Alf Young
Hard lessons from Ireland

It sounds like a form of fiscal vasectomy. An Bord Snip Nua (The New Snip Board) is the arms-length body set up by the Irish government to recommend how, in that deeply embattled economy, shrinking public resources can best be deployed to maintain key priorities. Last July Ireland's three-man Snip Board, headed by private sector economist, Colm McCarthy, proposed a 5.3 billion euro package of cuts, a 5% reduction in social welfare programmes and the loss of 17,300 public sector jobs.
     Yesterday, as one of his concessions to the Tories to get his budget through Holyrood, Scotland's finance minister, John Swinney, announced his own independent review of public expenditure in Scotland. The composition of his three-man commission has yet to be announced. It is expected to address 'the challenges and choices that will exist in a significantly constrained public spending environment and to ensure priorities can be established'. And it has to square that perplexing circle by the end of July.
     As it happens, Mr Swinney and Mr McCarthy were chatting in Edinburgh last Friday, where the Snip Board chairman was addressing a conference on the cuts to come. Perish the thought that's where our finance minister got his idea. McCarthy argued his board, as well as coming up with a 'great big menu of cuts' for government to choose from, was also about getting public opinion, opposition parties and the media onside for the pain to come. But he said something else which deserved a much wider hearing.
     Scotland, he suggested, was 'fortunate' in having the UK government take responsibility for our banking collapse. 'You should be very grateful that the Sassenachs are responsible for your banks incidentally. Being a sovereign and independent nation is great fun up to a point, but if you can lumber somebody else with the cost of the banks that's a pretty shrewd move.'
     Ireland is awash with books agonising over its experience of the crash, led by the redoubtable Fintan O'Toole's 'Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger'. Others have chronicled how bankers, builders and property developers and their links with a cosy political elite in Dublin helped bring that fine country to its knees. There is heated debate about who is best served by the most controversial Irish remedies, like Nama, the National Asset Management Agency, a state-sponsored bad bank set up to quarantine the most toxic assets on Irish commercial banks' balance sheets. In August, 46 leading academic economists wrote to the Irish Times condemning Nama as 'a massive transfer of wealth from taxpayers to private risk-takers'.
    
Where is the equivalent national soul-searching here? In Scotland it barely registers. Yes, someone broke a few of Sir Fred Goodwin's windows. But post-crash, our big banking campaign was to save a virtually insolvent Bank of Scotland from the intrusive clutches of Lloyds. According to both the SNP and the Tories, whose votes got yesterday's budget through, this recession was Brown's recession, made in London. John Swinney suggests the SNP minority administration would not be facing increasingly hard fiscal choices if it had control of its own economic destiny.
     Really. I don't recall any SNP voices arguing, during the boom years, that our collective addiction to debt, an unsustainable housing bubble and the increasingly leveraged behaviour of our banks would eventually all unravel, with disastrous consequences. Where was the party's policy for curbing bank risk taking? Isn't its overarching purpose in government to raise Scotland's rate of growth, first to UK levels, then to those of smaller independent states on what Alex Salmond memorably dubbed Europe's arc of prosperity? Isn't its main ambition, in dealing with the corporate world, to slash taxes on profits so more multinationals choose to locate here? Our First Minister was never prudence in tartan trews, He was cheerleader-in-chief as his old employer, the Royal Bank, set out to conquer global markets. Months before RBS hit the buffers, Bute House even issued his own fulsome commendation for its half-year results and his fervent hope that the worst was behind it.
     Had Scotland been an independent country by the millennium, what would the SNP have done to curb the expansionist ambitions of Scotland's two leading banks? Would it have intensified the regulatory curbs on their increasingly leveraged balance sheets? I know of no evidence that such concerns even registered on nationalists' radar, let alone figured in their myriad policy documents. Had Scotland been independent when RBS and Bank of Scotland's then-parent HBOS finally tottered towards insolvency in late 2008 and had to be rescued, an SNP government in Edinburgh would have been presented with a bail-out bill so vast as to render Dublin and Reykjavik bit players in the unfolding global drama.
     Shrewd indeed, as Colm McCarthy suggests, to have sidestepped that particular endgame. He is wrong, however, to suggest that we left it all to the Sassenachs. As taxpayers and UK citizens, we Scots are sharing with our English, Welsh and Northern Irish neighbours, the eye-popping costs of bailing out our banks and the consequences of the deep recession that followed. We will be paying that price in higher taxes, lost jobs and constrained public services for years to come. But we Scots were not innocent bystanders caught up in the crossfire. We pumped up the bubble too. We should be made to confront, as the Irish are doing, our own collective role in this saga. And what it tells us about who we really want to be.
     But wait a minute, argues John Swinney, reaching for another well-worn line. Thanks to North Sea oil revenues Scotland has a fiscal surplus. We should not be facing cuts at a time like this. I take it, John, you've already set your civil servants to work, modifying the contentious GERS (Government Expenditure and Revenue in Scotland) methodology to include our share of the colossal cost of rescuing RBS and Bank of Scotland. You can knock me down with a Scottish fiver if our finances are still in surplus after that.