Full Fiscal Autonomy - to bluff or not to bluff

While there is cross-party support for further devolution, there is significant disagreement among the main UK political parties on what exactly those powers should be.

The SNP’s plan to table an amendment for full fiscal autonomy was swiftly rejected by the UK government as the Scottish Bill was debated in the House of Commons.

Scottish Secretary David Mundell described the policy as a ‘shambles’, claiming that it would cost every family in Scotland £5,000. While there is cross-party support for further devolution, there is significant disagreement on what exactly those powers should be.

The Scottish Bill, unveiled in the first fully Conservative Queen’s Speech in May, set out a range of new powers for the Scottish Parliament, allowing it to raise 40% of taxes and 60% of public spending. It will also see Hollywood set the thresholds and rates of income tax on earnings in Scotland, as well as new welfare powers worth £2.5 billion.

The UK Government has supported the Scottish Bill as embodying the Smith Commission proposals, a report detailing further devolution of powers to the Scottish Parliament in the aftermath of the Independence referendum. Its findings were agreed to by the SNP, the Conservatives, labour, the Liberal Democratic, and the Scottish Greens last year. 

The SNP, however, has spurned the Scotland Bill as failing to meet the Smith Commission proposals ‘in full, either in spirit or law’. In an emboldened move the SNP tabled an amendment to the Scotland Bill calling for full fiscal autonomy. The Deputy First Minister John Swinney also laid out future amendments to include far reaching powers, including control of corporation tax, capital gains tax, and the minimum wage.

While the SNP argues that the policy would lead to rapid economic growth and prosperity for Scotland, making it one of the five richest countries in the world, its opponents claim it would create a £7.6 billion black hole in Scotland’s finances.

The democratic mandate for more ambitious powers is difficult to ignore – the parties 56 newly elected MPs, elected on an anti-austerity platform, vastly outnumber the remaining three Scottish seats held by Labour, the Liberal Democrats, and the Conservatives

Yet Cameron has accused the Nationalists of deliberately demanding ‘something they do not want’. Losing the Barnett formula as well as a drop in the price of oil overnight would significantly damage the Scottish economy in the short term.

While the SNP have made it a priority to win greater powers for the Scottish Parliament, bold amendments lacking cross party support suggest they are more interested in rhetorical tactics, rather than any realistic prospect of full fiscal autonomy.