Deconstructing Smith: or, Gearing-up for Failure
Jim and Margaret Cuthbert’s forensic deconstruction of the Smith Commission Report ‘Smith Fatally Flawed by Inadequate Attention to Feasibility’ (Bella Caledonia, 4th December, 2014) provides the first real, robust, analytical antidote to the hasty, slapdash, methodology that informed Smith, to say nothing of the less surprising banalities that followed in the mainstream media’s flaccid interpretation of the Report.
It is worth remembering the context of Smith; less an official response to the famous ‘Vow’ (in spite of populist rhetoric), than signalling a deeper anxiety in the Unionist approach to the Referendum. Smith represented the unacknowledged, panicky response of a political establishment that had complacently refused to engage with the Scottish people and their aspirations throughout the referendum process, simply because the fairly clearly voiced opinion of Scottish voters over the two year campaign did not chime with the vested interests of Westminster: a reluctance to engage with Scotland brought about by Westminster’s intransigent resistance to the issue Unionism was desperate to evade at any cost, and that almost cost Better Together the Union on 18th September: the dogmatic refusal by David Cameron (abetted by the Labour Party) to allow a Second Referendum Question, and to address the well-understood, pervasive political demand in Scotland for something that has variously been termed DevoMax; but also Home Rule, or even Federalism.
The ‘problem’ as seen from Scotland, was not Scotland; it never was Scotland: the problem (no inverted commas required) was always Westminster, and within the nexus of power that I term the ‘Westminster Cartel’, there was the pervasive and pernicious ‘state-within-a-state’ influence of London and the City.
The ‘Vow’ and the Smith Commission was Westminster’s lame, reluctant, last-minute attempt, less to engage with Scotland’s transformative ‘new politics’ than to snatch political control of Scottish aspirations for DevoMax/Home Rule/Federalism, and manage the expectations into limited, repressed channels that harmonised with, and were subservient to, the vested interests of the Westminster Cartel; hastily thrown together for decision before the politics finally ran out of Westminster’s control.
The Smith Commission snatch-squad has, however comprehensively failed; but Smith’s Report has managed to reveal instead the deeper failings of the project: the haste, the superficiality of thought, the failure of intellectual rigour, the lack of detail, the unconvinced and unconvincing engagement with the real issues of governance that were all the inevitable outcome of Westminster handing Lord Smith the impossible task of untying a political Gordian knot within an unsustainable deadline. It is almost as if the circumstances of Smith had been deliberately constructed to defeat adequate political reflection, understanding and insight into the appropriate solution. Perhaps that was always the purpose of Smith, and the real long-term goal of the ‘Vow’.
The Cuthberts’ critical eye meanwhile has focused on “significant technical issues” within the Smith Report that are a result of the inherent “lack of attention to detail”. These fatal ‘devil-in-the-detail’ flaws in Smith, have subsequently been glibly and maladroitly side-stepped by media and by Westminster politicians, in furtherance of a Unionist effort to sell this motley package to a sceptical, once-bitten-twice-shy Scottish public. In the Cuthberts’ well-founded view this careless lack of assiduousness is, however “likely to prove fatal”.
The Cuthberts identify a series of acute problems in implementing Smith, including: “exactly how to index the reduction to the Barnetted Block Grant if the Scottish Government is given extended tax raising powers of its own: the problem of likely fluctuations in the tax base if income tax is used as a major source of funding for the Scottish Parliament: and the problems that would arise if the tax base for which the Scottish Parliament was given responsibility intrinsically grew less fast than the corresponding tax base in the rest of the UK”.
For the Cuthberts, of even greater importance in Smith, “is the failure to give the Scottish Parliament adequate economic powers to grow the tax base on which they will have to rely: Smith signally fails to address the difficulties posed by giving the Scottish Parliament responsibility (for a given tax base), without power (to grow that tax base)”. We may draw the not unreasonable conclusion that the Westminster Cartel is perhaps trying to keep the power, while transferring the (unusable?) responsibility to Holyrood, ensuring Scotland’s legislature does virtually nothing new; apparently without anyone noticing.
In addressing this adversely ‘loaded’ transfer of responsibility, it is the lack of attention to detail in Smith that is simply not good enough, and the failure of rigour is quite plain from a first reading of the Smith Report. I shall here concentrate on The Barnett Formula and the Block Grant, which are quite fundamental to everything in Smith: yet in Smith there are only two references to Barnett. The first is as follows:
“The Barnett Formula will continue to be used to determine the remaining block grant. New rules to define how it will be adjusted at the point when powers are transferred and thereafter will be agreed by the Scottish and UK Governments and put in place prior to the powers coming into force. These rules will ensure that neither the Scottish nor UK Governments will lose or gain financially from the act of transferring a power.” (Smith, Foreword, p.4)
What does this statement actually mean? It is a masterpiece of fluid opacity. We are told that “new rules” will be required on how the Barnett Formula-Block Grant will be determined/adjusted/defined in future. This is both critical and central to the whole funding of Holyrood, but what are these new rules? How are they to be devised? How will they be agreed? How will they work? What are their effects? On closer inspection we discover that:
1. There is no context, no comparison with the present rules; no explanation of the current Barnett Formula definitions, rules or the way they are currently applied, in the Smith Report
2. There is no effort even to discuss what the “new rules” ought to be, might be, or what the options or consequences of different choices may imply for Scotland; outside some surprisingly vague, Delphic generalisations in para., 95 (see below)
The new rules are non-trivial; indeed they are quite fundamental. This void at the very heart of the matter of Smith seems to represent, at least ‘prima facie’, a failure of communication to the public; or perhaps it speaks to the underlying level of understanding of the material issues on the Commission (or the participants’ interest in the underlying subject matter). More generously, it may simply underscore the hopeless deadline to which Smith was operating; or it may simply serve Westminster’s purposes best, and all of this indifference to explanation, clarity and transparency on big, substantive matters simply represents the arrogance of power.
At the same time, from the perspective of the public, which is in no position to understand the recondite complexities of the existing Barnett Formula (it was Lord McConnell who pointed critically to Barnett’s current lack of “transparency”); without knowing the detailed case-by-case nature of the present Barnett rules (from routine year-on-year spending changes, to setting total national infrastructure spend), or knowing precisely what rule changes are envisaged, what might follow from the rule changes or how they will work; in effect we may all fairly conclude that we know virtually nothing of substance at all from Smith.
During the referendum campaign Yes, Scotland and the SNP were attacked vehemently, even bitterly, by Better Together and their media, for relying on future inter-governmental negotiations to resolve outstanding issues, without knowing the outcomes beforehand (when they weren’t, prophetically and somewhat inconsistently, telling everyone what these outcomes were!); demonstrating extreme hostility to negotiations and uncertainties that were no more uncertain than Smith now offers the Scottish people, as if they are unproblematic; and in most cases background contexts to uncertainty that were better understood in the independence debate than the new rules for the Block Grant and the operation of the (long ago) comprehensively discredited Barnett Formula, offer now.
The second reference to Barnett in the Smith Report is in the context of what Smith terms “Scotland’s fiscal framework”. In para., 95(1) Smith announces that “the block grant from the UK Government to Scotland will continue to be determined via the operation of the Barnett Formula” (p.25). The following paras., 95(2) to 95(9) are intended to establish a swift gloss on such specific matters as “Economic Responsibility” (2); “No detriment [to either side] as a result of the decision to devolve further power” (3); “No detriment [to either side] as a result of UK Government or Scottish Government policy decisions post-devolution” (4); “Borrowing Powers” (to reflect additional economic risks, and tax revenue volatility) (5); making the powers “Implementable and Sustainable” (6); seeking “Independent Fiscal Scrutiny” (7); continuing UK management of “UK Economic Shocks” (8); achieving “Implementation” through joint UK-Scottish governments agreement to “a revised fiscal and funding framework for Scotland based on the above principles” (9).
Behind the laconic, Delphic Oracular generalisations of para., 95(2-9) there is no indication how these blandishments are to be achieved, or more important, their consequences, intended or unintended. In short, the simple, straight answer to the question ‘are the proposals in para., 95 workable?’; for any diligent and candid reader, is ‘no idea’.
The diligent, candid and relentlessly forensic Cuthberts are, however clearly sceptical. In their worked illustration, the underlying problem is starkly revealed: because of relative differences in the proportion of revenues the Scottish and (r)UK governments would raise from devolved income tax (relative to expenditure), policy changes to tax rates potentially create a ‘gearing effect’ difference between the two governments, that in the Cuthberts worked example “would put Scotland in an intolerable situation”.
Smith not only fails to identify the gearing effect problem, but as the Cuthberts point out, the critical importance of para., 95(4)b to the achievement of the whole Smith edifice is not established. Yet para., 95 is cross-referred in the Smith Report no less than eleven times throughout the document, excluding para., 95 itself. Para., 95 is central; it affects virtually everything. Let us remind ourselves: para., 95(4) is intended to ensure “No detriment [to either side] as a result of UK Government or Scottish Government policy decisions post-devolution”: and
95(4)b states that “Changes to taxes in the rest of the UK, for which responsibility in Scotland has been devolved, should only affect public spending in the rest of the UK. Changes to devolved taxes in Scotland should only affect public spending in Scotland” (p.26).
The Cuthberts emphasise the scale of the difficulty there will be, implementing the content of para., 95(4)b.
I submit that if Smith believes para., 95(4)b will work then it should first spell out, in detail, how it will require to be implemented, to achieve the required effects.