Scotland is staring into a £4.5 billion black hole
‘Their form of rule is democratic for the most part, and they are very fond of plundering…’ That description of the Scots by Cassius Dio, the Roman historian, in the early 3rd century testifies to the consistency of the Scottish character over 1,800 years. Today the Scots are so democratic they have saddled themselves with three tiers of government, while their enduring taste for plunder has progressed from the crudity of border reiving to the sophistication of the Barnett Formula. Scotland has successfully reversed the fiscal arrangements that would have been familiar to Cassius Dio in the days when outlying nations paid taxes to Rome: contemporary Caledonia is a dependency that exacts tribute from Westminster.
That relationship is about to change. The campaign for the Scottish elections is being conducted in the context of the most radical fiscal revolution since the Treaty of Union in 1707. The Barnett Formula currently awards £1,600 more per capita public expenditure in Scotland than in England. There is universal recognition, however, that English taxpayers will no longer submit to Danegeld on so outrageous a scale. The Office for Budget Responsibility will start work next year on devising a substitute for Barnett which is expected to be predicated on a needs-based formula. That will, at a stroke, leave a £4.5 billion black hole in Scottish funding. Cue Corporal Fraser: ‘We’re a’ doomed!’
The election campaign began with Labour well in the lead. Now the SNP has overtaken them; the latest YouGov poll shows the nationalists projected to win 55 seats, six ahead of Labour, with the Tories trailing on 14 and the Lib Dems with six, just one ahead of the Greens. Since the party manifestos are pie in the sky, the SNP lead is attributable to Alex Salmond’s performance on television, far superior to Labour leader Iain Gray and any other opponents. Gray is gossamer lightweight; any serious politician would have taken Salmond apart on his record and undeliverable promises, but there are no big hitters in Scotland. The collapse of the Conservative vote has been a work in progress for years for the Scottish party’s leader, Annabel Goldie, and her extravagantly inept team. The Holyrood Conservative coterie — the Vichy Tories — has betrayed every Conservative principle since 1997 in a pathetic attempt to disown its anti-devolutionist past. Now its core vote has abandoned the Scottish Conservative party for the SNP or the statistically insignificant Ukip, or simply staying at home. It is such émigration intérieure that will relegate Scottish Toryism to the dustbin of history.
In a craven bid to head the separatists off at the pass, the Tories and other opposition parties joined the Calman Commission whose report was the basis of the Scotland Bill now wending its way through Parliament. The Bill provides for a 10 per cent reduction in Scottish income tax, but empowers the Scottish parliament to set tax at basic and top rates for non-savings income. It also extends Scottish ministers’ powers to borrow money up to £2.7 billion a year. What it does not specify is how the corresponding reduction in the Scottish block grant will be calculated. The only credible answer is: on a needs basis. As already noted, any such formula would reduce the Scottish budget, currently around £30 billion, by £4.5 billion. So, in order simply to stand still and avoid closing hospitals and schools across Scotland, that £4.5 billion shortfall would have to be made up out of the new taxation Holyrood will be empowered to levy.
It is at that point Scots will finally come face to face with the appalling fiscal demography of their nation. Out of four million Scottish voters, only 2.3 million pay income tax. On to that happy 2.3 million will devolve the patriotic duty of stumping up an extra £4.5 billion over and above what they already pay in tax. That extravagant scenario provides a microcosm of Scottish society, an antediluvian dependency culture in which the majority of the population squats on the backs of a wealth-creating minority. The public sector is the dominant element in the Scottish economy. By 2005 the public sector accounted for 74 per cent of the economy in Ayrshire, a situation which even the chairman of Scottish Enterprise, itself a sclerotic interventionist quango, described as an ‘Eastern bloc’ level of dependency. In the area served by the Argyll and Clyde health board the figure was 76 per cent.
Between 1998 and 2007 the number of public sector jobs in Scotland increased from 603,773 to 772,048 when the so-called ‘para state’ is factored into the equation, that sector of the economy which is nominally private but depends for its contracts on central and local government. During the first decade of this century 64 per cent of new jobs in Scotland were created in the public or para-state sector. By 2009 Scotland had attained global statistical significance, as the third most state-dependent country in the world, after communist Cuba and war-ravaged Iraq. Scotland no longer has a bourgeoisie in either the Victorian entrepreneurial sense or the textbook Marxist definition.
There are plenty of people living in pleasant houses in leafy suburbs, with three cars in the drive, taking two foreign holidays a year and hosting well-appointed dinner parties; but in the classic profile he is a consultant in the NHS and she is a head teacher in a state school. They are the people who tell pollsters, ‘I have no objection to paying more taxes to support public services’, secure in the knowledge that their state salaries will keep ahead of any tax hikes. These apparatchiks constitute the Scottish nomenklatura. The coming cataclysm remains unacknowledged. Alex Salmond has postponed financial cuts, has pledged no compulsory redundancies among civil servants and has produced an election manifesto including a five-year council tax freeze that would cost more than £1 billion. Labour leader Iain Gray commended his own manifesto to the electorate, saying: ‘There is some bold spending in there…’ It must have been like this in Pompeii on the eve of the eruption.