Johnstone’s View - Final stages of election

An old expression, perhaps wrongly attributed to China is ‘may you live in interesting times’.

It is a nuanced phrase, but as we enter the final stages of this General Election campaign, it strikes me that we do indeed live in interesting times.

With an SNP First Minister offering to assist Ed Milliband through the door of number ten, we are confronted with the rather bizarre idea of a United Kingdom government being propped up and held to ransom by a political party whose primary aim is to break up the United Kingdom.

A significant part of the nationalist pitch for their current course of action is to secure Full Fiscal Autonomy for Scotland. Full Fiscal Autonomy, or FFA as it is sometimes known, means the money raised in Scotland via the taxes we pay, including the taxes raised from the offshore oil revenues, would form the basis of our own budget. There are some exceptions to this, alcohol, tobacco and VAT for example, would not be included due to legislation from our friends in Europe.

On the face of it, it may sound like an attractive proposition, but a closer examination of the reality suggests it would not be as good as some would have us believe. That said, it may well find cheerleaders among those still smarting at the fact we are not now living in independence induced penury.

There are a number of reasons why FFA is not quite all it is made out be. First of all, there is a yawning chasm between monies used in public spending, and the amount raised in total taxes.

In 2013-2014 alone, the deficit between the two was more than £12bn, and that was in a period before the oil price slumped and oil was still over $100 per barrel. As we in the Mearns know only too well, crude oil remains around $55 per barrel mark, making the situation even less attractive than it was before.

Of course, proponents of FFA can indulge themselves in smoke and mirrors economics, but the bottom line is that the projected tax and spend projections published by the Institute of Fiscal Studies for 2015-2016 make for a grim reading when we transpose them to the FFA model.

The IFS figures suggest that the difference between revenue and spending would actually rise to more than £14bn. Taking into account various other factors, this would leave a tax shortfall in Scotland of more than £7bn, which means that in 2015-2016, the suggested public spending of around £86bn would be short by a staggering £7bn. Quite how putting ourselves in this situation would end austerity as some people claim, has not been adequately explained away so far.

For those of us in rural areas such as the Mearns, this level of deficit could have a disproportionate impact where it costs more to deliver the services we all rely on.

Of course, during the Referendum Campaign, various statements were bandied about such as ‘oil is just a bonus’ and ‘we send much more to Westminster than we get back”. If that is the case then on the face of it, FFA would be a complete bonus to Scotland, but clearly the figures don’t add up, and FFA is not nearly as beneficial as it is being presented.

So what kind of smoke and mirrors exercise can we expect to explain away the fiscal shortcomings of FFA? Well, I am glad to say we didn’t have long to wait once the whole policy started to unravel when it was placed under scrutiny.

One of my favourites is that whilst we want FFA, we don’t want it yet. In fact we don’t want it for a few years if that’s ok. Many, including myself, are baffled that just a few months ago, independence could be complete within in eighteen months, but FFA would take years to negotiate.

But on a more serious side, is the suggestion that Scotland would simply try to plug the gap by increasing borrowing. That might stick a plaster on the problem in the short term, but it is not a sustainable position to take.

What is rather worrying is the fact that even when the consequences of the SNPs demands are exposed, we are still left with a Labour party apparently willing to pay such a high price for the proverbial Ministerial Mondeo. These are indeed, ‘interesting times’.