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Scotland’s fiscal fantasy and the impact of an OUT vote

Scotland's fiscal fantasy and the impact of an OUT vote

A short visit to the Highlands last week was refreshing. The scenery is just as spectacular as ever, and the people just as welcoming.  But elsewhere, the tectonic plates are shifting.  Last week, a televised debate took place amongst the political leaders contesting the elections to the Scottish Parliament in May.   It resembled a bidding contest in which each participant had to outdo the previous one in terms of boasting about how much public money they would spend. The excellent Ruth Davidson from the Conservatives was the conspicuous exception.

The sense of unreality was heightened when visiting the prosperous market towns of Perthshire, which would not be out of place in the Home Counties. Yet the polls suggest that they are about to vote for the SNP in large numbers, waiting to be fleeced to subsidise the less energetic denizens of the old industrial belt of Central Scotland.

Under the SNP government, the health service has deteriorated markedly and education has gone backwards. But it seems they will be returned to power with a large majority.  These problems are not believed to be the fault of the Scottish government but, in some mysterious way, the English.

If we plump for Brexit and North of the Border they do not, the strategy is to vote for independence and apply to be a member of the EU. But would the EU want them?  To put it in perspective, no one imagines that Portugal, say, is an important country which possesses clout in the European Commission.  Yet its population is over 10 million, and there are only 5 million Scots.

In addition, the public finances are shot to pieces. The Government and Expenditure Review Scotland announced earlier this month that the deficit in Scotland’s public finances is almost twice that of the UK as a whole.  Scotland’s net fiscal deficit was £16.7 billion, some 9.7 per cent of its GDP, compared with UK figures of £89 billion and 4.9 per cent.  The EU already has enough basket cases in the Mediterranean.  Why would the Germans welcome another country which they would have to bail out?

The Alice in Wonderland flavour is heightened by the posturing on tax. The SNP had been firmly committed to a top rate of income tax of 50p.  At the start of last week, Nicola Sturgeon pronounced that it was not possible.  Why?  She had just discovered that only 17,000 people in Scotland earned enough to pay it.  But these contribute no less than 14 per cent of the total take from income tax, and may simply move.  In the leader’s debate, she was once again in favour of the 50p rate, but only in the sense of St Augustine: “O Lord, make me chaste, but not just yet”.

Scotland epitomises the problems which all centre-Left governments face. They want high public spending, but the electorate will not pay the necessary tax.  They cannot finance it by issuing debt for very long.  The only solution is to find a kindly uncle who will pay, in this case the English.

Paul Ormerod

As published in CITY AM on Wednesday 30th March 2016

Image: St Andrew’s Flag by Jim Bradbury is licensed under cc by 2.0

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