Tartan timidity

The cleverest politician in the British Isles, Alex Salmond, has played an unpromising hand with extraordinary skill. The Scottish Nationalists, whose party conference takes place this month in Perth, remain overwhelmingly his country’s most popular party. But putting the case for independence has grown harder, at a time when it should have become easier. Hence the current standoff between the Nats and Westminster about whether to offer the punters independence tout court or to add a second less scary option, of a bit more devolution, for those of a nervous disposition. Michael Moore, the Scottish secretary, has said firmly, “There is no second question to ask.”

This cooling has occurred not just because the Olympic Games have left Scots feeling warmer about the Union Jack. They have also begun to think a bit more about the economic risks of independence. A survey at the end of last year found that only 21 per cent of Scots would vote for independence if it left them worse off by £500 or more. To rewrite the splendid Declaration of Arbroath of 1320: “It is in truth not for glory nor riches nor honours that we are fighting, but for freedom—as long as it doesn’t cost more than £500 apiece.”

Of course, freedom looks less attractive when there is no need to fight off an invasion by Edward II to secure many of its benefits. Indeed, the Scottish government offers goodies unavailable south of the border. Scots have universal free nursing and personal care, and free university tuition; there is talk of free universal child care and better state pensions. Yet council tax is frozen and other taxes are no higher than in the south. Public spending per head in Scotland was 14 per cent higher than in Britain as a whole in 2010-11, and the public sector provides a quarter of Scottish jobs, compared with a fifth in the country at large.

No wonder, then, that Scots feel ambivalent about their government’s pledge to cut ties with the southerners who finance this conjuring trick. In July, before the glow of the Olympics altered the mood, 30 per cent of Scots told YouGov, the polling agency, that Scotland should be an independent country; 28 per cent liked the status quo; and 29 per cent were in favour of more devolution, a strategy whose lack of detail is hidden under the cartoon-character title of Devo Max. No “Whae Hae” there.

As the promised referendum approaches, Scots will have to get off the fence. The decision will by then have become even harder, for Britain as a whole is only at the start of a long slog to reduce public spending. For over a generation, under Tories, Labour and now the coalition, Britain’s tax take has not budged much above 38 per cent of GDP. And there is no reason to expect that share to rise—not even with Nick Clegg’s wealth tax. It might crumble further, if the one per cent of income taxpayers who account for 28 per cent of income tax revenue decide to retire.

Instead, whether Scotland remains in or out of the United Kingdom, the revolution in public provision of the next 20 years will transform its economy, just as it will transform other parts of the country that depend heavily on public money and jobs. For the time being, the threat of leaving the Union has helped to stave off some of the pain of cuts, as with the hit to army numbers. But that can’t last. When state spending has to be cut, year in, year out, Scotland will suffer more than the south. Grousing about decisions taken in Whitehall will be easier than taking responsibility for what has to be done.

But it is not good for Scots to grouse about the colonial power down south rather than to decide for themselves what to amputate and how to pay for what they want to keep. Two years ago, a brave and thoughtful independent budget review, undertaken by Sir Crawford Beveridge, set out the uncomfortable priorities on the spending front. The principle of universality was “no longer affordable”; public sector employment had to contract; the council tax freeze had to end; a concerted effort was needed to identify savings in public spending at every level. None of this has happened.

To preserve these services unscathed, the only option would be more tax—much more tax—and oil alone would not provide it. Yet, when the Scots had the power to vary income tax by three per cent up or down, the “tartan tax” was never used, and now that power has lapsed. Economic sovereignty, when offered, suddenly seemed unappealing.

Of course, there is an alternative: to become a tartan tax haven. The Scots long to copy Ireland’s low rate of corporation tax, to woo companies north. The EU may well forbid that. And then there are the rich: if they pay vastly more tax per head than the middling sort, it might make sense to woo them. An independent Scotland would be off to a good start. Not only is Britain’s second-largest wealth management cluster based in and around Edinburgh’s Charlotte Square, the Scottish capital also educates a higher proportion of children in independent schools than any other city in the United Kingdom. Oddly, the egalitarian Scots have never trumpeted either as national advantages.

An independent Scotland might not be able to offer a £500 bonus to all its citizens. It might have to contemplate some of the ugly compromises of sovereignty: a tax strategy to attract England’s disaffected plutocrats, perhaps, or a group of universities allowed to charge whatever fees they wanted. It would be far better for Scots to take their own decisions on how to cut public spending and raise taxes than to see their country as a client state of England. A few more tea-towels emblazoned with the Declaration of Arbroath might give them the courage to agree.