John McTernan: Devolving the right things

No sensible Scot wants pensions exposed to the vagaries of Scots taxes. Picture: Getty
No sensible Scot wants pensions exposed to the vagaries of Scots taxes. Picture: Getty
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Powers on welfare benefits should he handed to Holyrood, early experiments were beginning to work under Labour, says John McTernan

Alex Salmond is always at his best when he is at his most Blairite. Nowhere can this be seen better than in his original, preferred approach to the referendum. He wanted the inclusion of a “third way” – neither the status quo nor full separation but increased devolution. At the time, of course, it seemed mainly like a fiddle deliberately designed to split the anti-independence vote, thus making it possible for the SNP to win with 34 per cent of the vote. But Salmond was also prescient – his third option was, and is, a solution in search of a champion.

In the event, the referendum is going to be – as it has to be – a binary proposition: Yes or No, In or Out. That suits the SNP because, as Jim Murphy has written, they inhabit a binary universe: UK – bad, Scotland – good. But, here’s the rub, life’s not like that. Most of our personal and professional lives are coloured in with shades of grey. Everything’s a trade-off, and that’s great – give and take is how societies function. The true believers – from the evangelist to the fanatic – are few and far between. The rest of us are happy to split the difference.

This is the paradox of the constitutional debate. On the one hand, we’ve ended up with the instrument least capable of transmitting the nuance of public opinion – a referendum. As a forced choice it tips the balance decisively in favour of the status quo and against disruptive change. A referendum is, in the end, a blunt instrument, and change – whether joining the Common Market, or endorsing the Northern Ireland peace deal – needs a genuinely broad-based, bi-partisan campaign to succeed.

On the other hand, the complexity of Scottish voters’ views about the constitution can only effectively be captured by party politics. Survey after survey shows Scots don’t want independence but they really like self-government – and would like a bit more of it. Here, the confident and, in devolved terms, electorally dominant SNP are unable to channel public opinion – and demand what the voters want. Instead they have chosen an “everything will change/nothing will change” campaign in an attempt to reassure undecided voters and persuade them that independence is virtually indistinguishable from enhanced devolution. This is a pragmatically understandable proposition, but fundamentally flawed. A transformative political project cannot at one and the same time be about liberation and yet also external subjugation. Thus the contortions over Nato, or sterling, or the crown are not tactical plays, they arise from a profound – a fatal – strategic miscalculation.

What do the public want? Well you wouldn’t know if you were only paying attention to the Labour, Conservative and Liberal Democrat parties. If the SNP have been unable to build on Alex Salmond’s great insight into the public mind, neither have their opponents. There is a huge prize to win. Not just victory in the referendum but political dominance in the post-referendum period. What is odd is that no Scottish party seems to want to grab it.

The fault lies in the politicians and not in the public. Politicians are oddly transfixed by powers over income tax. Powers which they know they would – in truth – never use. Scottish politicians wax lyrical about the distinctive shape of Scottish values with a pride that stops just short of testing the proposition by raising income tax. Voters are meanwhile screaming – “Look over here? What about welfare?” And they have a point. What about welfare?

Scottish Labour should be demanding that work-related benefits and employment services be devolved. Early experiments with modest devolution to cities like Glasgow were beginning to work well under the last Labour government. They showed that localisation was the right route – and why not, since local labour markets are very different across the UK. So, Job Centre Plus and its services should come to Scotland. Ideally, doubly devolved directly to local government. With the services should come the working age benefits too – Job Seekers Allowance (JSA) and Employment Support Allowance (ESA) – with the power to vary the rates up or down. You could even regionalise it – with lower rates in low unemployment areas like Gordon where unemployment is non-existent.

The attraction of this is obvious. Genuine new powers – asked for by voters. Local strategies shaped for local circumstances. The possibility of better outcomes – and a testing of the risible notion that Scottish voters think the UK government is overly tough on welfare.

Together with JSA and ESA should go Housing Benefit. It is only a recent invention as a unitary national benefit and it makes sense to brigade it with the housing powers of the Scottish Parliament.

What should not be done – under any circumstances – is to devolve benefits for older people. The pension is part of the social glue that binds us together – and it, and related payments to older people, are profoundly redistributive. As Scotland ages faster than the rest of the UK it is hugely beneficial to be able to raise taxes on London’s millionaires to spend on Scottish pensioners. A real Union dividend. And voters get this. They want the old age pension to stay administered and funded by the UK government. It’s not just the symbol of pooling risk between our four countries. It is actually – literally – pooling risk. No sensible Scot wants the state pension exposed to the vagaries of Scotland’s tax take.

In turn, the pension itself is the reason social democrats should resist the full devolution of income tax to the Scottish Parliament. Full fiscal autonomy is a right-wing idea. Devolving income tax and pensions means cuts. A proportionately smaller working age population – and a flatter income distribution – combine with a larger number of pensioners means a deficit to be bridged. No politician believes Scots really have an appetite for higher taxes, so it will be cuts. A back-door victory for the unelectable low-tax, small-state Tories.

So, it’s obvious. Devolve the right benefits. Cut worklessness. Maintain redistribution from rich to poor. Now, we just need a political party to give the public what they want. Any volunteers?