Inside politics: With the constitution temporarily on the sidelines, the cost of living independently is finally being aired

By EDDIE BARNES
Published on 10/10/2012 00:00

INDEPENDENCE, said Johann Lamont two weeks ago, has a way of crowding out debate about other issues in Scotland. Two weeks on, with the subject of her speech still being pored over in the Op-Ed columns, it seems she has finally succeeded in taking the constitutional question out of the headlines.

Among other things, it has now brought a detailed counter-argument from the SNP. Alex Salmond argues that the entitlements and tax freezes which Mrs Lamont questioned two weeks ago form a “social contract” with voters. The Nationalists have also cranked independence back into the debate, saying only the opportunities it can bring will ensure that it stays in place.

The firm response from the SNP will now raise its own questions.

First, as Nationalist commentator Ewan Crawford noted on these pages yesterday, the onus will be on the pro-independence side to show how independence can pay. The SNP case is that the economy will grow once independence is delivered, helping to boost tax revenues. However, questions are piling up. In a new blog, Professor Brian Ashcroft, the head of Strathclyde University’s Fraser of Allander Institute, contradicts Mr Salmond to argue that an independent Scotland would have to enter a fiscal pact with the rest of the UK in order to reassure markets and thereby keep borrowing costs low (although he believes interest rates would still be higher than London’s), limiting the country’s ability to spend. There is also the tricky matter of the transition period, with non-partisan figures, such as public finance expert Bill Howat, suggesting there would be “chaos” for a lengthy spell. Further explanation can be expected from the SNP in the coming months.

Second, if independence is not supported, and with the SNP irrevocably committed to its “social contract”, the challenge will be to show how it can be afforded heading into the next Holyrood election in 2016. As Mr Salmond has himself noted, the wider financial prospects look bleak. More cutbacks are expected from the Chancellor George Osborne in 2015. And, as Mrs Lamont and ex-Auditor General Bob Black have explained, costs are only going up, with demographics playing their part. A Finance Committee inquiry into this issue, chaired by SNP MSP Kenny Gibson, is currently forensically examining the matter.

Exactly how a future Scottish Government would square this circle, within the current framework, will be a major challenge, with bean-counters now of the view that efficiency savings are hitting bone. Efforts to switch to “preventative spending”, while impressive, are unlikely to reap rewards short term. So, flog Scottish Water? End the Council Tax freeze? One other option, come 2016, will be to use new Scotland Act powers and ask people to pay a higher income tax to pay for their social contract. Quite whether the Scottish public likes devolution’s “hard-won gains” that much is a question that could well be put to the test.