Labour’s credentials in Scotland may be about to be shredded

The party’s policy on tax is crucial – but when it comes to Scotland, Ed Balls risks losing control

Only 28 per cent of respondents agreed they would be better off with Ed Miliband and Ed Balls (Ben Stansall/AFP/Getty Images)

Voters in Scotland are interested in predictions for the future. And they should be. It’s where they will spend the rest of their lives.

Close to six months from September’s leave-or-stay poll, most unsubstantiated economic prophesies have come from the nationalist camp. Challenges to the utopian vision of imminent independence – such as this week’s veto by the Chancellor and others on Scotland still using the pound in a currency union - are dismissed as Westminster bullying and campaign rhetoric.

But a small and barely reported late afternoon vote in Wales’ National Assembly earlier this week is threatening to shred the credentials of Labour, the dominant unionist force in Scotland, when it comes to promises and predicting what the future will look like north of the border if the Yes campaign fails.

Hard-edged and clear assurances on Scotland’s future from Labour leader, Ed Miliband, and the Shadow Chancellor, Ed Balls, have been pencilled in as the key message supposed to come out of the party’s spring conference in Perth in just over a month’s time. But instead of a show of unity and joint purpose in the fight against independence, the Perth gathering is now likely to resemble a blood-bath of division, insurgency and uncertainty over who exactly in the party calls the shots in Scotland.

The small ripple with large chaos-heavy consequences for Ed Balls came on Tuesday night in an amendment tabled by Plaid Cymru, the Welsh nationalists. The aim was the removal of any restrictions that Westminster could place on the Cardiff assembly’s future ability to vary income tax.

That may sound politically complex and a bit dull. It isn’t.

The motion passed with the help of Labour AMs, signalling an end to previous policy which states that any tax competition between the nations and regions of the UK would prove to be destructive. The Welsh First Minister, Carywn Jones, called the restrictions on the assembly’s tax powers “pretty much useless” saying such outside controls made “ no sense at all.”

If the challenge to Ed Balls’s authority had been contained in Cardiff, the fall-out from the mini-insurgency would have been minimal. If the Welsh want to run more of their own show, Whitehall has time to talk about more fiscal power - later. But in Scotland there isn’t much time left to talk. The referendum is in September and strong words of support for Mr Jones’s open revolt from sources close to Labour’s leader in the Holyrood parliament, Johann Lamont, points to the UK-wide authority of both Ed Miliband and Ed Balls being severely tested next month in Perth.

Scotland has been handed enhanced responsibilities on tax that will come into force in 2016. Measures proposed and adopted by Professor Sir Kenneth Calman gives Holyrood the power to vary the direct rate of income tax in Scotland by 10p in the pound, with the block-grant sent north by the Treasury (calculated by the long-standing Barnett formula) reduced by an equivalent amount.

The political idea is that Scotland’s parliament takes a greater control over what it both raises and subsequently spends. But to avoid the overall tax burden being different between Scotland and England, a “lock” rule was agreed that would mean if Holyrood chose to vary income tax, they would need to re-adjust others taxes to keep the playing field level across the UK.

Labour in Wales and Scotland have now effectively dumped the “lockstep” agreement, leaving Ed Balls in only partial control of his party’s devolved tax policy. It is an almighty mess, and the thousand or so Labour delegates who will gather in Perth for the Annual Scottish Conference, are unlikely to welcome any appeal for calm. Backstage in Labour’s ranks there is a simmering uncertainty not experienced since the early days of Tony Blair’s reforms.

So why the insurrection? Why risk a civil war that threatens to hand the SNP an ill-timed, pre-referendum gift of disunity and in-fighting?

That is not how Lamont and others close to her currently see the situation. Labour in Scotland is a party evidently struggling to find a purposeful and winning identity. It almost openly worries that its post-devolution strategy has been too careful, too risk-averse, and still too London-centric. All of which has handed the SNP the largely unanticipated gift of being seen as the authentic voice of Scotland.

The Welsh appear to have given Labour in Scotland a taste for revolt. The challenge to Balls and Miliband’s authority suggests that however late, they think voters can still have faith in what devolution, not that far short of independence, can deliver.

Are they right? In just over six months we will know.