Alyn Smith: Covid crisis proves again that Scotland needs more fiscal powers

The Covid-19 pandemic has plunged us into an economic crisis, the likes of which we haven’t seen since 2008. We’ve experienced the worst recession on record which shows no sign of improving. Workers have been laid off, countless businesses have gone under and some industries have seemingly ceased to exist. Despite being vital to curb the virus, lockdown restrictions left far too many without the means to put food on the table and crushed consumer activity, threatening the businesses that form Scotland’s backbone.

Without huge government spending, this virus could have decimated our economy even more than it has. The Coronavirus Job Retention Scheme allowed businesses affected by the Covid-19 pandemic to place their employees on furlough and have 80% of their usual monthly salary covered by the Government. This scheme saved countless jobs and businesses across Scotland, including in my constituency in Stirling. Up to the end of June, 736,500 jobs had been furloughed in Scotland, accounting for almost 30% of Scottish employees.

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As we watched cases begin to rise again, Scotland and Wales tightened their restrictions and requested that furlough be extended to protect their workers and businesses. The UK Government denied their requests.

However, when the UK Government announced that England would be going into a second national lockdown, myself and my colleagues looked on aghast as it was announced that furlough would indeed be extended for the period while England was in lockdown, mere weeks after our own requests for this had been denied. It seems for the UK Government, a jobs crisis is only a crisis if we’re talking about jobs in England.

If it was not yet clear enough that the UK Government follows a policy of England’s way or no way, the UK Treasury then denied Scotland’s subsequent request that furlough be made available to us here in Scotland beyond England’s second lockdown. Our anger at this was damningly echoed by the Tories’ very own Scottish leader, Douglas Ross, who responded by calling on his own party in government in Westminster to “treat Scotland the same way as England”.

Boris Johnson soon backtracked on this point, but it was too late. We had seen what we already knew – that this is not a “partnership of equals” as Westminster likes to claim. There is a fundamental asymmetry, particularly in the UK’s fiscal architecture. This sees the government in Westminster, which is the government both of the UK and of England, in control of the overall fiscal stance including borrowing, as seen in the extension of furlough only when England entered a national lockdown, not when Wales earlier entered a “firebreak” lockdown or Scotland tightened restrictions.

Combining the effects of the Covid-19 pandemic with the continuing uncertainty and volatility after the end of the EU transition period at Hogmanay (and I’m sorry, but despite a fudge a lot of uncertainty remains), it is clear that this asymmetry must urgently be addressed.

The Scottish Parliament’s Finance and Constitution Committee, chaired by my friend and Stirling’s MSP, Bruce Crawford, noted the need to reform this in its recent Pre-Budget Scrutiny 2021-22 Report. The committee highlighted the sheer magnitude of the crisis we are currently facing and the fact that the pandemic has revealed the asymmetry of how the UK’s current fiscal framework operates in an emergency situation. This is a fault line of devolution that Covid has blown wide open.

The report stressed that, without its own borrowing powers, the Scottish Government is largely constrained by the UK’s spend and policy decisions when determining its own Covid-19 related spending and policies, even when the situation in Scotland compared to the rest of the UK is different.

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Owing to this, the committee called on the UK Treasury to provide the devolved governments with greater access to borrowing in emergencies such as the current crisis we find ourselves in. It noted that “this could allow the devolved governments to tailor their own spend and policy response to the pandemic and economic recovery in Scotland depending on how this evolves differently from the situation in England”.

What struck me was that the report, and its recommendations, were agreed unanimously by all members of the committee, including the Scottish Conservatives. Maybe there’s hope for some of them yet.

We in the SNP and the Scottish Government have long believed that decisions about Scotland are best made by those in Scotland. It seems, at least in the case of borrowing, even the Scottish Conservatives agree.

Against the backdrop of ongoing uncertainty and volatility arising from Covid-19 and the ongoing Brexit negotiations, Boris Johnson’s government should listen to Scottish politicians, including those hailing from his own party, and give the UK’s devolved governments greater access to borrowing in emergencies so that Scottish workers, Scottish businesses and the Scottish economy can be best protected. All European countries are borrowing their way out of this, the UK is no exception and an independent Scotland would do the same. What we’re lacking is the democratic power to make sure that money is spent on Scotland’s priorities.