David Torrance: Time for Scotland to have its tuppence worth

BEYOND Delphic talk of the "centre of gravity" in Scottish politics, there was a welcome hint of political realism in the First Minister's recent remarks on Scotland's constitutional future.

"It is my job to come up with some answers, along with others," he said last week. "If you jump up and down nihilistically saying, 'Dreadful, dreadful, cuts, cuts, cuts' then I would be failing in my duty to the people."

So Alex Salmond's answer is an all-out drive for full fiscal autonomy, although that is in truth only half an answer. While having such power would undoubtedly make the Scottish Government responsible for dealing with a bleak public spending context, it would not in itself solve the problem. Some form of tax increases would inevitably be a feature of a fiscally autonomous Scotland, yet the prevailing neo-liberal orthodoxy precludes such wild talk.

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"The position we now face clearly highlights the urgent need for Scotland to take greater financial responsibility", declared Mr Salmond at last Thursday's First Minister's Questions, "to give us the levers to grow the economy and best protect our vital frontline services". Mr Salmond meant full fiscal responsibility, but logically what is preventing him protecting frontline public services with the powers already at his disposal?

Perhaps overwhelmed by the severity of the cuts coming their way - around 5 billion by 2014 - MSPs appear to have forgotten that a majority of Scots voted not only for a devolved Scottish Parliament back in September 1997, but also for one with tax-varying powers. The dormant Scottish Variable Rate allows Holyrood to do precisely that, vary the basic rate of income tax - up or down - by 3p in the pound.

Only the Scottish Conservatives get off the hook on this point (they should thank heaven for small mercies), given the party's well-known ideological opposition to higher taxes, but the other three parties would, if anyone actually bothered to ask the question, have some explaining to do. The Scottish Labour Party, supposedly more left wing than its UK incarnation, surely could not protest at good old-fashioned tax-and-spend policies, particularly in the current bleak context.

But if Labour ought to be squirming, the Liberal Democrats and SNP should be reaching for the well-thumbed book of political excuses. Both parties have in the past backed such an approach, the Lib Dems at UK level and the SNP at those first elections to the Scottish Parliament back in 1999. That may not, of course, be a policy experience Mr Salmond wishes to repeat.

The leader of the SNP has had a long and often circuitous political journey. As a young MP he had to be dragged shouting and protesting from the House of Commons when then chancellor Nigel Lawson had the temerity to reduce the basic rate of income tax to 25p - but just three years later he was telling his party's National Assembly that "independence in Europe" would "slash" interest rates and make the Scottish economy "productive and competitive".

By the mid-1990s Mr Salmond's old allegiance to high social spending, increased taxation on the rich and renationalisation was jettisoned as he learned to stop worrying and love the Irish model. The Laffer Curve became his new best friend as he waxed lyrical about replicating the Republic of Ireland's Tiger Economy in an independent Scotland.

The SNP leader was also known to be "prejudiced against" using what Michael Forsyth had memorably dubbed the "Tartan Tax" - a reference to Labour's tentative plans for a devolved parliament to have tax-varying powers. All that changed following Gordon Brown's Budget of March 1999. This lowered the basic rate of income tax by 1p and - following much internal debate - the SNP (or rather Mr Salmond) decided not to follow suit. If he won the May elections, he declared, an SNP administration would raise the Scottish Variable Rate by the same amount, thus cancelling out Labour's "bribe" and allowing higher spending on frontline services.

His calculation was obvious. With a commitment to increase tax the SNP would embarrass Labour and appeal to the egalitarian psyche of the Scots. The trouble was it assumed too much: that Scots really were prepared to pay more tax than the English for better services, and that a tax-and-spend model was really the right one for Scotland at that point in time. In other words, Scots concluded, not unreasonably: why should we pay more than we have to?

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Undeterred, Mr Salmond stuck to his guns. In 2000, looking ahead to the 2003 elections, he said: "I'm prepared for a re-match on this issue, on the tax issue, on the basis that the Scottish National Party would not be comfortable seeing public services starved of finance to finance tax cuts. I don't think Scotland is comfortable with that either."

Then, of course, the SNP was exaggerating the extent to which public services were actually being "starved of finance", but that is no longer true. More than a decade on and the financial context has changed radically, and much for the worse. Mr Salmond should, therefore, revisit his 1999-2000 persona and take another gamble: commit the SNP to raising the Scottish Variable Rate if it wins next year's Holyrood elections. Not just by a penny, but maybe by 2p, perhaps even the full 3p in the pound.

It would, unlike in 1999, completely wrong-foot the Labour Party, particularly in its current post-Brown bout of left-wingery, and give the SNP a clear narrative during the 2011 election campaign.

A unique selling point was palpably absent during the SNP's recent Westminster election campaign, so what better opportunity to avoid the same mistake, motivate activists and run with a positive message telling voters that the future need not be death by a thousand cuts?

In the wake of the 1999 election, Mr Salmond argued that the only problem with the "Penny for Scotland" policy had been one of timing. Well, he now has plenty of time between the summer recess and the election to formulate and explain his taxation plans; plenty of time between publication of next year's Scottish budget and polling day in May 2011. After all, if Scotland is to become fiscally responsible, what better way of proving he is prepared to take that responsibility?