A Spanish economics lesson for Scottish independence

by David Mathieson

It is ironic that just as the nationalist government in Scotland is churning the ground in preparation for a referendum on independence or ‘devo max’, another European country, Spain, is actively considering at ways of reining in a decentralised state.

The administrative system in Spain is one of the most highly devolved of any country in the EU and the wide range of powers exercised by the powerful regions or autonomias has long provided something of a model for the SNP.

Yet, with their economy under pressure, the costs of ultra-devolution are being increasingly questioned by Spaniards themselves.  Some regions are close to bankruptcy whilst the leaders of others are would like to throw in the towel and revert to a more centralised state.  A new political debate has opened up in which many ordinary Spaniards are openly asking ‘what is the point of further devolution – and is it worth the price?’

The 17 Spanish autonomias are generally responsible for the organisation and delivery of key public services such as health, education and justice and these alone account for some 80% of average regional spending.

The funding comes from a mixture of central and regional government revenues although not all regions enjoy the same spending powers nor do they raise revenue in the same way.  The founding fathers of the post-Franco constitution decreed that whilst the pace of devolution would be determined by local needs the eventual goal should be a uniform provision of services or what the Spanish have dubbed café para todos or ‘coffee for everyone’.

A noble aim maybe, but in the meantime the mishmash of services can be confusing – even the most enthusiastic advocates of the system admit that there are failures of coordination – and it is costly.

The outspoken Conservative president of the Madrid region recently estimated that the autonomia could save several billion euros by devolving or recentralising some services to the state.  Just how much the savings would actually be worth are debatable but there are many examples to suggest that that significant economies of scale could be gained by streamlining regional spending.

A particular problem has been the growth in the number of civil servants or funcionarios working in the regional administrations as powers have been handed over.  Between 1998 -2008 the total number working for the regions to staff the devolved services almost doubled – from 667 000 to 1 345 000 – adding another 668 000 to the payroll.  But during the same period the numbers of people working for central government only fell by half that number – 303 000.

The growth in regional spending – administrative or otherwise – has not been financed entirely from revenue but from borrowing.  In the good times this was poorly scrutinised by central government which avoided a political stand-off with the powerful regional governments but serious shortfalls are now coming to light.

Just before Christmas last year, for example, the Valencia region appeared to be hours from defaulting on €123 million loan from Deutsche Bank and was only saved by intervention from Madrid.

What made the incident all the more startling is that Valencia is actually one of the wealthiest – not the poorest – regions in Spain.  However, like others, it had become over-dependent on revenues from the construction sector bubble which have now all but disappeared.

The Spanish experience does not auger well for Scotland if it opts for either ‘devo-max’ or wholesale independence as there is nothing to suggest that either will be a cheap option.

A direct read-across from Spain maybe limited but the experience indicates that there are questions for the SNP to answer.  The Economist recently provoked the ire of nationalists when the magazine’s skittish cover portrayed an independent Scotland as ‘Skintland’. First Minister Alex Salmond described it as ‘an insult’ but failed to address the serious points made in the analysis: that a go-it-alone Scottish economy would be over-dependent on (declining) hydrocarbons, that the nationalists have no plan B if profits fail to materialise from alternative energy development and that Edinburgh will struggle to recover as a global centre of financial services.

In an uncertain global economy it is evident that a country of 5 million people will be far more vulnerable to external shocks than one of over 60 million.

Perhaps the biggest question of all though is what currency will an independent Scotland adopt?   The attraction of the Euro has dimmed, so will Scotland keep the pound?  There are plenty of people in Spain who could tell Salmond about the dangers of being locked into a monetary union without fiscal union.

During a trip to Madrid earlier this month Alex Salmond sought guarantees from the new Spanish government that it would not block Scottish accession to the EU were it to become independent.   He did not get them but in any event Salmond was asking the wrong question.

He should have been asking the Spanish for a candid assessment of the real costs of ‘devo max’ and independence.

David Mathieson is Chair of Labour International, the “CLP” for the 800 Labour members who live overseas.


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10 Responses to “A Spanish economics lesson for Scottish independence”

  1. swatantra says:

    What the UK needs is a New Written Constitution.
    Britain has been pretty good at drawing up constitutions for its Colonies. Its about time it drew up one for itself, and the Indian Consitutionwould be a pretty good starting model. What is needed is a Federal Structure for the British Isles and a greater autonomy for the Regions.

  2. Political Realist says:

    “What is needed is a Federal Structure for the British Isles and a greater autonomy for the Regions.”

    Why? The Scots hate England, and constantly elect governments which want to secede. Few in England, outside the nuttier end of the Conservative Party, wish to stand in their way. Scotland is like a nagging spouse, constantly threatening to leave, constantly saying how much happier they will be and how much the other party will regret losing them, but never quite willing to walk out of the door. A referendum held in England on Scottish independence would pass by an immense majority, and if Wales wants to be independent on the same terms no-one will stand in their way.

    Unfortunately, the blood and soil nationalists of Wales and Scotland (and both the SNP and Plaid Cymru are blood and soil nationalists, no matter how much they try to dress up in progressive clothes) appear to have more fun sneering at England than they have will to actually pack their bags and leave. They’re all mouth and no trews. That’s why Salmond, now he’s been offered a referendum as soon as he likes, is desperately trying to find excuses as to why it can’t happen yet: he wants to mouth off about how well Scotland will do as an independent state, but is less keen to actually be independent. Go on: hold the referendum. England doesn’t care either way: either you leave, in which case good luck and good riddance — you hate us anyway, so have fun in your “northern arc of prosperity” with your “world class banks” — or you decide not to, in which case you can shut the fuck up and help rebuild the economy that a Scottish Prime Minister and a Scottish bank run by Scots so damaged. Either way, the rest of us will be rid of Alex Salmond.

  3. swatantra says:

    The Referendum will fail and the majority of Scots will prefer to stay in the Union. The SNP will have to face up to that.

  4. uglyfatbloke says:

    Eh….the Economist was, however, painfully and demonstrably wrong on everything. Salmond did not answer their ‘serious points’ because they did not make any. In the past I always doubted that the Gnats could win a referendum, but I’m now fairly sure they will. Ever since the suppression of the McCrone report became public (though an unknown issue in England I think?) Cameron-style scare stories have stopped resonating with the Scottish public. Is there really anyone who thinks that Osborne or Balls or Clogg understands the Scottish economy as well as Swinney or Hosie? Seriously?
    Attacking the gnats where they are strong (the economy, social issues) is just plain dim when they are so weak on civil liberties…or defence…there are at least three practical affordable defence policies that the Gnats could adopt, so why are they sticking with stupid ones?
    It’s all probably going to get worse before it can get better…there will probaly be a Labour/Tory coalition in Glasgow after the local elections which will keep the same old faces in charge….. that’s sure to play well with the electors…..not.
    Then gants can be defeated – all it would take is a cast-iron promise of FFA (full fiscal autonomy) and a really solid bill of rights. The first Unionist party to take that on will benefit hugely, but if nobody does then Salmond will be laughing all the way.

  5. uglyfatbloke says:

    Oh…Politcal Realist…you may niot have noticed, but there are more Englsih MSPs in the SNP than all the other Holyrood parties put together and they probably have more English party members than all the other parties put together as well; they are hardly ‘blood and soil’.

  6. swatantra says:

    The Referendum will fail; the majority of Scots prefer to stay in the Union. The SNP will have to face up to that. But it won’t dent their popularity. So Labour wil still have an uphill task to connect with the Scots. Talk of a Coalition with the Tories is nonsense, as is another coalition with the Lib Dems, or the Greens. But a Coalition with the SNP is a possibility in the future, as the SNP vote declines in the next 15 years.

  7. uglyfatbloke says:

    Swatantra, it is increasingly doubtful that the referendum will fail; the trend toward a ‘yes’ vote is hardly a tidal wave, but it is a steadily increasing pulse in the politcal water. Perhaps part of that is not so much that people are particularly in favour so much as fewer and fewer people are actually hostile, but the 1707 Treaty is far from secure.
    After today’s elections Labour will almost certainly go into coalition in Glasgow to keep the SNP out. I may be wrong but I think that there are already Labour/tory coalitions in other local authorities and it’s certainly not outwith the general tradition of Scottish local government these last 20 years and more.
    There is no clear psephological reason to believe that the SNP vote will decline over the next 15 years, but it might. Equally the Labour vore in Scotland may just crumble completley over the next few months…it may even have done so today! Perhaps it is more likely that both the Labour and SNP votes will stablise…the Gnats cannot hope to keep a 15 point advantage forever. That said, Labour will have to do something positive and radical if it is to restore confidence in Scotland – the Calman Report and the curent Scotland Act are totally inadequate; the price of getting a common programme that the tories could accept.
    Labour could still destroy the Gnats by adopting policies that people would like – FFA (full fiscal autonomy), dumping Trident and a decent civil liberties policy would probably do the trick, but politically motivated scarey stories on the economy will not. The ridiculous ‘Economist’ issue is a case in point; the more people looked into the material the more ludicrous it became and the net result has probably been good for the Gnats.
    Of course there is no guarantee that Labour will ever recover here. Taking Scottish votes for granted – as the tories did until the 1960s and as the Liberals did before the tories – is what has led to the current situation. Scottish voting paterns actually change quite slowly, but once the change occurs someone goes into a nosedive. If 2011 voting was replicated for a Westminster election Labour in Scotland would be reduced to a handful of MPs, there might be two or three Glib-Dumbs …the last tory would also be eliminated (aaw; how sad..)
    Coalition with the SNP would depend on the SNP needing Labour, but if Labour continues to decay in Scotland it’ll be the Greens and the Socialists who will probably benefit the most. The greens have issues with the Gnats, but I imagine the socialists would get on all right with them and all three are independence parties.
    Part of the popularity of the gnats arises from the the ignorance of media commentators. Every time someone talks about Scotland ‘leaving’ the Union they betray the fact that they do not know their history…it is not a matter of altering the Acts of Union of the English and Scottish Parliaments, but of dissolving the Treaty of Union between the two. Scottish independence would also mean English independence and a lot of English people would favour that.

  8. Ian says:

    I’m still on the fence with us and the Union. I’ve still to see solid numbers, and making a decision based of talk and assumptions isn’t doing it any good. Lets stop beating around the bush and actually start digging out the solid facts.

  9. PaydayDesk says:

    The things going on in Europe today can be a lesson for all the world, not only for Scotland. Spanish is the biggest of European countries which goes through so difficult economic times. Hopefully that Europe will find a way to fight the crisis, but for now there are no any important changes. It’s awful to see the way euro zone and developed European countries try to avoid bankrupcy. All the wold is watching the crisis now and of course, Europe feels the pressure but at the same time, so help from other countries also. Hopefully, that Europe will find strength to get out of the crisis.

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