Perfect Storm for Independence?.

In politic stuff happens…….

For the last two decades conventional Nationalist wisdom has held that independence will be achieved by a gradual transfer of powers from London to Edinburgh.  But the global recession offers a glimpse of a more dramatic possibility.  Could the new conditions be brewing a perfect economic and political storm capable of blowing Scotland clear of the Union in a much shorter time scale?.

The Centre for Public Policy for the Regions at Glasgow University this week published an update of the impact of the previous week’s UK on the Scottish Budget.  It estimates that after peaking this year the Scottish Budget will decline in real terms to 2013-14 by between 2.1 – 3.8% annually.   In 2013-14 Scottish public expenditure will be up to £3bn less than in the current year and over the period the total expenditure will be down £6bn.  As the Centre comments: “Since devolution the Scottish Government has been principally faced with the question where to spend the extra money rather than where to cut back, such was the largesse available.  Now the tables have turned and  it is a question of who faces the largest cuts.”

The week before the UK budget Scottish Finance Secretary John Swinney offered his perspective on Scotland’s financial future.  In a speech which was otherwise professionally optimistic – of course he did not know the details of the budgetary horrors soon to be unveiled by the Chancellor – one passage sent a frisson of alarm around the lecture hall.  He pointed out that when the SNP Government came to office in 2007 it found that it would have to spend £501m in its first year servicing its inheritance of Private Finance Initiative (PFI) commitments: by the end of the Parliament the annual cost to the Scottish budget of PFI will have risen to £867m., to be met from a declining budget.

The third element of the storm is the increase in the demand for public services driven by the combined impact of the recession and the ageing of Scotland’s population.   Many of the costs of the recession, for example the increased expenditure on income support and employment services, are already factored into the UK budget, albeit on the back of estimates of the UK’s short term growth prospects which most analysts consider wildly optimistic.  But the wider social costs of higher levels of unemployment – for example on social support, education, health and justice – will fall on a shrinking Scottish budget.  And there they will have to compete with the rising claims of an ageing population for health and other social and community services which were widely regarded before the recession as presenting the major challenge to public budgets.

Even Perfect Storms quickly blow themselves out.  The financial storm facing the United Kingdom will be less amenable.  In the CPPR’s scenario UK and Scottish public spending after 1213-14 can be expected to resume its growth but at only about 1% annually, well behind the rate needed to meet increasing demand let alone to catch up with the £6bn backlog of need from the four years of real decline. And even that will depend on what priority is given by UK Governments  to reducing the UK’s public debt as a proportion of GDP from the 80% or more to which it is now heading to a more manageable 40 or 50%.

A fifth element of the storm is that while the UK Government will be inflicting massive cuts in Scottish expenditure  the world economy will be coming out of recession ahead of the UK.    A probable consequence is that oil prices will have started rising again, significantly strengthening an ‘independent’ Scottish budget relative to the actual UK and Scottish budgets.

The two final elements are directly political.  All the indicators point to a Conservative victory in next year’s UK general Election on the back of a large English swing away from Labour with the SNP making further inroads against Labour in Scotland.    The political polarisation between England and Scotland can only be further sharpened if the Conservative Government sticks to its declared policy of intensifying expenditure cuts in the interests of reducing UK debt.

Into this gathering storm SNP will introduce its proposal for a people’s referendum on independence to the Scottish Parliament.   Bolder Unionists may be tempted to ‘call SNP’s bluff’ on the grounds that hard economic times – particularly when symbolised by the fall of such Scottish totems as RBS and HBOS – undermine public support for radical constitutional change.  But the recent YouGov poll showing public confidence in both the SNP Government and Alex Salmond running well ahead of confidence in Westminster and in other party leaders will impose caution.   However refusing a 2010 (or 11) referendum will simply compound the Unionists’ problems.   On current trends the SNP will increase its majority in the 2011 Scottish Parliament elections and be in a stronger position to secure a referendum in 2012or 2013 -  by which time the various economic and political trends will have matured and coalesced into that Perfect political and economic Storm for independence.

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