Long live the United Kingdom — but not at any price

How long can the union between Scotland and the rest of the UK survive? Last year’s referendum was supposed to have settled this question for a long time. It has not. On the contrary, the evolution of Scotland’s politics raises doubts all over again. But the question today may be more whether England should leave the union than whether Scotland should.

It now appears possible that the Scottish National party might even win 56 of Scotland’s 59 seats in May’s general election. Because its support is so regionally concentrated, it might attract fewer than 4 per cent of the votes and yet win nearly 9 per cent of the seats. Given the likely distribution of votes for the other parties, the SNP is quite likely to be able to put Ed Miliband in Downing Street.

Why worry about that? Scottish votes have always been important for the Labour party. The difference is what the SNP might want in return. The party is little interested in the fate of the UK — which, after all, it wants to leave. Its interest lies rather in how much it can extract for the benefit of Scotland. If, as a result of its demands, damage were to be done to the rest of the UK, it might regard this not as collateral damage, but as a benefit: the weaker the UK, the less the appeal of staying inside.

Am I too cynical? I think not.

One of the deceitful arguments made by the SNP in the referendum campaign was that an independent Scotland could not merely sustain, but improve, its welfare state. This claim seems to have convinced many former Labour voters to support independence and so the SNP.

Yet it was clear that an independent Scotland would struggle to sustain even its existing welfare state. Since it would be more dependent on unstable oil revenue, its fiscal position would be highly unpredictable. More­over, as a newly independent state with uncertain revenues, it would have to pay higher interest rates than the UK. Finally, it would find it hard to raise taxes far above levels in the rest of the UK without triggering a flight of capital and skilled labour.

The fall in oil prices has underlined such risks. According to the Office for Budget Responsibility’s most recent forecast, Scotland’s net fiscal deficit this financial year is likely to be 8.6 per cent of gross domestic product, against 4 per cent for the UK. The implication is that if there were full fiscal autonomy (albeit without independent borrowing authority), spending might have to be slashed dramatically, possibly by as much as 10 per cent, to bring deficits in line with the rest of the UK. Yet Alex Salmond, former SNP leader, denies this logic of fiscal autonomy. He claims the principle that there should be “no detriment” to Scotland — as agreed with pro-union parties on the limited devolution package after the referendum — would also apply in the case of full fiscal autonomy.

In other words, Scotland would, he claims, be both fiscally autonomous and protected against the more painful implications. It would continue to benefit from a grant from the rest of the UK, to allow it to sustain higher spending per head than the latter, regardless of the revenue it raised. This implies, by the way, that the SNP’s proposition that independence was almost free of fiscal risk was false — not that this tacit admission has so far percolated throughout Scotland. If Mr Salmond’s cheeky argument succeeds, it never will.

The price of SNP support for Labour would presumably be precisely what Mr Salmond outlines: fiscal autonomy for Scotland along with fiscal insurance for Scotland by the rest of the UK. Such a one-sided bargain must further aggravate the frustration of voters in the rest of the UK, including Labour voters in relatively poor regions that do not benefit from comparable largesse. A Labour government would find it very hard indeed, if not impossible, to hold the line on spending and the deficit if it made such a bargain with the SNP: there is a case for more spending. In the short term, that might not matter. In the long term, it surely will. As for the Conservatives, they would argue even more strongly for fiscal autonomy for England, to balance fiscal autonomy for Scotland. It would be very hard to sustain the union if England became financially independent: just imagine the English debate over funding Scotland.

Maybe this situation will be temporary, so the SNP will not end up as a permanent kingmaker. If it does, however, the stability of the union is very much at risk. A situation in which the balance of power in Westminster is held by a party interested mainly in having its cake and eating it does not seem to me a price worth paying for the union. Worse, this party does not have an interest in my country’s success. It is interested only in what it can extract from us.

I want the union to survive but not at any price. If Scotland has permanently shifted its loyalty to the SNP, the best thing for the rest to say may be nothing more than a polite, albeit sad, goodbye.

martin.wolf@ft.com