Iain Macwhirter: Post-covid cost cutting will wreck SNP spending plans ... and possibly the union

Some of the give-aways aren’t quite as generous as they appear,  Anyone visiting one of our semi-privatised dental practitioners soon discovers that many of the treatments you actually want are not available on the NHS. The 20% uplift for the NHS is not as transformative as claimed. At 2.1% a year it is little more than recent average increases, according to the Institute for Fiscal Studies, and is actually less than the 3.4% that is being introduced by the Tory government in England. 100,000 houses over ten years isn’t exactly earth shattering or mould breaking.

However, I don’t want to sound too negative.  There is a big increase in spending on various benefits. Many of the measures, like free school meals and the child payment are humane and progressive.  But there are a lot of free things already offered on a universal basis and it all comes with a price tag – which unfortunately the SNP chooses not to reveal in detail. Since there is no corresponding tax increase -  indeed the manifesto has promised a freeze on income tax - the assumption must be that it is all coming courtesy of Rishi Sunack and the Barnett Formula (what a name for a band that would make). This may not be sustainable. 

Of course, under independence all would be well in the best of all possible worlds and no one would need to count the cost. Ms Sturgeon's manifesto offerings stretch far beyond the lifetime of this parliament and into the brave new world of Scottish independence.  The prospect of a four day week - a trial is planned - is presumably a hint of how things could be were the Scottish government in full economic control.

Then there's the Big One: Universal Basic Income. This is strictly offered on an independence-only basis. The message is: vote Yes and you might never have to work on again. What better inducement to make people think positively about independence? However, UBI is one of those great-sounding policies that starts to come apart once you ask awkward questions about who would pay for it.  

Reform Scotland, with Nicola Sturgeon's recent support, proposed a Universal Basic Income of £5,200 a year, given to every adult irrespective of need. This would cost around £25 billion a year, and yet it isn't nearly enough to live on. It's little more than Universal Credit after all – so seems rather pointless. Germany is planning a trial of a £12,000pa UBI. But that is still poverty pay in most people's books, and such a scheme would cost more than the entire Scottish budget. Savings would be made on social security, but it would still be hugely expensive. The idea of taxing basic rate tax payers in order to give millionaires money they don't need is unlikely to be an election winner. 

We actually have a kind of universal basic income at present: it's called furlough – and the cost of paying people not to work is proving ruinously expensive. The UK's budget deficit has risen this year to £400bn - its highest level ever. This can't go on and foreshadows a collision in the next few years between the Scottish government's spending ambitions and the fiscal limits of the Union. In short, there is going to be a spending crunch, combined with a dramatic rise in unemployment after the Coronavirus Job Retention Scheme is wound up. This may shred many of the SNP's manifesto promises. It might shred the Union itself. 

It is arguably unwise to plan any significant spending increases right now because we are living in a pandemic never-never land. The Scottish budget is being cushioned by well over £8bn in Covid payments from the UK Treasury over and above the block grant. That 4% increase in nurses pay – which the Royal College of Nursing has rejected as too small – is four times the pay offer to nurses in England. The suspicion is that the Scottish government has been using pandemic cash to help buy political votes.

That is denied by the Scottish government, who say all their pledges are affordable. However, they are as miserly with their costings as they are generous with universal benefits. Tory and Labour MPs in Westminster – especially those in the north of England have long believed that Scotland gets over-generous treatment in spending from the UK exchequer, despite being one of the most prosperous regions in the UK. 

The SNP has been able to claim that it's been hard done by by Tory austerity, even though spending has been around £1500 higher per head in Scotland than in England according, to the Office for National Statistics. The row over the Barnett Formula has been going on for many years. UK governments have always avoided fiddling with it because of the fear of stoking Scottish nationalism. But it is hard to imagine a better way of fuelling nationalism than continuing to finance its social ambitions. 

There has been talk of the Prime Minister heading off independence by offering a snap referendum next year. That seems about as likely as Boris combing his hair. He remembers what happened to David Cameron in 2014. Johnson doesn't want to go down in history as the prime minister who took the UK out of the EU only then to take Scotland out of the UK. But there is the possibility of a new financial bargain being struck as a part of quasi-federal repositioning of the nations and regions of the UK. At least, this is worth thinking about. 

An offer of fiscal autonomy to Scotland would meet one of the SNP's political demands and also redefine their spending ambitions. It might weaken the fiscal ties that bind the UK. But giving Scotland full tax and spending powers – with a subvention to the UK for common services – would be a worthwhile fiscal reality check, and might actually strengthen the Union. 

At any rate it would demonstrate whether or not the SNP's retail politics is affordable. Supporters of independence say that Scotland's nominal 8% budget deficit – crudely the difference between how much is spent in Scotland and how much is raised in taxes – is a unionist myth. Perhaps it is. We may be about to find out.