13 March 2009
Against all odds and despite constant setbacks, the SNP and Alex Salmond have stayed in power and stormed through their manifesto. Critics say the minority government cannot last but the first minister begs to differ. He tells David Scott why in an exclusive interview with PF
It is almost two years since a political earthquake in Scotland swept Alex Salmond and the Scottish National Party to power at Holyrood. Few people could deny that following its ‘historic’ election in May 2007, the Scottish Government has achieved a great deal despite the restrictions of minority rule.
But Salmond’s opponents say some of the first minister’s main political policies are beginning to unravel as the problems of minority government become increasingly apparent. The so-called honeymoon period, they claim, is over and the Salmond administration is now struggling.
The flagship local income tax plan has been ditched at least until 2011, when the current parliamentary session ends. And Salmond’s intention to hold a referendum on independence appeared to have been killed off last week when Labour, the Conservatives and the Liberal Democrats united in the Scottish Parliament to approve a call to shelve it.
But Salmond remains confident. Despite a hectic timetable, which has recently included a meeting with US secretary of state Hillary Clinton in Washington and talks just a day or two later with UK Prime Minister Gordon Brown and his counterparts in the other devolved administrations, the first minister looks relaxed and unfazed about the mounting political pressures.
Having met a deputation and dealt with a queue of officials and spin doctors trying to get a ‘word’, as well as a vote in the chamber, he finds time for an exclusive interview with Public Finance at his fourth floor office in the ministerial ‘tower’ at Holyrood.
So, is the honeymoon period over? ‘It’s a pretty extended honeymoon,’ he replies. ‘It’s been almost two years of government. The last time I checked we were still ahead in the Scottish polls by a considerable margin and I notice just in the last few days we’ve gone back to being ahead in the Westminster samples. So the public verdict seems pretty positive.’
On the referendum, he intends to press ahead with legislation proposing that it be held in 2010. According to Salmond, the other parties have shown contempt for the voters by opposing it.
‘Here is something that is overwhelmingly popular… whether people are going to vote “yes” or “no” they think it’s a good idea to have a vote. It’s in our manifesto. Last year Labour were going to vote for it. We know a substantial number of Liberal and perhaps even Tory MSPs are in favour of it as well. In one year we don’t know where the situation will be. We will introduce it next year.’
Critics have argued that the Scottish Government has made very limited progress in implementing its manifesto. Salmond points to 46 manifesto commitments that have been ‘met or exceeded’. Council tax bills have been frozen, business rates cut, student fees abolished, the first phase of abolishing prescription charges introduced, more police officers employed, hospital downgrading plans reversed and ambitious energy renewal plans put into operation. ‘We’re almost halfway through our commitments. There are a lot of things we have done so it seems to me we’re keeping pace with our commitments.’
With just 47 seats in the 129-member Parliament, the SNP needs the support of other parties to be able to push ahead with policies that require legislation. While Salmond has defied critics who claimed his government might not last, he has found that minority rule can be precarious.
By far the biggest example of this was the government’s unexpected and humiliating defeat on its 2009/10 budget on the casting vote of the presiding officer. Salmond immediately threatened to resign if the budget was not voted through at the second attempt. Labour and the LibDems, who voted against it, were thrown into disarray when it became apparent the public disapproved of action that threatened public projects and jobs.
Just a week later – with parliamentary rules suspended to allow a fast-tracking of the Budget Bill – the budget won overwhelming approval. Salmond had turned what appeared to be humiliating defeat into an acclaimed victory. Like Houdini, he had thrown off the shackles of minority government, escaped from the risk of political death and emerged unscathed.
But then came the local income tax. Its demise, at least for the time being, occurred when it was least expected. Finance Secretary John Swinney stunned MSPs during his announcement on the local government finance settlement by disclosing that ministers were not going to proceed with the flagship LIT policy in the current session.
He blamed Westminster’s ‘swingeing cuts’ in Scotland’s budget and the inability of the government to put together a ‘stable majority’ to enable it to steer detailed LIT legislation through Parliament. Swinney said the SNP would fight the next election to win a parliamentary majority that backed the abolition of the ‘unfair council tax’.
Angela Scott, head of CIPFA in Scotland, believes the decision not to go ahead with an LIT in the present parliamentary session now provides the chance to give further consideration to a property tax ‘in the widest possible terms’. She says: ‘The debate on LIT was very useful and, while there were a number of questions left unanswered, it maintained local government finance on the agenda – taxation in particular.’
Sir Peter Burt, chair of the independent Scottish committee of inquiry into local government – which rejected an LIT when it reported in 2006 – doubts whether the SNP will be prepared to shift on the issue.
‘The SNP is the government and it remains committed to the idea of a local income tax,’ he told PF. He points out that the current economic situation illustrates the ‘severe effect’ an LIT could have on council income if thousands of jobs are lost.
Salmond claims people understand the problems of being a minority administration. ‘The public aren’t daft,’ he says. ‘Folk know that we believe in LIT and want to abolish the council tax and people agree with this. But they also like the fact that we’ve done our best on council tax. We’ve had two years of the council tax freeze and we intend to have two more years. That is helping people right now.’
The criticism that the LIT plan was ‘flawed’ and not properly thought-out has also been applied to the Scottish Futures Trust, the company the SNP has set up as an alternative to the system that encouraged the Private Finance Initiative. ‘It’s been extremely properly thought-out,’ he counters. ‘It’s an organisation whose time has come. This is the moment. What has not been properly thought-out is that the PFI and public-private partnerships are running into the sand as we have seen this week when the UK government had to bail out its PPP plans. The advantage the SFT offers is that it allows expertise, aggregation and the purchasing power that you can see in the biggest projects being brought to bear on the smaller projects.’
Salmond remains convinced that Scotland needs new powers to borrow. ‘The case is overwhelming,’ he says. ‘I would have thought the recession has rather made the case for a Scottish Parliament with economic teeth.’
Sir Kenneth Calman’s commission on devolution is examining the arguments for and against borrowing powers. Calman says the commission has received a ‘significant number’ of submissions on this issue and has asked its independent expert group to provide it with a definitive assessment. ‘To some extent, the commission’s view of this will depend on the conclusion it reaches on other areas,’ Calman tells PF.
‘For example, as our first report makes clear, the case for borrowing powers is made much stronger in a situation where the Scottish Parliament is more reliant on its own tax revenues and less on a stable income stream from a UK block grant. You can’t look at the elements in isolation.’
Salmond is convinced the case for borrowing powers is overwhelming even under the present devolved arrangements. But would it be necessary for Scotland to have full fiscal autonomy before the ability to borrow would work? ‘No. Northern Ireland has borrowing powers. It has business rate income but so does the Scottish Government… all you need to have borrowing powers is a revenue base, you don’t need a taxation base.’ According to Salmond, the need for borrowing powers to manage capital spending is highlighted by the planned replacement of a road bridge across the Forth estuary, one of the biggest public spending projects of recent years.
Last week, Treasury Chief Secretary Yvette Cooper offered a £1bn funding package for the project but rejected the Scottish Government’s plea that the £2.3bn cost should be spread over 20 years. ‘Why would you pay for a capital asset that’s a once in a generation expenditure over a period of five years?’ asks the first minister. ‘Nobody else would. And therefore you need borrowing powers or a relaxation within the current system to allow the Scottish Parliament to even out its capital spending over a period of 20 years.’
The big hurdle for the SNP in the remaining two years it has in office will be convincing people of the case for independence. The disaster befalling Scotland’s two leading banks – Halifax Bank of Scotland and Royal Bank of Scotland – has undermined the argument that the country’s strong financial sector would be an asset in a separate Scotland. Salmond’s ‘arc of prosperity’ – the ability of countries such as Iceland and Ireland to stand alone – now looks decidedly less convincing.
David Heald, professor of accountancy at Aberdeen University, regards independence as a political judgement and emphasises that he does not think economic arguments either way ‘are very powerful’. But he adds: ‘I always thought that the Scottish banks were the strength of the Scottish economy… they were also the strength of related business. It makes independence more difficult and it does make the position of the Scottish economy more difficult.’
Salmond believes people can react in two ways. They either argue that economic difficulties mean you can’t have independence or an independent country means something can be done about it. ‘The lesson of the financial collapse is not that small countries have been particularly vulnerable. The lesson is that countries large and small have been vulnerable. And the countries that have emerged best are those with the most prudent and effective financial management.
‘I don’t think the failure of British governance, British management of the economy, British regulation of the financial sector, Britain’s boom and bust, should be an argument against Scottish financial autonomy. I would have thought that British failure is an argument for Scottish power.’
While Salmond believes his government is performing well ‘and will perform well for the next two years of our term of office’, the question remains whether the so-called honeymoon is coming to an end. ‘The answer is no,’ asserts John Curtice, professor of politics at Strathclyde University. He says one of the most recent opinion polls, taken after the decision on LIT, showed that while SNP ratings had dropped marginally, ‘the SNP administration is still three times as popular as anybody else, especially because the Labour Party is so unpopular due to the weakness of the UK government. The SNP position is still pretty strong and they would probably win another election.’
Salmond would no doubt agree with that prediction. But with the prospect of the Referendum Bill – another flagship policy – being defeated, it looks as though he might need to perform yet another Houdini-style feat if he is to escape from the tightening opposition-imposed political straitjacket.
John Swinney, Sir Kenneth Calman and Professor David Heald are all speaking at the CIPFA in Scotland annual conference in Edinburgh on March 19—20
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