An independent Scotland is a non-starter, but advocates of ‘devo-max’ should be careful what they wish for

Joel Barnett has lived a long life. He has scaled the heights of politics, from treasurer of the Manchester Fabian Society to chief secretary to the Treasury under Harold Wilson and James Callaghan. He remains a Labour member of the Lords. Roam the red-carpeted corridors, and you can sometimes see him: a rare sight like a red kite or spotted nutcracker.

But for all of his political achievements, none ranks so high as the formula named after him. The Barnett Formula, introduced in the late 1970s as a mechanism for allocating taxpayers’ cash to Scotland, Wales and Northern Ireland, has survived five prime ministers, several small wars, and remains in place alongside new parliaments and assemblies.

It is based on size of population, not social or economic need. It was devised at a time when Scotland and Wales were on the brink of referendums on devolution (which many assumed would produce a Yes vote). It was not supposed to be a permanent fixture. Like Karl Marx, who is reputed to have declaimed ‘Je ne suis pas Marxiste’, so the Barnett Formula has no greater critic than Barnett himself. In the ferment of modern Scottish politics, it is coming under strain.

It seems likely that its demise will be at the hands of ‘devo-max’, the ceding of tax-raising and public spending powers to the Scottish parliament. Although the timing and wording of a referendum on Scottish independence are not even close to being agreed, it seems possible that the two-question ballot paper will be adopted. Based on the opinion polls, the first question – do you want independence? – seems unlikely to be passed. But a second question, if it appears on the ballot paper – do you want the parliament to have new powers over tax and spending? – might well get through.

Labour in Scotland is preparing for the fight of its life over the union. Any vestiges of Labour sympathy for independence have been expunged. At the recent Scottish Labour conference in Dundee, speaker after speaker reiterated support for the union. It is more than a tactical dividing line with the Scottish National party. It is now a matter of high principle.

But if the Labour party supports devo-max, what will that mean? Labour needs to decide its own position on it. The fact is that Scotland cannot raise enough money from its own businesses and citizens to fund its public services, even if revenues from offshore oil and gas were included. A study for the Scotland Office under the last Labour government suggested that since devolution Scotland has had around £76bn from the rest of the UK. Scotland’s public services have had a structural deficit since the recession of 1980-81. As the report puts it: ‘Total spending by the UK and Scottish governments in Scotland currently amounts to 145 per cent of the total of Scottish tax receipts. Hence a fiscally autonomous Scotland would be dependent on the continuance of a fiscal transfer from the UK to maintain current levels of public spending. Equally, a fiscally autonomous Scotland could not make any contribution towards the provision of goods provided at the national level, such as defence, the regulation of markets or overseas representation while maintaining current levels of public expenditure.’

An independent Scotland is economically a non-starter. The figures suggest that a Scotland raising its own taxes and spending its own money is also a fantasy, because it would still be massively dependent on the English to pay for its defence, healthcare and welfare bill.

At the moment, the English are content to foot the Barnett Formula bill, not because they greatly value the union with Scotland, but because they remain blissfully ignorant of how much it costs them. The English have no great affinity with the land of Robert Burns, Adam Smith, David Hume, and Gordon Brown. Their understanding of Scottishness rests on its celebrity expatriates: Sean Connery, Billy Connolly, Alex Ferguson, Susan Boyle and Hardeep Singh Kohli. Their knowledge of its geography might depend on business trips to Glasgow or Edinburgh, or holidays to the Highlands, but more likely than not they won’t ever have set foot on Scottish soil. To most of the English, Scotland is as much a foreign country as Belgium, Ireland or Denmark.

The Scottish political class should be careful what it wishes for. A vote for Scottish independence would be a matter of idle curiosity in Swindon or Slough (although for the Labour party in England it would be curtains). But a vote for devo-max would shine a bright light on an arrangement which has benefitted the Scots, and been paid for by the English, since Barnett conjured it up a lifetime ago. If the English took a close look at their bank statements, they may want to stop the standing order.

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