News and Comment

However Scotland votes this September, the current status quo will no longer be tenable

Wednesday 26 March 2014

The polls are as premature as they are fast-changing, but since the publication of the Scottish government’s independence White Paper, the ‘Yes’ campaign has seen a modest increase in its support, narrowing the ‘No’ camp’s lead slightly. While only the very brave or foolish would confidently predict the outcome of September’s referendum, there is one conclusion that even the most circumspect are increasingly willing to draw: whatever happens post September, the status quo will not endure.

As more and more of the practicalities of independence are proposed, the policies of Alex Salmond and the SNP are beginning to look less secessionary and more concessionary than first thought. Plans to keep the pound, stay inside the Common Travel Area and retain the Queen as Head of State for example, are actually not too dissimilar from the previously discussed option of ‘devolution max’ – a policy which would give Scotland full fiscal autonomy, whilst keeping it within the union.

The devolution-max option was one which the SNP originally wanted included on the referendum ballot paper, but Westminster ruled out. If the vote in September goes as current polls suggest – i.e. the ‘No’ campaign prevails but not decisively – it is easy to imagine the SNP making a compelling case for its resurrection.

However they may not be the only ones petitioning the Government to change the way funding in the home nations is organised. Writing in the Municipal Journal last week Michael Burton commented that: “Once the referendum is out the way next autumn, it is clear that Westminster from 2015 will be under huge pressure from English local government to scrap the Barnett formula and create a more level playing field.” Burton refers to the fact that under the calculation used by the Treasury to determine the extent of public spending in the devolved nations, public spending per capita in Scotland is approximately £1,600 higher than in England. For this reason the LGA too has gone on record to campaign for Barnett’s replacement.

And the English aren’t the only ones who feel they are being short changed. The Holtham Commission has estimated that Wales loses out to the tune of £300m a year due to Barnett. Scotland too, despite the apparent gains won through the formula, has been critical of an approach which links it to spending priorities set in England. Alex Salmond has previously expressed concerns that possible “cuts in public funding for the NHS in England will lead to cuts to funding in Scotland.

Even the formula’s eponymous originator Lord Barnett has commented on the unfairness it fosters and surprise at its endurance: “I thought it might last a year or two before a government would decide to change it. It never occurred to me for one moment that it would last this long.”

Speaking to the BBC on Monday Scotland’s deputy First Minister Nicola Sturgeon, stated that if the outcome of the referendum was ‘No’ the SNP “would be against any reform of the Barnett formula that led to a cut in Scotland’s budget.” Her preference she insisted, would be for changes which enabled Scotland to raise its own taxes and its own budgets.

This pre-emption hints at a potential dilemma with serious implications for the way public services across the United Kingdom are funded. Should the Scottish independence bid fail, its Government will either demand full-fiscal autonomy or, at the very least, insist that the Barnett formula guaranteeing their current budget remains. England and Wales however will be petitioning Westminster to do just the opposite.