In the panic engendered by opinion polls which showed that the referendum on Scottish independence would be a close run thing ,Westminster politicians of all parties made a ‘vow’ to give Scotland greater autonomy if independence was rejected. When the vote went against secession, though by a narrower majority than had been anticipated before the fraught last few days, the task of delivering this promise was delegated to businessman and financier Lord Smith, with a deadline to report by St Andrew’s Day, at the end of this month.

       A likely package would give the Scottish Parliament control over the rates of income tax levied in Scotland, assign the country a statistical share of aggregate VAT revenue, and make some minor adjustments to benefit provision and some other fiscal and regulatory powers. These measures  would be sold as giving Scotland control of more than half the revenues needed to fund expenditures. At present, Scotland’s fiscal resources are almost entirely derived from a block grant provided by the UK Treasury.

      But revenue assignment gives no authority over VAT revenues, and the Scottish Government gained the power to vary income tax in 1999 – indeed the ‘tartan tax’ was approved in a separate vote in the 1997 referendum. But it has never even come close to using that power. When the UK government embarked on a spending spree from 2000 to 2006 – during these years public expenditure in Scotland increased by almost 50% in real terms – it might have been a sensible decision to cut income tax instead. But the suspicion that the consequence might have been a reduction in subventions from Westminster meant that the idea was quickly dismissed. And despite continuous complaint about centrally imposed austerity in the years that followed, the possibility of raising additional tax revenue through additional income tax to make such ‘cuts’ unnecessary has not been debated. In fact the administrative procedures necessary to implement such a policy were allowed to lapse.

      The centre of political gravity in Scotland is today well to the left of that of England, and an independent Scotland might have chosen a more Nordic regime involving higher taxation and higher public expenditure. But within the context of a United Kingdom, the demand is for policies that are different from those in England only to the extent that they are more generous than those in England. The real demand from Scots is not really for more powers but for more money to spend on powers which in large part the Scottish Government  already has. So long as there is any element of grant from the UK government, the cry will be that the grant is not enough. 

         The widespread illusion that more tax authority means more money is likely to be quickly dispelled. The new reality is of political pressure to pay Scotland less, not more. Public spending per capita in Scotland has averaged 10-15 per cent more than English levels and – since average incomes are similar – this difference is hard to justify objectively. The “Barnett formula” which generates that outcome was uncontroversial so long as knowledge of its existence was confined to a few fiscal aficionados (yes, there are such people) but the independence debate has brought it to wide public attention. The irrationality identified in the “West Lothian’ question – Scottish (and Northern Irish) MP’s can vote on issues of relevance only to England and Wales – was equally a matter acceptable only when it was not widely understood. There are many stable federations, but not with one state constituting more than 80% of the total.

        The close independence vote, together with the hasty promises which preceded it, have rendered unsustainable the quiet compromises that had defused the Scottish issue in British politics. The no verdict in September was not the end of an argument, but the beginning.