscal autonomy that is bolder than anything Labour proposes will allow the Conservatives to throw off accusations that it is anti-devolution. More importantly, offering Scotland a real measure of fiscal responsibility would address one of the major deficiencies in devolution and a source of grievance.

There would be an additional attraction in fiscal autonomy from the Conservatives’ perspective and one that would lead Labour to oppose it bitterly. One of the best arguments for retaining the current level of Scottish representation in Westminster and allowing Scottish MPs to vote on English domestic affairs is that decisions on English domestic policy have a direct impact on devolved budgets.

The Barnett formula ties the Scottish budget to English policy decisions and a strong case is made by Labour MPs to allow Scottish MPs to vote on English matters so long as this remains the case — which would not be so with fiscal autonomy.

The Conservatives are committed to reducing the Commons by ten per cent but have not provided any details. Scottish fiscal autonomy would allow for a significant reduction in Scottish representation.

Three birds would be killed with one fiscal autonomy stone. It would allow the Tories to present themselves as pro-devolution by enhancing the powers of the Scottish parliament. It involves a degree of fiscal autonomy currently absent that would inject fiscal responsibility into devolution and undermine efforts to blame London for cuts. It would also allow the Tories to reduce the number of Scottish MPs at Westminster and contribute to the objective of an overall ten per cent cut in the size of the Commons.