Scotland is subsidised by Westminster; cancel that and you cancel the UK

Scotland is a less private sort of society than England, and its expectations of public authority are higher
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The Independent Online
The election guns have opened fire in earnest. As the Government's artillery starts to pound the enemy, it becomes clear that Labour's devolution plans - above all for Scotland - are to be a main target.

This has a crude logic. Everywhere else, Mr Blair has forced his party into a bunker line of more defensible positions. But there remains a "Scottish salient", jutting out and exposed. Labour's Home Rule proposals remain far the boldest innovation in the party's election platform.

As the bombardment on the Scottish Salient thickens (with "In Defence of the Union" chalked on every shell), a thick smoke of nonsense is spreading over the landscape. Will we ever discuss lucidly the West Lothian question, or Scotland's over-representation in the House of Commons, or the "tartan tax" (the proposal by Labour and the cross-party Scottish Constitutional Convention that the Edinburgh parl- iament should have the right to vary income tax by 3p in the pound)? Is Scotland oversubsidised by the British taxpayer or a net contributor to the Treasury, and should a self-governing Scotland within the United Kingdom pay its own way?

The money question is at the centre of the din. A string of Tory ministers have argued that Scotland gets more than its fair share of central funds, and that if the Scots insist on a parliament, then London would be justified in slashing back that allocation to something like the UK average or less. Even the judicious Hugo Young, writing in The Guardian, observes that if the Scottish parliament comes into existence, "the financial settlement will need to be revised at Scotland's cost". In other words, England will punish Scotland for having a parliament. Ingrat- itude! Right, then we'll see how you like it when we turn off the cash flow.

The sheer silliness of this takes the breath away. In effect, it declares that devolution must be made untenable - that there must be no halfway house between the present status quo and full Scottish independence. If a devolved Scotland is expelled from the financial redistribution framework of the UK, then the Edinburgh parliament will be obliged to set and raise its own taxes. And the distinction between a nation which controls its domestic and economic affairs and an independent nation is negligible.

There are maverick Tories - like Andrew Neil, now editor-in-chief of The Scotsman - who argue that a parliament is pointless unless it raises its own expenditure. But John Major is committed to keeping Scotland within the Union. How does that square with the threat to make it impossible for a devolved Scotland to stay within the United Kingdom? Even luckless Stephen Dorrell, who wanted Westminster to abolish an elected Scottish parliament when it was already sitting, showed more logic.

Is Scotland unfairly subsidised? Last week's Scottish Office figures showed that "identifiable public spending" was running at pounds 4,505 a head in Scotland, and only pounds 3,614 in England - a difference in Scotland's favour of 24.6 per cent. But two questions have to be answered. Is that a fair picture of public expenditure? And does any Scottish advantage correspond to proportionately greater Scottish needs?

"Identifiable public spending" covers only about 70 per cent of what the state pays out - by some calculations, even less. Seven years ago, the Scottish journalist George Rosie made a TV programme about "non-identifiable" spending which revealed that it was concentrated in the South-east of England - the true "subsidy junkie" of the UK. More fancifully, the Scottish National Party argues that if the sum is extended to include oil revenue from the Scottish sector of the North Sea, a share of privatisation proceeds and a slice of the total borrowing requirement, Scotland has made a net contribution of pounds 27bn to the Treasury over the last 20 years. But the figures are shaky, and anyway have little to do with financing a devolved Scottish executive.

Even so, Scotland probably does receive considerably more state expenditure per head than England as a whole. The block grant which is paid annually to the Secretary of State for Scotland is calculated by the "Barnett Formula", unrevised since 1970. This formula, roughly speaking, estimates Scotland's share of public spending by its proportion of British population and then adds an extra fraction - just over one-eighth.

"Need" is an elastic concept, but there is plenty of need about. Scotland has a small population (5 million), part of it scattered over huge areas divided by sea-crossings, mountains and a coastline serrated by long fjords. Most people live in the Central Belt, which until recently had the worst urban housing in northern Europe. The collapse of heavy engineering and mining produced widespread structural unemployment, while Scotland's gruesome health record, above all in coro- nary heart disease, is only partly self-inflicted by cigarettes and bad diet.

All this adds up to special need, in roads, ferries, bridges, housing, environmental improvement, grants to incoming industry and health investment. But the truth is that politics, as much as demonstrable need, have won and kept for Scotland its extra fraction of public spending. It's easy to forget that Scotland already has administrative devolution, in the shape of the Scottish Office with all its sub-ministries and agencies, and the Scottish Office misses no chance to add to its powers. Even in the Thatcher years, when the government was hostile to devolution, the Scottish Office managed to dismember all-British bodies like the Nature Conservancy Council, the Housing Corporation, the Training Agency and the administration of universities, establishing Scottish institutions under its own jealous eye.

Secretaries of State, Tory or Labour, have always used the bogey of political nationalism in Scotland to protect their budgets in Cabinet. In turn, the governance of Scotland is a corporatist jungle of deals between the Scottish Office and the boards, quangos, local authorities and trade unions which run the country. The essence of these deals, conducted at a level where local Labour can bring its political dominance to bear, is that the Scottish Office keeps the cash flowing in return for at least token respect for government policies.

In short, it's hard to tell whether need or politics plays a larger part in deciding how much money Scotland gets, at Scottish Office or local government levels. But there is a third element too. Scotland is a more collectivist, less private sort of society than England, and its expectations of public authority are higher.

This has had its dire effects; the dependency culture created by Labour hegemony over vast council housing schemes was not a pretty sight. But the tradition enabled Scotland to resist the worst excesses of the 1980s. Only one secondary school opted out of local authority control; the popular rebellion against water privatisation was overwhelming, and mass protest against the unfairness of the poll tax showed the way for the rest of Britain. If public spending in Scotland is higher than elsewhere in Britain, it is in part because this level of state involvement in society is what Scottish people want.

If Labour wins the election and fulfils its promise, Scotland will have its parliament. If the Scots vote Yes to both referendum questions, the parliament will be entitled to put a 3p surcharge on income tax, on top of the block grant from London. It's a pity that financial responsibility will go no further - that Scottish revenue from VAT, for instance, could not be directly assigned to Edinburgh instead of going through the Treasury. But the Tory threat to cancel the very principle of redistributing funds according to need - that amounts to cancelling the United Kingdom. If Mr Major and his colleagues would honestly prefer an independent Scotland to a devolved one, they should say so openly.