THE UK Government’s confident assertion that it is wholly sovereign compels it to treat the Scottish Government as little more than a jumped-up parish council. Add to that the UK Treasury’s expectation that it should maintain strict oversight over all public authorities, and not just other departments in Whitehall, and the Scottish Government is caught between the blades of a pair scissors, cutting into its authority.

Faced with two decades during which the powers of the Scottish Parliament have increased, and are increasing, Westminster Tories have started to reduce them. The first line of attack was with Brexit. Powers repatriated to the UK in areas of devolved responsibility have remained London. This will lead to public projects, even in devolved areas of competence, being stamped with the Union Jack, and declared to be proudly British

Then came litigation over the powers of the Scottish Parliament. We can expect repeated appeals to the Supreme Court to set much tighter limits on the authority of the devolved legislatures. The court’s most recent judgment suggests it is likely to be broadly supportive of the UK Government’s expansive claims.

But these may only be the warm-up act. The main event is likely to begin next year, as the Treasury, the second blade of the scissors, sets out the review of the Fiscal Framework.

This defines how much support the Scottish Government obtains through a block grant from the Treasury, and how much money it can raise through Scottish taxation. The framework’s implementation is deliberately opaque, and complex. It takes years to work out all the details of who owes what to whom. This is the result of the principle that in applying the framework there should be detriment neither to the UK Government nor to the Scottish Government.

That means working out how much revenue the UK Government would have raised in Scotland if there wasn’t devolution. While that might sound simple, it’s not. To take one slightly odd example, in the last year, the UK Government has asserted that any money recovered in Scotland under the Proceeds of Crime Act should be remitted to HMRC.

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This money is the result of spending in Scotland by the police, and the Crown Office. It is not tax revenue. Yet the argument is that it only remains in Scotland because of devolution. This seems to be a very clear indicator of the assertive stance the Treasury will take in negotiations early next year.

No matter how obscure the details of its plan might be, the Treasury will have the simple objective of stripping as much power as possible from the Scottish Government. Not quickly, or crudely – just a gentle squeeze over the life of this parliament, with the objective of weakening support for independence sufficiently to block the path to an agreed referendum.

Think of all the ways in which the Scottish Government has tempered the tendency of the UK Government to rely on markets for the provision of services, especially in health care and education.

Think about how Scotland, obtaining powers to manage social benefits, will increase payments for children. It suits the UK Government to undermine those distinctively Scottish policies. Does Nicola Sturgeon lead a government? It was a clever piece of branding in 2007 to change the name from Scottish Executive to Scottish Government.

The National:

IT added to the narrative of autonomy. But, by itself, the change of name did nothing concrete. “Scottish Executive” certainly captured Donald Dewar’s initial ambition for Holyrood, that it would enable debate and decision-making in Scotland, for Scotland, including how to spend money remitted in the block grant.

The budgetary process certainly supported the gradual emergence of differences between Scotland and the UK, even when there was a Labour majority in Westminster, and a Labour-led Scottish administration.

There is at least an argument that the Fiscal Framework is an elegantly contrived disguise of ever-tightening limits on the Scottish Government’s capabilities. Defining success, planning to achieve it, and taking responsibility for failure, are all hallmarks of government. A spending authority, which the Scottish Government still is, faces huge constraints. That suits the UK Government. In Scotland, we can have months of agonising over whether to change income tax rates very slightly, raising perhaps £200 million per year – in a budget of £40 billion.

The borrowing powers of the Scottish Government are just not enough. Little more than £300m* per year, they exist so that if something goes wrong, and block grant payments are smaller than expected, then the Scottish Government need not cut its spending.

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That block grant is of course determined by UK Government spending. The sudden increase in National Insurance Contributions last month did not guarantee more funding for the Scottish Government.

If the Treasury forces through more years of austerity, the Scottish Government might grumble, and find ways to mitigate the worst effects. But, as with Covid policy, it will need to follow the UK’s lead.

There is no easy, obvious way out of this situation. We are about to find out that power devolved is indeed power retained.

The challenge for the Finance Secretary will be to play a weak hand in negotiations sufficiently publicly that everyone will know just how the Scottish Government’s hands are being bound by the Treasury, and the overweening arrogance of British institutions builds support for independence.

 

*The Treasury has told us that the £300m figure is incorrect. It has pointed out that the Fiscal framework outturn report: 2020 states: "The overall limit of resource borrowing is £1.75 billion and the total annual limit is £600 million. Resource borrowing can be used for in-year cash management (maximum £500 million annually) and in cases of forecast error (maximum £300 million annually, increasing to £600 million in case of a Scotland-specific ‘economic shock’)."

It also says the Scottish Government keeps proceeds of crime – they don’t go to HMRC.