Why independence will disappoint the tartan libertarians

Scotland will not be forced to adopt a scorched earth approach to public spending if it leaves the UK.

The publication earlier this month of the first report by the Scottish government’s Fiscal Commission Working Group, into the macro-economics of independence, was met with a surprising degree of approval from an unlikely source. Writing for the conservative website Think Scotland, right-leaning journalist Alex Massie praised the report's apparent endorsement of austerity as the most effective economic strategy for Scotland should it leave the United Kingdom in the next few years: "[These findings] add weight to the notion that Scotland's future lies as a low-tax, flexible, nimble, enterprise…it seems quite probable that cutting public spending - for one reason or another - will be one of the first tasks facing an independent Scotland."

The idea that independence will provoke a shift to the right in Scotland, rather than to the left, as is commonly assumed, has been touted by a number of Scottish commentators for a while without having gained any real traction in mainstream debate. It tends to be composed of three parts. The first is that SNP leader Alex Salmond and his finance secretary John Swinney are closet Thatcherites who, despite their soft-left posturing on welfare and social issues, advance an aggressively neo-liberal economic agenda, as illustrated by their support for lower corporation taxes. The second is that an independent Scotland, carrying an inherited share of UK debt amounting to between 70 to 80 per cent of its GDP, will be under heavy pressure from the international financial markets (credit rating agencies, essentially) to demonstrate a commitment to ‘fiscal credibility’ in order to maintain low borrowing costs. And the third is that SNP plans for a currency union with the rest of the UK will tie Scotland to a fiscal stability pact which imposes severe restrictions on Edinburgh’s capacity to borrow, precipitating a reduction in debt-fuelled Scottish public expenditure.

Under these conditions, nationalist visions of an independent Scotland replicating the social achievements of high-spending Nordic welfare states would have to be abandoned. Instead, as Massie contends, the first independent Scottish government would need to observe strict budgetary constraints and take steps to liberate enterprise in an effort to soak up necessary public sector job losses. In this sense, independence would act as a disciplinary force against the prolifigate Scots, prying them away from their longstanding addiction to big government. (Something, ironically, successive Westminster administrations have failed to do.)

But the assumptions on which this libertarian fantasy rests are grossly exaggerated. To begin with, although there is a strong neo-liberal streak in SNP economic policy (hence the party’s position on corporation tax), Salmond and Swinney are not the Friedmanite ideologues some make them out to be. Indeed, in his repeated calls for increased capital expenditure as a means of growing the Scottish economy out of recession, the First Minister’s response to the financial crisis has followed a clear Keynesian logic. Likewise, Swinney’s decision to levy a charge on large supermarket retailers suggests a willingness to challenge commercial interests not commonly associated with free-market enthusiasts. The SNP’s aim of cutting Scottish defence spending and redirecting the savings towards more socially productive industries provides another indication of the nationalists' underlying loyalty to traditional centre-left principles.

The right’s insistence that, with independence, ‘market realities’ will amplify Scottish austerity is similarly unconvincing. According to the commission's report, between 2006 and 2011, including a geographical share of North Sea oil and gas output, Scotland’s average deficit was 5.1 per cent of its GDP. This compares favourably to the UK’s deficit of 6.4 per cent over the same period (p.158). What’s more, the report points out that by 2017, Scotland's population share of UK public sector net debt will be equivalent to 72 per cent of its GDP, five per cent lower than the UK’s anticipated share (p.170). By the standards of equivalent European countries, this represents a substantial debt burden. But it certainly isn’t unmanageable, nor does it make additional, radical cuts to public expenditure inevitable. At any rate, any future Scottish government, having witnessed the failure of the current coalition government’s deficit reduction strategy, will be acutely conscious of the effects austerity has on economic recovery.

The report also questions right-wing claims about the likely consequences of monetary union. While it concedes that any fiscal stability pact agreed between Edinburgh and London would have to enforce "discipline and sustainability" in the management of Scottish public finances, it simultaneously acknowledges the need to provide space for "national discretion to target instruments of fiscal policy to address key local challenges and take advantage of new opportunities" (p.132). In line with the lower debt and deficit levels Scotland is likely to enjoy outside the UK, this could allow for a limited programme of deficit-financed capital expenditure, with any subsequent increase in borrowing costs covered by the new sources of revenue independence would make available. These might include the aforementioned defence savings, a permanent tax on bankers’ bonuses (something Salmond has indicated he is sympathetic to) or a clamp down on tax evasion and avoidance, among other options.

Of course, the fact that Scotland’s overall fiscal position may improve slightly with independence doesn't mean an independent Scotland would escape ongoing economic difficulties. A heavy reliance on diminishing natural resources, massive inequalities of wealth and income and a burgeoning demographic crisis ensure Scotland, like the rest of the UK and most of the developed world, will be subject to severe financial pressures in the years ahead. There is, however, little to suggest those pressures are best alleviated by a scorched earth approach to public spending, and less still to back up the assertion that such an approach is necessary or unavoidable. The chances of independence transforming Scotland into some sort of socialist nirvana are slim; the chances of it turning Scotland into a libertarian paradise slimmer yet.

Scotland's First Minister Alex Salmond holds up the signed agreement for a referendum on Scottish independence during a press conference in St Andrews House in Edinburgh. Photograph: Getty Images.

James Maxwell is a Scottish political journalist. He is based between Scotland and London.

Getty
Show Hide image

Don't bet on James Brokenshire saving devolution in Northern Ireland

The Northern Ireland secretary's decision to extend talks makes a settlement less, not more, likely. 

The deadline for the parties at Stormont to form a new executive has passed without an agreement. Northern Ireland secretary James Brokenshire has – as was inevitable – taken the least difficult option and opened a “short window of opportunity to resolve outstanding issues”.

Talks have been extended for a “short few weeks” – Brokenshire’s interpretation of the “reasonable period” allowed after the initial three weeks after the election elapsed. Despite his earlier warnings, there will be no snap election (for which he conceded there was “no appetite”).

Unhelpful though the tortured semantics of “a short few weeks” are, we can assume that new negotiations may well as last as long as the impending Commons recess, which begins on Thursday and ends on April 11th – after which, Brokenshire said, he will bring forward legislation to set regional rates in the absence of an executive. This, though not quite direct rule, would be the first step in that direction.  

So what changes now? Politically speaking and in the immediate term, not a great deal. For all the excited and frankly wishful chatter about the two parties approaching the final talks afresh after Martin McGuinness’ funeral last week, Sinn Fein and the DUP remain poles apart.  

The former declared talks to have failed a full day before the deadline, and Sinn Fein president Gerry Adams has since said there has been “no substantive progress” on the key issues at hand – particularly the DUP’s “minimalist” approach on the Irish language and marriage equality. Seemingly unassailable differences remain on a new Bill of Rights and measures to deal with the legacy of the Troubles. As such, both Adams and Sinn Fein's new leader Michelle O’Neill continue to stress their election lines: equality, respect, integrity, and, perhaps most tellingly, “no return to the status quo”.

Brokenshire clearly recognises that there will be no new executive without some movement on these issues: yesterday he referred to the talks to come as an “opportunity to resolve outstanding issues”. He is right to do so: Sinn Fein’s demands are, for the most part, as yet unimplemented provisions from the Stormont House and Fresh Start Agreements of 2014 and 2015. 

But will the DUP budge? It appears unlikely at first glance. Sinn Fein’s approach to negotiations has only heightened tensions between the would-be coalition partners, whose relationship has regressed to the openly adversarial (DUP leader Arlene Foster yesterday expressly blamed Sinn Fein for the collapse in talks).

There looks to be little appetite for compromise on Sinn Fein’s headline demands. The DUP’s opposition to historical prosecutions of Troubles veterans is well-publicised, and appears to be aligned with UK government thinking.

Nor does there appear to have been any real shift in the party’s position on legal recognition for the Irish language. Speaking on the BBC’s World at One yesterday afternoon, Ian Paisley Jr stressed in pretty woolly terms to the DUP’s commitment to “promoting minority languages”, which, however true, is not the commitment to an Irish language act that Sinn Fein are asking for. That the spirit of Paisley’s remarks was essentially the same as his leader’s contrarian take on the issue – she said, provocatively, that there was much a need for a Polish language act as an Irish language act – is not a promising sign.

The continuing fallout from the Renewable Heat Incentive scandal that triggered last month’s election also complicates matters. Though the London press have already relegated this public spending scandal to the footnotes, the full ramifications are yet to be seen. A full list of claimants was last week published by the Belfast News Letter, and the longer the process of negotiation and renegotiation drags on, the clearer the answer to the question of who exactly benefited from the scheme’s mismanagement becomes. Though, Foster's penance in the wake of the DUP’s calamitous election performance has gone some way to rehabilitating her public image, the taint of corruption could retoxify the brand. It isn’t difficult to see why veteran Stormont horse-traders like Reg Empey, the former leader of the UUP, believe an executive may well be unachievable until the inquiry into "cash for ash" delivers its ruling – a process which could take a year.

The political impasse, then, looks as insoluble as ever. Leaders of smaller parties such as the non-sectarian Alliance have blamed Brokenshire for the startling fact that there were no roundtable talks at any point during the past three weeks. The Northern Ireland secretary’s decision to extend talks for another fortnight could bury power-sharing as we know it for good. From Wednesday, the civil service will take control of the province’s budget, as per Section 59 of the Northern Ireland Act. The permanent secretary of the Department for Finance will immediately have access to just 75 per cent of available funds, and, if the situation persists, 95 per cent.

In the worst case scenario, this means cuts could well come hard and fast. All the better for Sinn Fein - as I wrote earlier this month, the imposition of austerity and Brexit from London offers an opportunity to parlay short-term pain into long-term political gain. Meanwhile, Brexit secretary David Davis has admitted that Northern Ireland would automatically rejoin the EU in the event of a border poll. The path to a united Ireland via direct rule looks clearer than ever before.

Unionists are not blind to this existential risk – and here Brokenshire’s bizarre insistence that he was ready to call Northern Ireland’s third election in twelve months exposes his political naivety. He maintains there is “little public appetite” for a new poll. He might be right here, but that doesn’t mean a revanchist DUP would refuse the opportunity, if it arose, to go back to a unionist electorate it believes have taken frit at Sinn Fein’s post-election manoeuvring. Some in the party are keen to do so, if only to put to bed what they deem to be premature and melodramatic talk of imminent Irish unity.

Another election would suit Sinn Fein’s long game. The more dysfunctional and unworkable devolved politics in the North, the stronger the logic for a quick transition to a united Ireland in the EU. Much of the Northern Irish political establishment deem Brokenshire a lightweight - as do many in his own party. That he seems not to have realised that threatening a new election wasn’t much of a threat at all – or foreseen this avoidable mess - does nothing to dispel that notion. 

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.