Where next for Scottish devolution?

The early years of devolutionin Scotland were times ofplenty and saw high levels ofpolitical congruencebetween the devolved

administrations and Westminster. Thisfinancial and political latitude gaveHolyrood administrations room to growpublic services and to provide for free someservices which had previously been chargedfor, such as personal care for the elderly. Fewpainful decisions about priorities had to bemade; cost-cutting reforms were notrequired.

During this period it was also possiblefor Labour politicians to feel that nothingconstitutional had really changed: powerhad not irreversibly shifted to new politicalstructures, nor was there any need forformal intergovernmental machinery.Problems could either be resolved throughpersonal relations or brushed under the

carpet, emerging only occasionally asgossip about personal tensions betweenLabour figures.This status quo has now changed.

Political congruence ended with theelection of the SNP minority administrationto Holyrood in 2007. Spending growthdecelerated sharply in 2009 and finallywent into reverse following the spendingreview of 2010.

Political�divergence�andconstitutional�wranglingBefore the election of the Coalitiongovernment in 2010, the relationshipbetween SNP ministers in Edinburgh andLabour ministers in London wascharacterised by considerable mutualsuspicion and hostility, although theformal intergovernmental mechanismsfunctioned adequately enough. Much ofthe disagreement was about constitutionalissues: the SNP’s priority was to look forways to make Scotland a separate,independent country. Even when disputeswere not constitutional, they were oftendescribed or construed as such. SNPministers employed an admirable strategy:if they sought something from Londonand were granted it, that was a triumph; ifthey were rebuffed, the outrage providedammunition in the fight forindependence. Labour UK ministersstruggled with this: sometimes, evenperfectly reasonable requests were viewed ©

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Where�next�forScottish�devolution?After�four�years�of�SNP�government,�JJiimm��GGaallllaagghheerrreviews�the�fight�for�Scottish�independence�and,�in�theparty’s�current�ideas�on�fiscal�independence,�finds�athinly�disguised�plan�to�end�the�Union.�As�the�partiesjostle�for�position�ahead�of�the�upcoming�Scottishelections,�what�will�the�SNP�do�next?

SNP�ministers�employed�anadmirable�strategy:�if�theysought�something�fromLondon�and�were�granted�it,that�was�a�triumph;�if�theywere�rebuffed,�the�outrageprovided�ammunition�in�thefight�for�independence

with suspicion.1 As a result, the Scottishmedia were often happy to accept that aScottish perspective must be preferable to aLondon one.SNP ministers set themselves two

objectives during this period: to build areputation for competent government andto promote the cause of independence. Thiswas a perfectly straightforward approach:while there might be some scope forcriticism of the use of public money topromote independence, there was nothingunderhand about it. The interestingquestion is whether or not it worked.

Individual SNP ministers did develop areputation for competence, while the FirstMinister’s big personality came to dominatethe Parliament (using skills honed, ironicallyenough, while toughing it out at Westminster)and he entranced the media. However, thepicture on overall policy achievement hasbeen more mixed. At first, populist-mindedspending of the growing budget continued:free bridges and university education wereadded to free personal care and bus travel forthe elderly. Indeed SNP ministers haveapparently decided to make ‘no tuition fees’ akey election promise in 2011, generatingconcern in the higher education worldamong those who do not see how the incomegap created by these plans can be filled froma shrinking budget. However, its position as a minority

government has prevented the SNP fromsecuring more controversial legislation, suchas would allow a local income tax(something for which they might beprivately grateful – experience of

government may make them more cautiousabout manifesto promises in the future). Theparty has also had to make compromises,notably with the Conservatives, to get itsspending plans through. Ultimatelyminority government has beendisempowering, and this has been shownmost clearly in relation to the constitution.The constitutional debate has generated

a lot of heat. Launched in August 2007, theSNP government’s ‘national conversation’was intended to stimulate debate about theconstitutional future of Scotland andultimately lead to a referendum onindependence.2 Despite the opposition ofthe majority in the Parliament, the SNPgovernment proceeded to spend over£400,000 on events and publications.Papers were published, events were heldand bloggers unleashed. But at the end ofthe conversation, ministers discovered thatthey had no majority and that anIndependence Bill would fail. Perhaps theyhad genuinely thought the people would bepersuaded by the papers and the bloggingand would rally to force the Parliament topass such a bill. Or perhaps they were justmaking it up as they went along.Regardless, the conversation is now over.In the meantime, the Unionist parties

had concluded that a simple ‘no’ toconstitutional change was not a sustainableposition, given that public opinion inScotland generally favours devolution,which would increase rather than decreasethe Parliament’s powers (SCSR 2010). In avery unusual move, they worked with theUK government to set up the ScottishParliament’s own commission (the CalmanCommission) on the issue. Working on across-party basis (though without the SNP)this produced proposals for tax devolutionto increase the accountability of theParliament (CSD 2009). At the time ofwriting, a Westminster bill to implementthese plans is being considered by bothParliaments, and both will have to approve

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1 For example, the SNP government’s request for an amendment to the Scotland Act after the House of Lords’ judgment inthe Somerville case, which the UK agreed only after several months’ consideration.

2 For more on the SNP’s ‘national conversation’ see http://www.snp.org/node/3 and www.scotland.gov.uk/Topics/a-nation-al-conversation.

At�the�end�of�the�‘nationalconversation’,�ministersdiscovered�that�they�had�nomajority�and�an�IndependenceBill�would�fail

the changes. So far, the bill’s generalprinciples have been supported atHolyrood and it has received a secondreading in the House of Commons.Nevertheless, it is unlikely to be enacteduntil after the Scottish elections.

Dreams�of�fiscalindependenceDespite this, SNP ministers have decided tomake the constitution a big electoral issue, butinstead of independence they will now arguefor ‘fiscal independence’ (also described as‘autonomy’ or ‘responsibility’). In this system,Scotland would determine and keep theincome from all its taxes, including North Seaoil revenues, and make a payment to Londonfor common services, like the army.3 Benefitswould be devolved, apart from old-agepensions. This would be marketed as a way ofavoiding ‘London’s cuts’ and promotingeconomic growth. Owning a hammer, it issaid, makes all problems look like nails: it isperhaps not surprising that the SNP answer tothe UK’s fiscal crisis is independence.

The SNP government has produced nodetailed plans of its own to shape thisdebate but has relied heavily on a proposalby two academics (Hughes Hallett andScott 2010). This sets out the far-reachingproposals for change as described above,presenting them not as constitutionalchanges but as a way to increase economicgrowth.

This is not the place for a full analysis ofthese plans, but what is striking is thepotential financial risks they pose forScotland. Even with oil revenues flowing,Scotland would have to run a deficit or cutpresent levels of public spending in order toimplement them.4 The plans offer no scopeto build up an oil fund or to use therevenues for other purposes, such assupporting the bail-out of financialinstitutions. They would also leave Scotlandin the vulnerable position of beingresponsible for all fiscal but no monetarypolicies, much as Ireland finds itself today. The plans would make Scotland’s fiscal

relationship with the rest of the UK more orless the same as the Channel Islands’ (withconsequent tax avoidance opportunities,though on a much larger scale). They are, infact, a complete redefinition of theScotland–UK relationship as a confederationrather than as a Union. On this, SNP ministerscan fairly be criticised for disingenuousness:these are not fiscal adjustments to boost thegrowth rate but a thinly disguised plan to endthe Union and replace it with some sort ofconfederation. Perhaps no-one should besurprised that SNP policy – in the end – allcomes back to redefining Scotland’srelationship with the rest of the UK.Claims that increased fiscal devolution

might be expected to lead to increasedgrowth have been heavily criticised byeconomists (see Muscatelli et al 2011) andare unlikely to carry much weight withundecided voters. But they illuminate oneinteresting connection.A group of business people, associated

with the right leaning think-tank ReformScotland, argue that some form of fiscalindependence would allow Scotland to runa low-tax, business-friendly economy. Themost prominent individual in this group isperhaps the former Royal Bank CEO andchair George Mathewson. The groupargues for low taxes to stimulate economic

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3 This was, on paper, the system that applied in Northern Ireland before 1972. The province purportedly sent Westminster an‘imperial contribution’. However, such was the weakness of the NI tax base that this contribution was always negative, andthe rest of the UK supported NI public services. This system has since been replaced by the Barnett Formula.

4 Scottish public spending is about 17 per cent higher per capita than the UK average and non-oil taxes about 1 per cent lower.Oil revenue is volatile but typically adds about 16 per cent to tax receipts (Government Expenditure and Revenue Scotland).

Perhaps�no-one�should�besurprised�that�SNP�policy�–in�the�end�– all�comes�back�to�redefining�Scotland’srelationship�with�the�rest�of�the�UK

growth and asserts that increased growthwill enable Scotland to protect publicspending. There is a lot of wishful thinkingin the argument, but it is a significantpolitical development: right-wing tax-cutters have not hitherto been notablevoices in Scottish public life.

A�last�throw�of�the�dice?�In four years of government, SNP ministershave failed to convert the Scottish public tothe cause of independence: by standing upto London and creating a sustained‘conversation’ about independence theyappear to have succeeded in cementing theScottish electorate’s taste for devolution.The 2009 Scottish Social Attitudes Surveyteam concluded:

‘Overall levels of support for independenceremain low, with only 28% preferring independ-ence to devolution. Although this is four pointshigher than the record low of 24% recorded in2007, it is still lower than any figure recordedbetween 2004 and 2006.’

This is shown in electoral support for theSNP. Its performance in the 2010 generalelection was disappointing. It increased itsshare of the vote to nearly 20 per cent andovertook the Liberal Democrats, but wononly six seats, well short of its target of 20.Similarly, recent polling data bodes ill forMay 2011. Polls in the autumn put Labourfive or six points ahead of the SNP inboth constituency and regional list votingintentions. The most recent polling5 putLabour about 10 points ahead. Persuadingthe Scottish electorate that attaining fiscalindependence will save Scotland fromcuts and make it more prosperoustherefore becomes essential for SNPministers.

The most recent polling results suggestthat Labour could end up with as many as10 seats more than the SNP in Holyrood.This would not mean an overall Labourmajority: Holyrood’s proportionalrepresentation system was designed so as tomake it very difficult for any party to winoutright Moreover, a poor showing by theLiberal Democrats – which current pollingalso suggests, as the Scottish Lib-Dems suffera backlash from their London Coalition-mates’ decisions – might even mean that aLib–Lab alliance of the sort that held officein Holyrood from 1999–2007 would struggleto secure and sustain the 63 seats needed foran overall majority.

Looking�aheadThe first challenge for the Parliament to beelected in May will be governmentformation, which may not be as easy as itsounds. The principle now seems clearlyestablished (following Alex Salmond’sskilful setting of the agenda in 2007) that ifthe SNP is no longer the largest party itwill have lost the election. Labour will havefirst right of refusal in forming agovernment. But that may not bestraightforward. Even if the Lib-Dems havesecured enough seats to do a deal withLabour, can they sustain membership oftwo coalitions at once, each with differentand bitterly opposed partners?Even more challenging would be a result

that required more than one coalition partnerto form a stable government. Party rivalriesare bitter, especially between Labour and theSNP. The SNP’s constitution actually bansalliances with the Conservatives, despite thefact that their most regular allies ingovernment at Holyrood (on non-constitutional issues) have been the Tories. IfDavid Cameron has successfully ‘detoxified’the Conservative brand in England, thischange hasn’t been felt across the border. TheTories vie with the Lib-Dems for third placein the popular vote and returned only oneScottish MP at the last general election. Only


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5 www.tns-bmrb.co.uk (17 January 2011)

Right-wing�tax-cutters�havenot�hitherto�been�notablevoices�in�Scottish�public�life

the Lib-Dems are plausible partners in morethan one coalition, although in 2007 theyrefused to form an administration with theSNP because they were unwilling as amatter of principle to support anindependence referendum. The outlook for the smaller parties is

always uncertain. The Greens hoveraround the threshold of five per centneeded to secure a set in the regional lists.They returned two MSPs in 2007, andhope for as many as six, but there is noguarantee of any. The far-left has collapsedinto factionalism and lurid scandal, andhas shown few signs of re-emerging.6

All this might tempt the Labour Partyinto forming a minority government, butthere are sobering lessons from the SNPexperience. Firstly, the SNP governmentwas unable to make progress on anycontroversial legislation and the big ticketitems in their last manifesto remain on theshelf. Secondly, they have had tocompromise to get budgets through, evenwhen spending was still growing. Themessage for the next Parliament is ‘flat cash’for nearly all public services for severalyears. The first ‘cuts budget’ – which at thetime of writing had just completed aturbulent Parliament passage in theelection run-up – has simply deferredcontroversial choices and unpopulardecisions on issues like university fees andcouncil tax rises. It assumes instead that bigsavings can be made from ‘efficiency gains’.A stable coalition with a decent majoritywill find it hard enough to make long-termdecisions of that sort – a minority

government would need exceptionallystrong confidence-and-supplyarrangements, maybe with more than oneparty, to achieve any kind of success.A new set of issues will also arise in

intergovernmental relations. For the firsttime, administrations in Scotland and theUK will be divided not on constitutionalbut on party grounds. Relations will bemore like those between London andCardiff than what London and Edinburghhave been used to: the dividing line will notbe whether Scotland should leave the UKbut the wisdom of the government’sspending cuts. Whitehall should not assumethat this will make matters simpler –indeed, mixed coalition partnering mightmake them unusually complicated.

Where�next�for�the�SNP?In these circumstances, the question of whathappens next for the SNP becomes moreinteresting. They may not have expected towin in 2007 but now they have had a tasteof office. Some of their ministers haveproved to be able administrators, with somecommentators comparing the Labourfrontbench team unfavourably with them. The SNP’s weakness has been their focus

on independence. Despite all the party’sefforts, the Scottish electorate remainsunconvinced of its benefits, andconstitutional change has been led anddecided on by the Unionist parties. Had theSNP not been committed to anindependence referendum, it might wellhave been able to form a coalition in 2007.While it seems unlikely that the SNP willever give up entirely the idea ofindependence, it might yet be furtherredefined or postponed. To paraphraseAugustine, ‘make me independent Lord,but not yet.’ The party has always had a Home Rule

wing, though to maintain doctrinalorthodoxy they present as ‘gradualists’. Ifthe SNP were to conclude from the last fouryears that Scotland was unlikely to be ready

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A�new�set�of�issues�will�alsoarise�in�intergovernmentalrelations�...�the�dividing�line�willnot�be�whether�Scotland�shouldleave�the�UK�but�the�wisdom�ofthe�government’s�spending�cuts

6 The irrepressible Mr George Galloway has however seen a gap in the market and proposes to stand for his ‘Respect’ party.

for independence in the near future butneeded better government now, it would beformidable either as an opposition orpotential governing party. It could, however,pay two prices. First, there is the risk of asplit with determined secessionists, theparty’s fundamentalist wing. This groupmay be declining in numbers and morenumerous in the membership than theleadership, but they have been kept onsideby the party’s commitment to a referendum.Second, a party whose main purpose was toachieve relative autonomy would find itselfin need of an ideological stance other thanits long-term aspiration to independence. Inreality, the SNP has always sought topresent itself as a centre-left party, in linewith the centre of gravity of Scottishopinion.

There is a gap to be filled in Scottishpolitics. Labour’s success in painting theThatcher government as anti-Scottish hashad a lasting effect on the Conservatives,whose support has been flat for manyyears. Many right-leaning Scots havenowhere to go, and it is possibly for thatreason that some individuals on the fringesof the SNP have been able to sell a visionof an entrepreneurial Scotland to beachieved through constitutional change.The SNP certainly includes people on both

the right and left but – especially in itslatest tax-cutting mood – the party’sleadership looks to have found a centre ofgravity on the centre-right. Might the SNP now take up that

position? Again there is a risk of a split. ButScotland does need to have the debateabout the size of the public sector, aboutdependency, and about its ambivalentattitude to enterprise. The challenges of thepresent period of fiscal adjustment cannotbe addressed without it. Two centre-leftparties will struggle to differentiatethemselves on this issue, and publicdiscourse will be the poorer for that.Scotland has now had 12 years of

devolution. Much energy has been spent overthe last four on constitutional wrangling, butthe conclusions now seem clear. The SNPtried hard to pull Scotland towardsindependence, but were overtaken by thecautious deliberations of the CalmanCommission. It is about time that the debatemoved on to the immediate challenges ofeconomic development, public spending andpublic services. It would serve Scotland andthe rest of the UK well if Scottish politicianswere able to focus on these issues and notdivert all serious questions into one form orother of the debate on independence. Thatwould be a different, and better, ScottishParliament. But whether it happens is reallyup to the SNP.

Jim Gallagher is Gwylim Gibbon Fellow atNuffield College, Oxford.

Commission on Scottish Devolution [CSD] (2009) ServingScotland Better Edinburgh: CSD

Hughes Hallett A and Scott D (2010) A New Fiscal Settlementfor Scotland St Andrews: Centre for DynamicMacroeconomic Analysis

Muscatelli A, Fuest C, Darby J, Boadway R, McGregor Pand Ulph D (2011) ‘Shoogly peg to hang an economy on’Scotsman, 31 January 2011

Scottish Centre for Social Research [SCSR] (2010) ScottishSocial Attitudes Survey 2009


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It�would�serve�Scotland�andthe�rest�of�the�UK�well�ifScottish�politicians�were�ableto�focus�on�the�issues�and�notdivert�all�serious�questionsinto�one�form�or�other�of�thedebate�on�independence

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Where next for Scottish devolution?