How Boris Johnson may be doing the independence movement a favour - again

Boris Johnson is the perfect, shabby charlatan to play one last conjuring trick: the vanishing country. Having turned his back on Europe, he seems unable to hold even the current, shrunken United Kingdom together. Scottish independence can have no stronger advocate.

This nonsense of increased National Insurance contributions to fund social care in England is just the latest example of his unthinking Unionism. Ignore the hasty attempts to seem to spread the burden more equally. The structure of National Insurance ensures the burden of payment will land on people in jobs, and will have a large effect on low-paid work. It seems typical of this government’s ability to be as mean spirited as possible.

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The Scottish Government can use this general incompetence to demonstrate exactly how the UK is failing to support the devolved institutions. To avoid being accused of short-changing Scotland’s social care, the Prime Minister tried to direct the Scottish Government’s spending this week. That’s not his job.

And it looks like the Treasury is trying to hold on to some of the money that should come to Scotland under the block grant arrangements. Expect more bad temper between Holyrood and Whitehall.

For most working people in Scotland, this is going to feel like an increase in income tax. One of the reasons we’re having this discussion is that governments for nearly 50 years have shied away from raising the standard rate of income tax. Instead, VAT has gone up, and National Insurance has gone up. Gordon Brown was inventive in finding stealth taxes.

It was partly because raising income tax has become political anathema that the Fiscal Framework gave the Scottish Government so few other ways of raising revenue other than by targeted increases in income tax rates. For the UK to raise National Insurance contributions unexpectedly makes further increases in Scottish income taxes that bit more difficult because of the risk of popular backlash. It’s enough to make me look fondly on Gordon Brown’s tawdry, shop-soiled offer of federalism.

All this should make it that much easier for the Scottish Government to build a case for independence. Being competent, and concerned with good governance, should be enough.

That makes it all the more puzzling that there seems to be no clear connection between the Scottish Government’s plans for an economic transformation strategy, and its plans for independence.

There should be a simple, clear message emerging over the autumn. Scotland, complete with Green Party government ministers, is very different from England. The steady pursuit of narrow, factional interest, worthy of the geniuses who gave us Brexit, shows how the UK stops Scotland from being itself.

In this context, it is important that there is an imminent review of the Fiscal Framework. As it operates now, the framework reflects the UK Government’s plan that the Scottish Government should only seem to take responsibility for funding its budget. The complex arrangements around block grant adjustments, income per capita indexing, and flexibilities for resource borrowing cannot hide the simple fact that Scotland remains heavily dependent on the largesse of the UK Treasury.

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This year, the Scottish Government will spend about £43 billion. It will receive about £13bn from taxes which it manages, but as a result it will give back about £12.5bn of its block grant to the UK Treasury.

THE freedom to set tax rates generates about £0.5bn net. But the UK Government can casually offer Scotland £1.1bn of funding to make higher taxes seem more palatable. Being able to set higher tax rates doesn’t do much for the Scottish Government.

In addition, the Fiscal Framework graciously allows the Scottish Government to borrow up to £600 million per year, up to a maximum of £1.75bn. And those borrowing powers are quite like your bank giving you an interest free overdraft limit: nice to have, but not much use if you’re needing to borrow enough money to buy a new car.

In the extraordinary circumstances of the pandemic, the UK Government borrowed £260bn in 2020. Scotland’s economy is about one-12th of the size of the UK economy – so to meet the challenges of the pandemic, an independent Scotland would have been looking to borrow at least £20bn.

Extraordinary circumstances will continue for the next decade. There will be a structural economic transformation as Scotland ends its dependence on carbon. That will require the ability to raise funds, with a very important role for government.

The obvious way for government to raise funds for socially important investment is to issue debt. For Scotland, to support decarbonisation, that might mean about £6bn per year. Let’s see the need for those powers in the economic transformation strategy. Let’s see them being sought in the revised Fiscal Framework.

This case for economic transformation is the economic case for independence. It is Scotland, autonomous, and capable, far sighted, and prudent, engaging actively with the challenges of social and economic transformation.

If the Scottish Government has any serious commitment to independence, that vision need not be spelled out explicitly, but it will loom large over the strategy – reminding us on every page that devolution can be good, but independence would be so much better.