Friday, 6 November 2020

It's not their money


Yesterday’s complete policy reversal by the Chancellor over furlough is good news – up to a point. It takes us back to where we were in March with a scheme which is merely inadequate, short term and poorly thought-through when they could have used the last seven months to refine and improve it. The way it was done looks to have been driven more by panic than revealing any indication of planning of forethought. And despite all of Johnson’s bluster about the SNP not being willing to take yes for an answer, it still doesn’t give a clear or categoric answer to the question that they’ve been asking, which was whether furlough will be available in Scotland (and the same question applies to Wales) if Scotland’s decisions differ from those taken in England after the end of the English lockdown rather than used as a means of ensuring conformity.

During his speech yesterday, the Chancellor told the SNP that the Scottish parliament has the power to raise taxes, and that if it considers these measures important it could raise funds for them. I’m sure that it was intended as a put-down, but it inadvertently underlined the key difference between devolution and independence. The only way that a devolved Scottish Parliament, acting under Westminster-imposed rules which limit its borrowing capacity and mandate a balanced budget, is by first increasing taxes to raise the necessary revenue. A state with monetary sovereignty, like the UK, can spend the money without having to raise it first, exactly as Sunak is doing. He is explicitly not raising taxes to pay for his program, and nor does he need to. And for all his talk of fiscal responsibility and the need to ‘repay’ the money in the future, he knows both that he won’t be doing so any time soon, and that neither does he need to, because the government has ‘borrowed’ the money from itself by increasing the total supply of money. When he talks about ‘repaying’ the money, he simply means reducing the overall supply of money in the economy. That’s a policy choice, not an economic necessity, and means either tax increases or more austerity, neither of which make any economic sense for the foreseeable future.

They claim that the UK Government is being in some way ‘generous’ to Scotland and Wales by ‘giving’ us extra money (a point dealt with in more detail by Peter Daniels on Nation.Cymru today), but they are tightly controlling the purse-strings more with a view to keeping us in our place than allowing us to make any decisions of our own. Money raised, borrowed, or simply magicked into existence by a few keystrokes doesn’t belong to England, or to London, or to the government – it belongs to all of us. Their pretence that it’s theirs merely underlines the nature of the relationship in their eyes – master and supplicant. The good news, if there is any, is that they don’t even understand that treating Wales and Scotland as supplicants will be counter-productive for them in the long term.

1 comment:

Alan Morrison said...

There is another issue with Westminster borrowing from the Bank of England, ie itself, in that the BoE still charges interest on the amount borrowed. Westminster then subtracts Scotland, Wales and NI's portion of this interest from the block grant before the grant is forwarded to the devolved nations. So in essence Westminster borrows from itself and charges the devolved nations interest on the borrowing and the interest is paid back to itself.