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Mathieu Vaillancourt is a writer and policy analyst.

Even if the SNP rise in Westminster is hardly a new phenomenon (as seen in the 1974 general elections), their rise in support is very important. It leaves the Scottish Labour Party poll at an historic low in polling intentions in a country in which the Scottish Labour Party has traditionally been strong, especially since the mid-1980s.

But how to explain the SNP’s magic touch both in Edinburgh and currently in Westminster – at least according to recent polling? One explanation is the SNP has been able to implement policies which are popular among Scots, along with populist tax policies such as a freeze in council tax. These all cost money and are funded through a generous (to put it lightly) fiscal accord with Whitehall.

This is why the Canadian parallel is important to understand. Canada is a quite decentralised federation and, like the UK, it has a strong nationalistic streak in some regions. On one hand, the province of Quebec has a distinct common language and code of law; on the other, the province of Alberta had in the past an aversion to the federal government because of the question of oil revenues – a bit like Scotland during the last few decades.

Even if Canada has equalisation payments among provinces in order to have the same basic social services from one province to another, all Canadian provinces have full fiscal autonomy in their own devolved jurisdictions. In other words, they have the powers to fund extra government programs as long as they raise the taxes for it. Easier said than done!

Quebec provides one example of how fiscal federalism can be a double-edged sword. Like Scotland, the province has some social programmes (such as cheap state daycare, a pharmacare insurance programme and low university tuition rates) that other Canadian provinces do not have. But because Quebec must raise its own taxes to pay for them, these taxes are high enough to cause the province fiscal problems and unsustainable public debt. If a province raises taxes too high, people and companies vote with their feet – and relocate somewhere where the ”sun is warmer” for them. With a low corporate tax rate policy akin to that of their Irish neighbour, the SNP take the point. They understand the importance of attracting corporations to Scotland.

When the top 25 per cent of the population pay 77 per cent of all income tax, and 37 per cent of people in Quebec are too poor to pay any income tax, since they are under the income tax threshold, there is no choice other either than to raise taxes on those people in between, or to make cuts to healthcare and education, which are the two most important devolved responsibilities for Canadian provinces – or to take both courses.  A rise in sales tax or a lowering of the income tax threshold could even make the most social-democratic person in the room become Tea Party-like.

This is why the best way of removing the SNP from the realm of populism is to give the devolved parliaments full autonomy to raise taxes by as much as they wish for their devolved responsibilities in return for carrying out the policies they see fit for their devolved government. But a word of warning – with great tax leveling powers comes great responsibilities.

13 comments for: Mathieu Vaillancourt: A lesson from Quebec. The SNP’s Waterloo will be fiscal – not political

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