Full Fiscal Responsibility – SNP you know you want it?

Since the election much airtime has been given over to the subject, “Is Britain a ‘big C’ conservative country?”

It is patently clear that only one part of the UK might be described as such. Across the UK, we have a different party in the lead in each nation. But wasn’t that the case before the last election?

So nothing changes but everything has changed.

The SNP tsunami – for that is just what it is – has changed Britain more than #indyref last year.

What the SNP surge demands is a new constitutional settlement for the UK.

Back in February this year I wrote for ConHome about the Conservatives being the only ‘unionist’ party to offer the MOST radical package of reforms to make sense of a changing Britain. The Strathclyde Commission from Scottish Conservatives last year unveiled a package of reforms which made Scottish Labour look like the most tin-eared party around.

A package offering full devolution of income taxes to a Scottish Parliament. Power WITH fiscal responsibilities.

In the aftermath of #indyref the Prime Minister set up the Smith Commission which unveiled plans for greater devolution of key fiscal [income tax] and welfare powers late last year. Those plans should have been trumpeted by all the unionist parties in the campaign – but they were invisible.

In that February blog I also called for consideration a federal UK as the best way of keeping our family of nations together. But that didn’t make it to our manifesto.

So what next?

The SNP has achieved the perfect storm. A loud voice without responsibility in Westminster and the ability to become the most effective opposition to the Conservatives in the coming year while Labour enters a ‘dark place’ over its soul – a bitter battle that has the potential for Labour to remake its early 1980s history all over again.

Into that political space, watch out for SNP Westminster leader Angus Robertson becoming a star of PMQs – as the SNP bag the 2 questions the Lib Dems used to receive while in Opposition.

Although he has been given the SNP Foreign Affairs role, it is worth watching out too for Alex Salmond. He will not be the SNP Shadow Chancellor, but would have been a good choice. Salmond knows much more about economics than those now left on the Labour front bench.

And all that provides a perfect backdrop for Nicola Sturgeon to win handsomely in Holyrood in May 2016.

What should the Prime Minister do?

The most important thing is not to rush at any solutions. Nicola Sturgeon has made clear she has had business-like and cordial engagement to date. With that starting point, the best thing to do is to start to talk.

David Mundell as the new Scottish Secretary has made clear the Smith Commission outcomes will be delivered in full. That’s the right mood music to start with.

However a wider ‘iterated’ deal will be fraught with difficulty – for both sides.

Lord Forsyth has called for a White Paper which presents all the potential policy solutions including full fiscal autonomy. Sir Malcolm Rifkind has talked of a Royal Commission which looks at a wider constitutional settlement across the UK which makes sense of our new ‘Balkanised’ politics.

Another option might be to have a Constitutional Convention – which brings a wider set of voices together. But this may make for a less clear outcome.

But there is a potential blockbuster approach from the Conservatives which may become a game changer to the entire debate.

During the election the SNP committed itself towards full fiscal responsibility – a step back from their previous stance called ‘autonomy’ – and their manifesto called for this over the ‘medium term’.

Of course there is a problem. An estimated annual fiscal hole of £7bn- £9bn – according to the Institute for Fiscal Studies.

To quote the IFS: “The SNP’s manifesto confirms a policy goal of ‘full fiscal responsibility’, at which point Scotland would have to fund its spending through its own tax revenues and borrowing. In the shorter term though the priority is a package of substantial further devolution of tax and spending powers that stops some way short of full responsibility. The hope seems to be that any fiscal gap opening up as a result of full fiscal responsibility would therefore be delayed by invoking the ‘no detriment’ principle for a package that stops short of full fiscal responsibility.”

The SNP manifesto indicated that full fiscal responsibility would take ‘several years’ to negotiate.

So what if the Conservatives were to build on the Strathclyde Commission’s eye-catching ideas and offer full fiscal responsibility combined with transitional relief for an initial period (to be negotiated)?

Can I hear the SNP saying no?

Full fiscal powers and full responsibility – as soon as you like – with transitional relief to plug the initial fiscal gap. But with a clear timetable for winding down that relief.

The SNP has talked about a principle of ‘no detriment’ to Scotland. But what’s more important – full fiscal powers or not?

A big, open, comprehensive offer from the Conservatives.

The good news is – with debates on a white paper and a commission – the Conservatives are taking this agenda seriously and driving forward options.

For with power lies that responsibility.