Eddie Barnes: Every drop counts

The subsidy myth runs strong in the independence debate. Last week was an opportunity to show that, in the SNP’s words, “Scotland more than pays her way”.

So much for best-laid plans. For someone within St Andrew’s House, the HQ of the Scottish Government in Edinburgh, had other ideas. A private memo written by John Swinney last year setting out in stark terms the financial pressures likely to face an independent Scotland was sent to the BBC, timed to coincide with the big day. The good news from the government accounts was about to be sidelined.

Few of the issues presented within the report – from the declining taxes coming from the North Sea to the rising cost of the country’s ageing population – were in any way revelatory. However, the memo contained phrases and words – “deterioration”, “uncertainty”, “volatility” – that have not survived the SNP spin-doctors’ green pen since the independence debate began.

Worse, from the perspective of the SNP government, the paper specifically discussed issues such as the “affordability of pensions” and welfare.

“What made it significant was that it was talking about real world issues,” says one pro-UK campaigner. “The row over the EU advice last year was really a process issue. This was about your pension, your benefits.” The independence campaign has been predicated on the basis so far that a Yes vote next year might offer Scots a way out of the grinding austerity within the UK.

Swinney’s short-term assessment put a large dent in that. And what was intended to have been a good day produced a disastrous set of headlines the following morning on the “secret” memo exposing the SNP’s private views. How does the pro-independence campaign recover? Indeed can it? John Curtice, the UK’s leading pollster, has compiled new analysis of the most recent polling data to suggest that even if all of those voters who are not yet certain of their decision are given to the pro-independence side, the Yes camp would score 49.4 per cent of the vote – still just short of the winning post.

The Strathclyde University academic adds: “I’m not saying [a Yes victory] is mathematically impossible, but this gives you an indication that the potential for achieving that result looks pretty minimal and that the best they can hope for is an extremely minimal victory.”

That is all before the impact of last week’s revelations is measured. Anything could happen over the next 18 months, of course – and people who are certain of the decision right now, may still end up changing their mind. But with those numbers of “undecideds” already quite low and with, in Curtice’s view, the first year of this marathon campaign already having been “lost” to the Yes side, there isn’t much time left to start converting. Can it be done?

As they scrambled to react to the contents of Swinney’s paper last week, the Scottish Government appeared uncertain how to respond – the paper was “outdated”, it declared initially, before then arguing that elements within it helped stand up the financial case for independence.

As it recovers from what opponents have inevitably dubbed the SNP’s “Black Wednesday”, the pro-independence side is marshalling its resources in an attempt to fight back.

One of the most damaging elements of Swinney’s memo was its stark warning about the low forecasts coming from the North Sea. Oil remains the vital element within the Scottish budget that helps restore some form of balance to its accounts.

But last year’s bumper year, which handed over £11.3bn to the Exchequer is due to fall to £4.4bn by 2017, according to the Office of Budget Responsibility (OBR), in a marked downward revision on previous estimates. Swinney noted in the memo that this had “resulted in a deterioration in the outlook for Scotland’s public finances”. It may have been a statement of the obvious, but it is the first time the SNP leadership has stated it so clearly.

If you don’t like the numbers, get new numbers. Hence, this week, the Scottish Government will publish its own forecasts for revenues and not surprisingly, they will show that it believes oil revenues are likely to be much higher, partly based on new estimates by Oil and Gas UK which show that projects given government approval in 2011 and 2012 are likely to add a further £3bn to the tax take by 2017. Academics believe the SNP has a point in taking on the OBR. Professor Alex Kemp of Aberdeen University, and the UK’s leading oil economist, says the official forecasts are at the low end of expectations. “The OBR has taken a low price and low production levels (on which to base its estimates). Who knows, they might be right? But the point is that they have made two pessimistic assumptions,” he declares.

The figures are still certain to show a drop in production from last year, and the question of “volatility”, as raised by Swinney’s memo, will not go away. But back-up like that will allow Alex Salmond and Nicola Sturgeon to argue that there is more cash in the Scottish kitty than the cautious Swinney had warned of.

Meanwhile, having sought to question the UK’s government fairness over welfare reforms in the first part of the year, the YesScotland campaign is now preparing to move on to the issue of prosperity, in the hope of persuading people they can afford to take the leap.

The figures from the government accounts will be re-polished, with ministers keen to stress the “relative surplus” it holds over the UK (ie: we are less broke). A central part of the new drive will be aimed at the business community, which can expect spreadsheets and business plans on the metrics of independence.

The campaign wants to project the image of a country which can have both – social justice and economic prosperity. “They are not diametrically opposed,” insists one campaigner.

The approach was set out in a speech last week by Deputy First Minister Sturgeon. With oil reserves in its pocket and with a strong economic platform, the question she said was whether “we give ourselves the power to use that wealth to build the fairer society we want”.

But is it really the case that the country can have it both ways? The problem for the Yes camp after last week is that Swinney’s paper has laid out in bold the limits and constraints that an independent Scotland could face. One pro-UK figure notes: “Every time they say, ‘independence will solve this…’ we can now just point to their own Finance Minister’s paper.”

And, as it stands, the economic model put forward by the SNP is failing to win over sceptics. Union leaders tempted by the idea of an independent Scottish administration free from Tory shackles have coined it the SNP’s “Scandimerican” plan – Norwegian-style social services on American-style tax rates.

Now, with Swinney’s numbers having exposed the realities at play, left-wingers in the independence camp now argue that the SNP must show it is prepared to take sides. They point to the vote by members of the Communications Workers Union last week to back independence, and they want the SNP leadership to change tack and make its choice, plumping for a vision of a Scotland which opts willingly to support and pay for good quality social services.

They are unimpressed by Swinney’s “Gogarburn-centric” world view. One leading figure declares: “Swinney had one crucial role over the last four years which has been to steady the nerves about whether the SNP could do a normal governing job. But after the 2011 election, his purpose has now gone.”

This group, backed by other pro-independence parties like the Greens and the Scottish Socialists, would like to see the party dump its pledge to reduce corporation tax after independence. “The corporation tax cut is stopping us talking about welfare. It’s a matter of time before they reverse the corporation tax cut,” the leading figure adds.

Green MSP Patrick Harvie, an advisory board member at YesScotland adds: “I think there are many people in the SNP who know this position is unsustainable and won’t last until the referendum. A more honest approach around tax and spending and welfare is something that would win the support of many people in Scotland. It might scare off [millionaire independence supporters] Jim McColl or Brian Soutar but there are far fewer people in that position than there are people in the public sector and we’d win far more support from those people than alienate the super rich.”

With Swinney weakened after last week – officials briefed afterwards that one of the reasons the memo was out of date was because Sturgeon was now in charge on the constitution – the decision is for Sturgeon and Salmond to take.

The centre-left Sturgeon is now leading plans to lay out the pensions and welfare scheme for Scotland. Can it all be afforded? One source close to her says: “Many of our critics have said that our current policies weren’t possible and we have managed to do it quite well under the stewardship of John Swinney. In terms of what we are doing to be proposing viz independence, it will be costed.”

She will also seek to push pressure back on the other side – for example the UK government’s own proposals on pension reform will, say the Institute of Fiscal Studies, create reductions to pensions for most people. As for Salmond, he has continued to ride both horses – defending his corporate tax policies, at the same time as giving tub-thumping social justice speeches to the Jimmy Reid Foundation.

Independence campaigners insist the two are not mutually incompatible. But Swinney’s paper has now illustrated perfectly the old truism that to govern is to choose. “We’ve got until October [when the white paper on independence is published] to sort this out,” says one independence campaigner. “If we can do that, then we’ve still got a decent chance of getting through to people.”

However, the longer the uncertainty goes on, the less likely it is that already sceptical voters are going to give Salmond’s plan the benefit of the doubt. Last week, independence was burdened with a price tag. The challenge to the independence camp now is to spell out how they intend to pay.

Twitter: @EddieBarnes23