Andrew McFadyen: Time for Labour to take sides

Putting Scotland first is the key and that, says Andrew McFadyen, means realising the common ground they share with the SNP in the battle with the coalition

'SOVEREIGNTY lies with the people", not with any government or party. That was the founding principle of the Scottish Constitutional Convention. It implied that change could be built from the bottom up without having to wait for the election of a sympathetic government at Westminster.

Just over a year into the Conservative-led coalition at Westminster, Scotland's elected representatives need to consider carefully what those words mean.

David Cameron's administration is pushing through the biggest cuts in public spending since the Second World War. In Scotland, this means that the number of teachers in our classrooms will continue to fall and standards of care in the NHS will come under increasing pressure as spending fails to keep pace with inflation.

Public sector employment in Scotland fell by 2 per cent last year, as 11,600 jobs were axed. The next set of figures may well show a dramatic spike upwards and the number of redundancies we can expect to see in local authorities is scary.

The Ernst & Young Scottish Item Club's recent report predicts that the squeeze will continue until 2015. By then Scotland will probably employ 80,000 fewer people in the public sector compared to its peak in 2008. There is little that the Scottish Government can do about this because their budget is tied to the decisions taken by the Treasury for other Whitehall departments.

In these circumstances, social democratic politicians of all parties need to start making the case for a different kind of Union. Mr Cameron's Conservatives are looking pretty tarnished by the hacking scandal, but his brand of politics has have never carried support in Scotland. In the recent Inverclyde by-election, both coalition parties lost ground, achieving just over 12 per cent of the vote between them. The message from the electorate is that they want border posts at Carlisle for Tory policies. Devolution is a process, not an event, and now is the right time to press the accelerator.

Wendy Alexander deserves enormous credit for establishing the Calman Commission, but Scottish Labour should revisit its conclusions in the light of recent experience. For example, Calman took the view that common standards of social security were part of the social citizenship of the UK. This case is strongest when it is made for universal benefits like child benefit and old age pensions. However, it assumes that governments in Westminster and Holyrood have the same approach.

When Chancellor George Osborne decided to remove child benefit from

higher-rate taxpayers he melted some of the glue that holds Britain together. The government's approach to social security is likely to reveal even wider divisions. Labour politicians should have the confidence to argue that they can do a better job in the Scottish Parliament.

Housing benefit is the most obvious example of a benefit that should be devolved.

Glasgow's Govanhill is seeing a return to scenes of poverty associated with slum housing in the 1960s. The area has been dubbed "Govanhell" by concerned residents and contains some of the worst housing conditions in the UK. Unscrupulous private landlords are crowding tenants into dirty and often unsafe tenement housing. Evidence has been uncovered of flats infested with cockroaches, common closes penetrated with damp and loose bannisters posing an unacceptable risk to young children. One way to deal with this problem is to hit rogue landlords in the pocket by refusing to pay housing benefit to anyone who doesn't maintain their property to a decent standard. Despite the fact that housing is a devolved issue, the Scottish Government doesn't have the power to do this.

Scottish Labour should also be arguing for the Scottish Parliament to have much greater control over its own income than was proposed by Calman.

The shadow chancellor, Ed Balls, has repeatedly accused the coalition of risking the economic recovery by pushing through cuts that are too deep.

If Scottish Labour believes this then why not argue for the powers to take different decisions north of the Border? Taxes, including alcohol duty, fuel duty, corporation tax and revenues from the Crown Estate, should all be devolved to Edinburgh. The current lack of financial responsibility encourages a culture of gripe and grievance and prevents Scotland from having a serious, grown-up debate about policy.

It's easy for the First Minister to complain about the high price of petrol when he doesn't set the prices. Would he really be so keen to cut fuel duty if he had to cope with the multi-million pound hole it would leave in his budget? And what about corporation tax? Would the SNP really be willing to push through even deeper cuts in essential services like health and education to provide the Royal Bank of Scotland with a multi-million pound boost to its profits?

Even if you believe the Reaganite argument that lowering taxes would attract new companies and generate additional growth in the economy, it would take years to replace the lost revenue.

Giving the Scottish Government power to take these decisions would call Alex Salmond's bluff. In fact, if Scottish Labour could only see it, the SNP have come on to their territory. Most Nationalists no longer argue for a classic nation state, in which Scotland would have its own army and currency. They sensibly want to retain the jobs created by military bases in Scotland and Scottish bank notes will continue to be denominated in pounds.

Full independence is off the agenda and "independence light" is simply home rule by another name.

There is now a broad Scottish consensus, shared by most members of the SNP and Scottish Labour, that Holyrood should be the centre of Scotland's political life. But we want to have our cake and eat it.

Unlike Alex Salmond, it has never been my ambition to take tea with Prince Charles at Balmoral, but I do take pride in some of the world-class institutions that Britain has created and the values that they represent.

The BBC still produces some of the best television programmes and news coverage anywhere in the world and the NHS makes my heart swell. Its founder Nye Bevan came from the Welsh valleys. He said: "No society can legitimately call itself civilized if a sick person is denied medical aid because of lack of means.".

He is just as much a hero to the Scottish Labour movement as Clydeside radicals like Jimmy Maxton or Tom Johnston and the values he articulated are part of our common heritage.

The actions of the Conservatives and the Liberal Democrats in inviting private companies to bid for NHS services show that they have both different politics and a different idea of what it means to be British.

In order to be true to itself, Scottish Labour needs to make it clear that it will have nothing to do with any pan-unionist alliance or joint referendum campaign with the Conservatives.

Sharing a platform with Tory politicians, who are still seen by large sections of the electorate as anti-Scottish, would also do terminal damage to Labour's own reputation in the run-up to the next Holyrood election.

The real danger is not that Scots vote for independence, but that a negative scaremongering campaign reinforces the caricature of Scottish Labour as a party that has run out of ideas.

Instead, the referendum should be grasped as a positive opportunity for Labour to change Scotland's relationship with the rest of the UK and reassert its own identity as the party of progressive home rule.

• Andrew McFadyen was a senior media adviser to the Scottish Labour Party