Scotland – Why do the Scottish nationalists want full fiscal autonomy?

The SNP’s plans to make Scotland more ‘competitive’ and ‘attractive’ to investment are a recipe for further cuts and increasing poverty on both sides of the border.

Full fiscal autonomy (FFA) for Scotland is a potentially disastrous medium-term Scottish National Party (SNP) objective. (See General election results: the Scottish context, Proletarian, June 2015)

If achieved, FFA would give the Scottish government substantially greater tax and spend powers. While some will no doubt be attracted by the idea of further devolution, the reality it would bring would be a harsh one.

Should it be implemented, FFA would first of all mean an end to the Barnett formula – the agreement that presently allows Scotland a higher per-head public spend than the rest of Britain. The Barnett formula is not unreasonable, given the low density of Scotland’s population and the difficulty in providing services that this situation creates. Under FFA, and in the absence of the Barnett formula, the Institute for Fiscal Studies has projected a £7-10bn Scottish budget shortfall.

Those suffering at the hands of the Tory government’s savage cuts would be best warned that the road of the SNP is not the way. That road only leads to further devastation and obliteration of services, and, as a consequence, jobs also must go. The working class of Scotland would do well to say; ‘We have had enough Tory cuts; we don’t need even deeper Tartan Tory cuts on top.’ Anyone who values their public services ought to steer clear of the flirtatious nats.

With much of the cuts still impending, the situation in Scotland as well as the rest of the UK is already bad enough. For example, Glasgow City Council announced in June that £103m was to be slashed from their budget over the next two years. Already a number of sell-offs and takeovers have occurred, job losses have been announced and staff relocations (on reduced terms) are pending. These circumstances are repeated in council after council. In Edinburgh over 2,000 jobs are set to go within the next two years. Dundee has to cut £28m from its budget.

In this context, the plan to lose at least an additional £7bn per annum under FFA might appear simply deranged, if viewed from the point of view of ‘defending local people’s interests’. It makes more sense, however, when one understands that the policy is driven by class interests that transcend all the SNP’s ‘progressive’ hocum. The misery already inflicted by the cuts to council budgets is evidently not enough for these champions of the British capitalist class: the cold and hunger to be unleashed by these is only the tip of a very large iceberg – and with FFA that iceberg can only expand exponentially.

If the SNP actually pursued the progressive politics it pretends to espouse, then fiscal autonomy would be the furthest thing from the minds of its leaders. But it is not the mythical nation, nor its very real people, whom the party represents, but the British bourgeoisie; it is the capitalist class interests that are always defended first and foremost. Therefore, while Scottish workers, children and public-service users suffer, the Scottish government plans to unleash further cuts at the behest of the bourgeoisie.

Whilst FFA had previously been seen as a medium-term objective, an opportunistic alliance was recently made between the SNP and the right wing of the Tory party, in an attempt to wrap FFA up in the coming Scotland Bill. In June, the SNP’s 54 MPs voted for Tory MP Sir Edward Leigh’s amendment to the Scotland Bill, which would have granted FFA to the Scottish government. The amendment was defeated by 298 votes to 68.

The thousands of Scottish workers who joined the SNP post-independence referendum might now be asking themselves how they have ended up voting with a Tory ‘grandee’ on issues concerning Scotland. It is certainly not for the benefit of Scotland’s working class that Sir Edward submitted an amendment that would have ended the additional funding that Scotland receives via the Barnett formula. It is not for the benefit of the Scottish working class that Sir Edward submitted an amendment that would have created a £7bn hole in the Scottish budget.

No, Sir Edward submitted this amendment for the benefit of the class he represents – the British ruling class. This is illustrated quite clearly by SNP shadow chancellor Stewart Hosie’s comment: “We agree if we could have serious, justifiable tax competition, this is a good thing.” (Cited in Tory and SNP fail in joint full fiscal autonomy bid by David Maddox, The Scotsman, 16 June 2015)

There can be no doubt then that a tax race to the bottom is absolutely central to SNP economic policy. Needless to say, the less tax that is collected by government, the less can be spent on providing public services.

With a £7-10bn FFA black hole in the public purse, the people of Scotland will need all the tax revenue they can get, so any reduction in taxation would be bound to have a disastrous effect on working-class living standards all over Britain. With each region having to lower taxes in order to compete for investment and jobs, the public purse everywhere would see a sharp contraction.

A further glimpse into the nationalist vision for the Scottish economy has been revealed by the influential N-56 group, self-described on their own website homepage as an “independent business organisation“, which seeks to make Scotland “the Frankfurt of the North” by “boosting the financial services sector … (forging) a link between education and economic participation, promotion of entrepreneurship and a simpler tax system“. (Full Fiscal Autonomy ‘could double Scots economy’, The Scotsman, 4 May 2015)

This is a chilling vision fully in line with the long-term SNP showpiece policy of lowering corporation tax. On the face of it, the SNP ditched this policy in March. In reality, the policy remains under the guise of “targeted changes in business tax allowances“, or what Stewart Hosie calls ” serious tax-competition” with England.

According to the Financial Times, this is “to encourage investment, research and development and the growth of smaller companies“. (Vanessa Houlder, ‘SNP corporate tax proposal could lower rates across the UK’, 22 April 2015)

The oil aspect

Whenever one is considering SNP politics, the issue of oil is never far from the surface. On this occasion, the political weapon that is ‘Scotland’s oil’ has been used against the SNP.

In the build-up to the independence referendum, the party made the claim that Scotland would soon benefit from oil prices of US$113 per barrel. Since then, oil prices have plummeted. Whereas the Scottish government previously anticipated oil and gas revenues of £15.8bn to £38.7bn over the next four years, recent projections show likely revenue of £2.4bn to £10.8bn. (See Ian Johnston, ‘SNP hopes of full fiscal autonomy dealt blow by slump in North Sea oil revenues’, The Independent, 26 June 2015)

A key question must be prompted by this massively-altered projection. Did the SNP intentionally mislead the public or is this simply an honest mistake?

If the former, the SNP lied to the Scottish people in an attempt to score a referendum victory. In which case, they cannot be trusted. If the latter, then the SNP made a mistake in its calculations of between £13.4bn and £27.9bn. This is an error of such proportions as to render the party’s leaders entirely incompetent. So, once again, the conclusion must be that they cannot be trusted.

The tax credits and air passenger duty dimension

In July, the callous chancellor George Osborne announced £12bn of cuts to tax credits. These cuts will heap misery on the Tories’ much-lauded ‘hard-working families’. Despite such rhetoric, they always have been and will be enemies of the workers.

The proposed tax credit cuts will hit 2.7 million hard-working families. This represents 39% of all households containing dependent children. In Scotland, 347,400 children belong to families receiving tax credits. Twenty-seven thousand Glaswegian families will have income stolen from them by the Tory government. (‘Government’s tax credit snatch and grab will hit more than 2.7 million working households across the UK’, Unison, 3 October 2015)

SNP MPs voted against the tax credit cuts at Westminster. And so they ought, given First Minister Nicola Sturgeon’s declaration that this “is the most iniquitous policy since Margaret Thatcher’s poll tax“. SNP social justice secretary Alex Neil also referred to the policy as ” inexcusable“, while SNP MSP Kevin Stewart of Holyrood’s welfare reform committee has said the cuts are “shameful“. So far, so good then, from the SNP.

Unfortunately, practice does not coalesce with rhetoric. The tax-credit cuts may be the brainchild of George Osborne and the Conservative Party, but in government at Holyrood, the SNP are de facto implementers of the cuts. Only the thinnest wedge can be placed between the nationalists and the unionists on this as on so many other issues. They may be constitutionally divided, but they continue to be economically united. Despite their various labels of ‘nationalist’ and ‘unionist’, what they both remain is capitalist.

New powers announced in the Scotland Bill will give Holyrood the power to top up any tax credits stolen by the Conservative government. The power to overturn Westminster decisions and simply continue paying tax credits as before is not to be granted.

The SNP have refused to make any guarantees to use what power they are being handed, however. Deputy first minister and cabinet secretary for finance John Swinney has offered no commitments to reverse the cuts in Scotland. Alex Neil, cabinet secretary for social justice, communities and pensioners’ rights, has said the SNP will announce nothing until any potential reverses are “properly costed“.

Suddenly, the same Alex Neil who called the cuts “inexcusable” finds them all too excusable, now that his party actually has the power to do something about them. Clearly, it is easier to remain all things to all people when cheering from the sidelines. In office, the SNP cannot but reveal their class politics.

Apologists may attempt to cling to the idea that the SNP’s leaders are being financially responsible: perhaps they just have to sit down and work out where to find the money. But the fact is that the money is there, but the SNP has already agreed to spend it elsewhere.

As a result, those with the requisite funds to travel will soon be enjoying cheaper flights – all paid for by low-earning hard-working families via the tax-credit cut. This is because the SNP are committed to spending £250m in cutting air passenger duty (APD). For its part, Scottish Labour has claimed it would overturn the cuts to tax credits by scrapping the APD reduction.

So what impact will the cut to APD have? ” ABTA, the travel association, believes a reduction in air passenger duty north of the border, highly likely following today’s decision to devolve control over the duty to Holyrood, will make English airports less competitive.

“It is therefore urging the government to match any reduction in APD in Scotland across the whole of the country.

“‘Future reductions in APD planned by the Scottish government will be good news for passengers flying from Scotland and for Scottish airports and travel businesses, but this will come at a cost to the competitiveness of regional airports in the north of England, and to consumers elsewhere in the country, who will be paying some of the highest flight taxes anywhere in the world,’ said Mark Tanzer, CEO of ABTA .” (Oliver Smith, ‘Scots to get cheaper holidays – what about the rest of us?’, The Telegraph, 22 January 2015)

It is quite simply one more part of the tax-race strategy.

So the SNP will not promise to use its powers to reverse tax credit cuts; not a finger will be lifted for the working class. But it cannot wait to use those powers to help big business by implementing its plan of a tax race to the bottom.

Misery and austerity may have allowed Scottish workers to be duped by the SNP for a while. Now is the time to wake up and defend our class interests before both Scottish and British governments plunge us further and further into poverty and misery.