Scottish politics 1

A factory of grievances?

James Mitchell

Over the next few years as the devolved parliament proves incapable of preventing cuts biting deep, there will be a full-scale return to the politics of grievance. There will be substantial differences with the past.
     The existence of the parliament provides Scotland with an authoritative voice and a policy inheritance. Devolution will become, as was inherent in its design, a factory of grievances rather than a form of independent decision-making. From an English perspective, and indeed from the perspective of territorial justice, it is anomalous that Scotland has services unavailable to other parts of the UK while not having to pay for them.
     There is a difference between arguing that Scotland should have special assistance on account of need, but Scotland is a relatively wealthy part of the UK and is in less need of special services and assistance than many parts of England. The instability of the system will become apparent. It has frequently been noted that supporters of devolved government disagreed on the end point but the far more significant contradiction lies in the fact that the same supporters of devolution see it both as a form of self-government, permitting divergent public policies, and a lever for demanding more from London. 
     The corollary of improved costly services must be that those who wish them should have to pay for them. This requires fiscal powers that are unavailable and not yet under consideration. The parliament's existing tax powers evaded difficult questions and proved more significant symbolically than as a public policy tool. Calman was established in response to the election of an SNP government rather than in response to the weaknesses of the devolved system.  Its logic was driven less by the need to create an improved system of government but to maintain unity across the three parties opposed to the SNP.  The starting point for any review of devolution needs to be a more thoroughgoing understanding of the public policy purpose of the Scottish parliament and government. 
     We need to return to first principles when considering its fiscal powers rather than consider these in party political gamesmanship. Broadly, taxation and fiscal policies serve three purposes: raising revenue to pay for goods and services; redistribution of wealth; and as a lever to encourage or discourage behaviour.  The debate within Calman focused on only the first of these and even its proposals in this respect have been found wanting.   
     Each of these three purposes is relevant for meaningful self-government. Having the power to raise sufficient revenue is vital to pay for services. As we have seen, devolved government was not short of money in its first phase but is now as it moves into the second phase of devolution. The simple fact is that the level of services cannot be maintained with the funding available to Holyrood. Moreover, the choice of maintaining the level of services by increasing taxes is unavailable to the parliament. It is possible that the policy programme would have been different had it required a decision to increase taxes. It is this choice that needs to be available to ensure that decision-making neither lacks fiscal responsibility nor blocks costed and considered options. The problem with the Calman-coalition proposals is that the choice of improved services remains unavailable. 
    The second purpose of fiscal policy is to allow government to redistribute wealth. This is not the same as providing money for services such as education and health. Over the long-term, such services may have redistributive consequences. For example, investment in education allows for redistribution over a generation as children gain an education that allows then access to better paid employment than their parents' generation. But the most effective and immediate means of redistributing wealth is through the tax and benefit system. Scotland's record in redistribution of wealth reflected changes in the UK as a whole as the main levers were held at UK level. 
    Stein Ringer’s work is amongst the best overview of the record coinciding with the period of devolution. Ringen's conclusion is that Britain was a 'society of entrenched inequality' in 1997 and after 10 years it had 'become a yet more unequal one'. This was not for the lack of trying, nor the lack of resources poured into services designed to help the least well off but because when it came to income distribution, government in London 'paid careful attention to the broad middle class – which of course represents the bulk of the electorate – but failed those at the bottom of the distribution and gave too much to those at the top'.
     The key phrase here is that in parenthesis. The 'contented middle classes' needed to be appeased. Labour's instincts may have inclined it towards more redistribution but electoral imperatives prevented it doing so across Britain. The issue is whether that would have been the case in Scotland. There is some evidence that there are only slight differences in attitude on matters of redistribution north and south of the border but this evidence tells only part of the story. 
     Political leadership plays its part in the shaping of public opinion and the dominance of left of centre parties pursuing a more redistributive agenda in Scotland has never really been put to the test. More important is what happens when Scottish opinion is no longer in step with opinion elsewhere in Britain. This is where the real impact of the second phase will be felt: party political incongruence combined with severe fiscal constraints. 
     The third function of taxation is also important. There is no institutional incentive to encourage economic growth. Economic growth brings dividends to government in the shape of increased tax receipts and savings on public services required for those left behind. Devolution is a system in which only the savings from public services from economic growth benefit the Scottish government while any tax receipts accrue to Westminster. But beyond this, taxation allows government to alter behaviour by creating incentives and disincentives. This is unavailable to the Scottish government. The absence of such powers embed the imbalanced nature of devolution encouraging the politics of grievance. 
     The great problem with devolution is that it was created in reaction to a perception that the old system lacked legitimacy but failed to give sufficient consideration to what powers were required to create self-government.  If devolution is to be more than a means of wringing money out of London and more than a factory of grievances as we move into a period of financial austerity and become a meaningful form of self-government, then greater attention needs to be paid to the three functions of taxation. 

This is an extract from 'Devolution without self-government', a chapter in 'Radical Scotland: Arguments for Self-Determination', published by Luath Press @ £12.99

James Mitchell is professor of politics at the University of Strathclyde