Brian Monteith: Grasping Scots financial independence is key

IT IS a joy to behold that the Scottish political scene is at last excited about the serious issues that effect everyone's lives rather than banning mink farms that do not exist or debating the broadcasting of rugby games (yes, seriously). Was that what devolution was for?

Why has political economy at last come alive? Is it because our MSPs have gone on holiday and the media now has free reign to discuss what matters to people rather than take the lead from our party leaders who have for years been saying that Scotland was a land apart from those enduring the recession?

Although our media has been a better opposition to first the Scottish Executive and then the Scottish Government than the political parties over the last decade it is something more urbane that has stirred. Of all things a committee has produced a report that has actually got everyone talking.

The Independent Budget Review was published last week after the recess started and so it has been left to the likes of public policy economist John McLaren and former cabinet advisor John McTernan to regale us with its findings and what it means for us. How I have enjoyed their columns as they point out how our Scottish political institutions have been living beyond their means and the big questions that the impending cuts ask of us.

Questions such as, why should the NHS be protected from savings when it is the largest employer in Scotland and its 11 billion budget accounts for a third of the government's spending? Or what is more important to us, keeping the 1,000 extra policemen the SNP and Tories fought to put back on the beat or the easy consensus of allowing pensioners to travel free by bus from Irvine to Inverness?

Tens of thousands of pensioners have votes, but despite what the front-page frightening headlines suggest, relatively few of us are victims of crime. So guess which way the SNP government is already leaning towards? Indeed, as Michael Kelly has pointed out in these pages John Swinney has already started to rule out certain cuts before the ink is dry, suggesting not ideology but self- preservation is top of his priorities.

Stepping back from the detail I would like to suggest that all this rumination is good for the political soul. It is real meat and drink, the decisions that come of it may be painful but they are life-enhancing, for once this a political debate that is informed and based in reality - not the ivory or Catalonian towers that form the Scottish Parliament.

What Crawford Beveridge, the chairman of the review, and his fellow authors have achieved is precisely what those of us who have been advocating fiscal responsibility have been craving - a political debate that takes account not just of peoples' wants but the costs of their pipe dreams.

Before Beveridge the received wisdom was that the supply of money was never-ending, that it would always increase above inflation and that all that had to be done was debate about what it should be spent on - usually on the latest service to be magically become gratis. If it was public sector and it had a charge, abolish it, if it was a new service make it free. Someone else would pay, that someone else being the next generation or even the generation after that who would be presented the bill for all the debt run up, plus interest.

Since 1999 Scottish Government spending through the Scottish block grant has more than doubled from 15.6 billion to 35 billion but the outputs have not improved commensurately. When measured against public services in England we have in many cases fallen behind in healthcare and educational achievement as comparative studies remind us with embarrassing regularity.

Holyrood has crash-tested the theory of increased government spending and it has been an uncomfortable ride with the wheels coming off the public service jalopy and now casualties are about to be found everywhere.

Despite the good work of the Independent Budget review in pointing out the hard choices the debate we are now faced with is not yet complete. The vital component missing is that so long as any increased revenues from tax reform go to the Treasury no politician has an incentive to advocate reducing the burden on individuals and businesses to re-invigorate private investment and boost economic growth.

Reducing taxes garners no votes because it is equated with requiring further cuts - which in a debt-ridden recession looks impossible, although it is not. The real question is which taxes can be cut that will help - but few politicians in Scotland are interested enough to even find out. This limitation makes the debate on how to grow the economy one-sided as more public spending and consequently higher taxes are the only levers MSPs feel able to pull.

That is why in the debate surrounding the IBR report the idea of fiscal autonomy remains important. The idea is not, however, a panacea for delivering economic growth, after all Gordon Brown had autonomy of economic policy and made serious mistakes - only to then be absolved of his behaviour by the Scottish public in May.

Given the opportunity of having more powers Scottish politicians may still advocate living beyond their means like Mr Brown did and, with no alternative being offered, the Scottish public may still back them too. Until there is a cataclysm from such obscene economic indiscipline then no-one is going to learn from such mistakes.

Financial prudence should not be the preserve of fiscal conservatives but the Scottish Left is like a drunk looking for its next bottle of Buckie. While fiscal autonomy would allow such behaviour it would offer the benefit of then forcing these spendthrift economic alcoholics to confront reality and dry out - without blaming London.

Until our politicians have the full set of economic levers to discuss - such as the ability to raise and reduce all or most of our taxes with the differential in income then impacting on the Scottish Government's budget, and the ability to borrow to smooth out any choppy waters - the political debate will remain constrained.

We probably need a public spending cataclysm of Holyrood's own making before our MSPs and the Scottish body politic begins to understand the enormity of their responsibility - but a cataclysm of Westminster's making has, through the IBR report, at least helped us begin to think there is more to politics than spending other people's money.

l Brian Monteith is Policy Director of ThinkScotland.org