Grasp the thistle: why tartan taxes should be cut

WITHOUT quite knowing why, or what to do with it, the Scottish Executive is in the money. In the first year of devolution, its total budget - provided virtually in its entirety by Westminster - was £16.3 billion, a generous sum for a population of something around five million people.

But by the financial year 2007-8 (a year which will see the next Scottish Parliament elections) the budget will be 25.5 billion - an increase of 56 per cent in just eight years, during which time the Scottish population actually will have declined.

Despite Gordon Brown’s continuing pre-eminence at Westminster, the only certainty about the present levels of Scottish funding is that they cannot last for ever. A change in government at Westminster would quickly produce a squeeze on the flow of cash across the Border.

Yet, even without that unlikely cataclysm, there will be a slowdown in the increase in English public spending in the next parliament, with a concomitant slowdown in the growth of the Scottish pot. If that was to be accompanied by a recession, cuts would be necessary, not just at Westminster, but here too.

The contention that divorcing decisions on taxation from those on spending leads to extravagant and inefficient government has been proved by the experience of devolution. The Scottish National Party has been proved right in its long-standing belief that all revenues spent in Scotland should be directly raised here, and it is an argument which is now finding some favour on the Labour, Liberal and even Tory benches.

Yet, as the present budget excludes payment for social security, defence, foreign affairs and a range of other activities, it is likely that domestic spending in Scotland is already somewhat in excess of what could easily be sustained by Scottish resources alone, no mater how oil-rich or adventurous.

For the SNP, therefore, it is not enough to argue that independence will solve everything. In order to be credible on this matter, it needs a more robust set of policies which anticipate harder times ahead and which determinedly eschew the traditional opposition solution of throwing cash at any problem that can be exploited at the ballot box. In short, the politics of the pork barrel have to stop.

Those politics are at their most obvious, and most dangerous, in the health service. Total health spending is now rising at more than 8 per cent a year, yet the public believes that services have got worse, and the statistics largely bear out that impression.

Clearly, money is not the solution, nor is the expense of keeping open every hospital that is supported by strong community feeling: it is to re-imagine the NHS and to re-plan it to take account of present population patterns, a stronger role for GPs and a level of intermediate treatment which makes full hospital admission less likely. A visionary new approach to health delivery in Scotland would work within available resources and develop services during a transitional period. Moreover, it would seek to engage the Scottish people in helping to plan that task.

Education spending has risen even faster in percentage terms, but much of that increase has gone on improving conditions for teachers. Now is the time to consider more radical change, devolving further responsibility to schools themselves, so that they can run their own affairs and set their own priorities. Once again, that means not more money, but actually removing areas of expenditure and particularly the expensive local authority bureaucracy that stands between funding and delivery.

In addition to much more cost-effective thinking, planning and execution of government responsibilities, the SNP must also come to terms with the reality of waste. No mater how well thought out, the attempt in 1999 and 2001 to balance the SNP’s proposed budgets by adding an allocation for savings appeared as superficial as the double-counting that Tom McCabe, the finance minister, indulged in when presenting his supposed efficiency savings in November last year.

The Tory initiative in England of commissioning detailed scrutiny of government spending using outside experts, and their consequent identification of areas for change, has been largely successful.

It has also proved popular, because most of the public know that there is waste in governance and want to see it eliminated. That is not to denigrate public servants, who know it too. Enlisting their help would be an essential part of the process and that process is one that the SNP needs to get started on now.

The most radical change of all, however, would be for the SNP to willingly accept that low taxes - personal as well as business - produce most growth, something that is now very obvious in the differing performance of the new European Union accession states. Even within the present settlement, being willing to use the tartan tax to reduce the tax burden and stimulate economic activity would create a new set of opportunities with which Westminster would find it hard to cope.

Strangely, even the Tories in Scotland seem unable to grasp this thistle. If the SNP did, however, it would not only have to implement that much-needed, smaller and more efficient government in which it should believe, it would also have to accept, once and for all, that spending a higher percentage of GDP per head on government services than any other European country, save the Vatican state, is no way to create the fleet-of-foot, highly motivated and strongly competitive new country Scotland needs to become.

The Scottish Socialist Party should be left to advocate squeezing the rich until the pips squeak. The real gap in the electoral market lies with the vast bulk of the voting public who are tired of seeing more and more of their money delivering fewer and fewer results.

Being where the people are is never a bad thing to be for an ambitious political party. For now, the people are firmly on the side of small being beautiful. That must become a core SNP message too.

Mike Russell is a former MSP and chief executive of the SNP.