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Kenny Farquharson: More powers, or independence

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Published Date: 21 June 2009
HOW many photographs exist of Alex Salmond eating? There must be hundreds. Alex eating pies. Alex eating curries (lots of those). Alex eating ice cream cones. There was another in the newspapers yesterday – a lurid close-up of Alex demolishing a Belgian biscuit. It was a scary sight.
During an election campaign a few years ago I asked an SNP friend of mine why the Nationalists didn't stage more photo opportunities with Salmond and children. When his Labour opponent at the time, Jack McConnell, stepped in front of the cameras he w
as invariably surrounded by ruddy-cheeked wee cherubs. Why didn't Salmond do the same? My friend sighed: "It's because when you put kids next to Alex, it looks like he's going to eat them."

However much I would like to, I am not going to devote this column to the First Minister's eating habits, and how we as taxpayers are paying to keep him well-fed. On the subject of how he managed, in April 2007, to claim £400 for food consumed at Westminster when he was on a well-publicised diet in Scotland campaigning for the Holyrood elections, I will be silent. Nor will I dwell on the mystery of the £800 he claimed for food at Westminster during two summer months when the Commons wasn't even sitting. Not a word will pass my lips, because I have something more important to discuss with you.

Salmond is this week going to cause all kinds of problems for his political opponents – and they will have no-one to blame but themselves. Salmond will be able to deflect attention away from his party's failure to keep election promises, his government's lack of momentum and, yes, the cost to the taxpayer of his calorific intake.

This coming Tuesday, Jim Murphy, Labour's Scottish Secretary, will be at Bute House for talks with Salmond and the Scottish Cabinet. A clue to how that meeting will go was revealed in a briefing note issued by the First Minister's office yesterday. It can be summarised like this: Salmond is going to use the Calman Commission as a stick with which to beat Murphy over the head with all the vigour of a Tehran riot cop. And he will do so while claiming the moral high ground.

The Calman Commission, you will recall, was the group established by the unionist parties to come up with improvements to devolution. When the Commission published its report last Monday you could detect some smugness on the part of Labour, the Lib Dems and the Tories. They plainly felt that they, and not the SNP, were now making the running on the constitution. They, and not the SNP, were the ones having a constructive and detailed discussion about how to make Scotland a better-governed country. They, and not the SNP, had done the hard work to equip Scotland with the powers needed to protect its people from the vagaries of the global economy.

They had some justification. I'm a long-time believer in what this newspaper dubbed Devo Max – a strong Scottish Parliament exercising far more substantial powers, but still within the Union. And I would have liked Calman to have been more radical, both in the financial levers made available to the Scottish Government and the areas of legislative competence devolved from Westminster. But my fear – that Calman would simply tighten some bolts in the devolution boiler-room, squirt some WD40 on the moving parts and give the whole thing a wipe with an oily rag – proved unjustified. What's proposed is a substantial transfer of powers. This really is Devolution 2.0.

Of course there are legitimate questions about how it will operate in practice, but the SNP arguments against Calman are in danger of making the Nationalists look like moaning ingrates. Salmond, however, has a trump card, and he will play it with some relish on Tuesday. The SNP will ensure that the political narrative of the coming months is not about what Calman is proposing, but about whether the proposals will be put to the popular vote.

As the briefing note from the First Minister's office says: "On the central issue of Scotland's funding, the Calman parties should be prepared to put their option to the people in the referendum that the SNP Government propose for 2010, and we will agree to include it on the ballot paper. It can then be tested against the Scottish Government's policy of independence and Scotland being responsible for all of our tax and spending – including North Sea revenues – with the economic and financial powers we need as a nation."

The unionist parties have already made clear their opposition to a referendum. Salmond, therefore, will take great pleasure in portraying them as anti-democratic. That's much more fun – and far better politics – than an arcane debate about the practical difficulties in replacing a set block grant with fluctuating income tax receipts.

By failing to think this through and anticipate the SNP's response, the unionist parties have allowed themselves to be outmanoeuvred by Salmond. They have handed him the advantage. There is, of course, a way for Iain Gray, Tavish Scott and Annabel Goldie to recover their momentum. It is a course of action I believe they should have the courage to take. They could simply call Salmond's bluff and agree to a referendum on Scotland's future. No multi-option nonsense – you can't decide the fate of a nation on second-preference votes. Let's have a straight choice between the two options on the table – more powers or independence. There's an elephant in the room, and there has been ever since the SNP gained power in 2007. So let's look that elephant square in the eye. And no, that's not me getting back onto the subject of Alex Salmond and food.



The full article contains 976 words and appears in Scotland On Sunday newspaper.
Page 1 of 1

 
1

Marga,

Edinburgh 21/06/2009 02:20:43
I think the strong dissent just published of two Calman members might give Mr Salmond a few more ideas. Dissent is one thing, hiding it (dissent embargoed for a week after the publishing of the main report) is also handing Calman's enemies the moral high ground on a plate (oh dear, we weren't talking about food, were we ..)
2

Mercutio,

FALKIRK 21/06/2009 05:39:01
Will "Spud" Murphy be served up on a plate to The Rt Hon Alex Salmond MP MSP and First Minister for Food Allowance.
3

PJMC,

Glasgow 21/06/2009 09:01:18
You mean exactly the strategy proposed by Wendy Alexander more than a year ago for which she was attacked.
4

A Scott,

Glasgow 21/06/2009 09:37:33
Im sure that I read yesterday a blog in the North Briton stating that 11 Liebor Mp,s claimed for grub during the parliamentry recess (Oily Jim claimed two yrs in a row) still no mention of that by Kirsty Warks pal Kenny.
5

Linda,

Edinburgh 21/06/2009 09:38:48
In Sunday Times the Calman Commission proposals are describeed as incoherant .. by former Labour minister Sam Galbraith.

From Prof Drew Scott in Scotsman..
Independence or just the status quo are more likely to bring Scotland growth than Calman's recommendations
IN OUR view the fiscal reforms proposed by the Calman Commission are at best an opportunity missed and at worst a recipe for economic instability in the future.

On the first matter, the commission appears simply to have sidestepped entirely the option
of a move to fiscal autonomy whereupon a Scottish Government will be responsible for raising all its revenues via taxation and borrowing. We believe this to be a fundamental mistake. Only under fiscal autonomy can the accountability of the Scottish Parliament properly be entrenched, and it is surprising that there seems to have been very little consideration of this option by the independent expert group advising the commission.

Fiscal autonomy permits a Scottish government to utilise the full range of taxes (and other fiscal policy instruments) to maximise the rate of growth of the economy and to borrow on global financial markets in order to fund investment expenditures and, if necessary, engage in countercyclical economic policies.

The Calman Commission proposals will do little to enhance the ability of a Scottish government to introduce measures necessary to improve Scotland's underlying economic growth rate, or to balance the Scottish economy through good times and bad. Furthermore, with such a small proportion of the overall spend of the Scottish parliament being financed by locally raised revenue, the degree of accountability is illusory especially since so much of the spending will still be underpinned by the Barnett block grant.
6

Curley Bill,

21/06/2009 10:57:14
If anyone wants to read a more lucid and less childish article regarding the Calman Commission and the SNP's reaction to it, they should read Campbell Gunn's piece in the Sunday Post.
Kenny, you should be ashamed.
7

Linda,

Edinburgh 21/06/2009 11:10:15
The biggest waste of money is the Scotland Office. It's responsibilities are virtually NIL since devolution yet figures buried in the Scotland Office’s Annual Report 2009 reveal that the total administration costs of the department have rocketed from £3.7m in 1999 to £7.2m a year in 2009.
This is public money paying for Jim Murphy's onslaught on the democratically elected Scottish government.
8

frank mcbride,

lusitania 21/06/2009 11:41:33
Kenny, the only part of this article you got right was calling for a Referendum. However, your reasons were spurious.

If, as you aver, Calman is a great step forward can you explain its regressive nature?

The Tax Varying powers are worse than that already available to the SP; they are incoherent and, as such, unworkable.
They give the SP no extra control over Scotland's finances; no powers to asymetrically vary rates, no clear mechanism for estimating Scottish IT returns.
And most important, a return of Tax Raising control to Westminster.
Westminster will control banding, allowances and allocation (Eng/Scot tax take).

The return to Westminster of Devolved power, by the back door, through the mechanism of Westminster Superior Authority is clear in Calman's recommendation that "the self-denying ordinance" should be ignored.

This has ramifications for the SP position on nuclear facilities and other contentious issues.
9

John PH,

Fife 21/06/2009 14:14:56
Kenny
Your fears that Calman would be simply tightening the bolts on the boiler, squirt some oil on the engines moving parts, then give it a clean down with an oily rag “is” justified.

The fire that SNP is stoking, is building up a head of steam of Scottish opinion so that the Calman Boiler, not able to take the pressure, will be ruptured, the engine wrecked, the train will come to rest. The Scots will alight and then catch a much better train going the other way with more substantial abilities.

To show Scots the way, the sign on it will say, “onboard for Independence, a Written Constitution, a bill of rights, and a normal parliament with full fiscal autonomy”.

Do they get on board? Or wait for the next clapped out unionist train?

Look out for the stampede.
10

zeitgeist,

21/06/2009 15:58:09
The calman proposals on tax are simply un-workable :

In some political circles, the response to the fiscal policy reforms put forward by the Calman Commission have a certain superficial appeal because they increase the accountability of the Scottish Parliament for a small (15%, up from 5%) part of its spending decisions. The proposals may appear doubly attractive in the same circles because they seem to deliver a counter-punch to the current SNP Government which, since May 2007, has dominated the debate about Scotland's constitutional options and, as a part of that, the economic powers a Scottish government should command if it is to be able to tackle Scotland's underlying economic problems and the economic challenges that lie ahead. These points are true as far as they go (15%), but only in so far as they work. They cannot. However attractive the Calman proposals might be in the political context, they are seriously flawed (if not illiterate) for simple economic reasons. And that will affect the politics. The superficiality of Calman's proposals should not blind us to the dangers for Scotland's economic prospects.

The big idea in the Calman Report is "tax devolution". Under this a future Scottish Parliament will be responsible for setting a Scottish element of the UK rate of income tax (one-half on the UK basic tax rate). The revenues from this would be assigned to the Scottish budget as "own resources". An amount equivalent to the revenues that would have been expected from the application of the UK rate of income tax in Scotland, will be docked from the block grant (which, in the meantime, will continue to be set by the Barnett formula]. Notionally this will create a situation where, if the Scottish Parliament should decide not to alter the Scottish segment of income taxation from the UK-wide rate, there will be no impact on Scotland's budgetary revenues or public spending. If, however, the Scottish Parliament were to change Scotland's income tax component
11

zeitgeist,

21/06/2009 16:01:50
overall revenues and spending would be reduced (increased) by the amount that income taxes were lower (higher) than those that would have been generated had Scotland's tax rate been set at the UK rate. This poses a problem. If one takes the view that the provision of a certain level of services is necessary, then reducing the Scottish tax rate is scarcely an option. Or, as Henry Ford would have put it "you can have any form of devolution you like as long as you don't use it". (He actually told his customers "you have any colour they like as long as it is black"). In addition, the Scottish Parliament is forbidden to alter the differences between upper and lower tax brackets, or to interfere with taxes on savings, investments, dividends or profits. So Scotland is forbidden to try to create a fairer society; or, more crucially, a more competitive economy should she wish to do so.

The fundamental objection we have to the Calman proposal is that it inevitably and unavoidably leads to a situation in which the revenues flowing to the Scottish budget will be subject to unanticipated variations which either requires a perverse – that is to say pro-cyclical – policy response on the part of Scotland's government (but not its Parliament) to offset these fluctuations; or automatic and immediate access to net additional funds. The latter is ruled out by denying Scotland the ability to borrow (except for immediate cash flow problems, capped at £½bn), although a last-minute ad hoc bail out by the Treasury might be possible. Maybe that is the point: control.

One can only speculate on the motives for favouring a regime that comprises such a punitive measure. But consider how it would have played out in the current crisis. In the UK as a whole, the crisis has caused a drop of 5%-6% in income levels and the government has had to borrow 11% of national income to counter it. Translating that to Scottish conditions, since noncapital borrowing is ruled out, public spending on servi
12

zeitgeist,

21/06/2009 16:03:27
on services (schools, health) would have to be cut by 11% immediately. But those cuts in spending will drive a further decline in incomes and hence tax revenues, requiring a second round of cuts and/or tax rises. Ultimately, in order to restore spending, tax rates would have to rise to make up the short fall, provoking yet another (a third) decline in disposable incomes and hence revenues and spending.

This cycle of revenue declines, followed by spending cuts and then tax increases, is unavoidable because one cannot increase taxes immediately and to save the spending cuts. It takes two years: one year to pass the budget change through Parliament, and then one year for the changes to be implemented and bring the higher revenues in. This problem is a direct consequence of linking current government spending to current tax receipts under a regime in which the annual budget must be in balance – i.e. outgoings (expenditure) have to be matched by income (revenue).

Although the Calman report might have acknowledged this situation could arise, and would prove a nightmare from the perspective of economic management, astonishingly it offers no insight – still less any proposals – as to how it might be addressed. This is, to say the least, a disaster waiting to happen – and one that does not require a crisis anywhere close to the magnitude we are presently experiencing to trigger it. Economists are very familiar with the need for Governments to have access to a facility for "smoothing" unexpected variations in revenues, typically through borrowing powers. No country in the world (bar Denmark and Korea) tries to operate without those powers for itself or its regional governments. Yet the Calman Commission elected to ignore this issue entirely. This was not ignorance or oversight: the Commission was warned repeatedly, both in evidence to their expert group and in evidence from the council of economic advisors, of the dangers of following this path. But it appears not to
13

zeitgeist,

21/06/2009 16:05:35
But it appears not to have interested them. Most telling perhaps are the three scenarios on pages112-13 of the Report. They are: tax revenues in the status quo, and where Scotland reduces her tax rate, and where Scotland enjoys a boost to incomes. But there is no scenario where incomes fall in a recession. One might ask: why not? Was it because they didn't think of it; or because they thought it would never happen; or because they didn't dare admit that their proposal was fatally flawed?

There are also practical problems that make the Calman tax proposals unsuitable, if not unworkable. How is the block grant going to be cut if tax revenues are uncertain and variable? These cuts have to be made in advance (not after the revenues come in), and in an exact number of pounds. Percentages relative to the rest of the UK won't do since the UK revenues are just as uncertain. What dispute resolution procedure will be invoked when it is discovered that too much grant was cut because the UK revenues were weaker than expected? All tax revenue figures are subject to revision for up to two years later. What is to be done if revenues were expected to be higher, so the grant element is cut causing public services to be cut, and then they are revised to imply that the grant should never have been cut by so much? Then again, how are the self-employed, partnerships and trusts to be allocated a jurisdiction? The opportunities for flipping are nearly endless. And who will pay for all this, to administer and enforce the new regime? And how much will it cost? It used to be said that half of the Tartan tax would have absorbed in administration and implementation. If so, to raise 10p's worth of revenues under the new system, to restore spending power to its previous level, would require a Calman tax rate of 20p on top of the 10p UK tax rate. Although our figures might exaggerate the case, Scots would nevertheless see their tax rates rise above the rest of the UK just to stand still. Why
14

zeitgeist,

21/06/2009 16:06:49
Why would the Commission want that?

There is a further problem. The calculation of how much to reduce the block grant is made relative to what the UK-wide rate would have yielded in the old system. But incomes per head are about 4% lower than in the UK as a whole. This implies a loss of 4% (approx £400m) of revenues, and hence spending, compared to the old system, even if Scotland keeps her tax rates at the UK-wide rate. So it is not as if things have not changed if the Calman tax is not used. In today's money, this is equal to a loss of 16 schools each year. The reason for creating such a permanent bias is not clear.

In summary, we have to conclude that the current recommendations are worse than undesirable; they are unworkable. And while we acknowledge a preference for fiscal autonomy ourselves, it is important to recognise that if this is the level of service we can expect from official sources, then most people will demand a degree of autonomy when the advantages of this proposed system reveal themselves – including a hand in the design of the system. If there was ever proof "we" could do it better than "they", this was it.


By Andrew Hughes Hallet, Professor of Economics and Public Policy, George Mason University and Professor Drew Scott of the University of Edinburgh

15

DougtheDug,

21/06/2009 17:12:04
"I am not going to devote this column to the First Minister's eating habits, and how we as taxpayers are paying to keep him well-fed...because I have something more important to discuss with you."

More important than the police investigating Labour MP Jim Devine, or looking at the apparent tax-evasion of Labour MP Eric Joyce who failed to pay Capital Gains Tax when he sold his second home in London or ex-Labour MP Tam Dalyell trying to claim for £18,000 from the taxpayer for bookcases just two months before he retired from the Commons before 2005? It must be important and I suppose the Labour Party needs all the cheerleaders it can get at the moment.

The Calman Commission does nothing to protect the people of Scotland from the, "vagaries of the global economy", because it changes very, very little. And if there is such a thing as, "Devo Max", or "Provincial Powers Max", as it should be more properly called, then the Calman proposals are most certainly not, "Devo Max". It's not, "Devolution 2.0", though it may very well be as much as "Devolution 1.0001"

If you believe that the new funding method is going to be dependent on fluctuating income tax receipts then you should read the report. The funding is still going to be at the level of the Barnett Formula but instead of a block grant it will be a assigned taxes plus a block grant to make it up to the Barnett formula level every year. Unless it's a hell of a bad year or a good year then there is not going to be much of a variation in tax levels and the block grant proportion of the funding will take the change in tax receipts into account for the next year's funding to make up the funding to the Barnett Formula level.

The sum total of the changes are:
1. Scotland will continue to be funded at the level set by the Barnett Formula
2. The Scottish Parliamentcan now vary income tax by 10p in the pound rather than 3p in the pound
3. The Scottish Parliament can now borrow money just like any other local author
16

mr broon,

Edinburgh 21/06/2009 20:23:35
The First Minister's huge appetite knows no bounds, and when gallus Eck is not polishing off pies or curries, he is eating Opposition politicians for breakfast.

How does the old adage go? Any publicity is good publicity.

Kissing babies or holding old ladies hands doesn't quite suit insufferable Eck's LARGE personality, who much prefers munching Desperate Dan pies.

However, Eck's a glutton for publicity. Remember, he's only the leader of a minority Nationalist Government, although you wouldn't think so when you compare his Government with the "toon cooncillors"
in the Unionist parties!
17

kirk 1,

21/06/2009 20:52:00
Kenny, please stick to reporting the news, instead of trying to make it.
Trying to help the 3 stooges trip up Salmond will only
cause you more heartache.


18

Brianwci,

22/06/2009 02:44:55
For a non Independence man Kenny that was a fairly balanced article. Thanks, I enjoyed it.

Between Salmond's 'logical' approach to the Referendum and the unionists being shell shocked following the phenomenal SNP advances in the General Election (not to mention the Tories in Government) and with Holyrood being just around the corner......

....can you really see the unionists saying NO the People will NOT be given the chance to vote on THEIR OWN FUTURE?

I don't think so!!!
19

PMK,

23/06/2009 12:13:30
Another mention of the food ... why not mention Murphy claimed the maximum for every month of the last two years! Kind of puts Salmond's claim in the shade ... Also, he was away on holiday (out of the country) for two months while claiming the max.

Calman farce has only brought independence closer (especially now you can guarantee there will be no 'fiscal autonomy'/'fiscal federalism' option in any upcoming referendum).

 

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