Scotland talks: Is federalism the answer?

During the recent general election campaign the Scottish First Minister Nicola Sturgeon said again and again that she wanted to “lock” David Cameron out of Downing Street, and that even were the Conservatives to emerge as the largest party she’d “never” do deals with them.

Obviously the surprise formation of a majority Tory government has changed everything. Not only did the SNP’s much-vaunted “anti-Tory majority” crumble as soon as the first exit poll appeared, but this morning Sturgeon sat across from the Prime Minister at her Edinburgh residence and began to deal with the situation at hand.

On the face of it, the Scottish and UK governments are poles apart. Although the SNP’s manifesto played down independence, it did commit to “full fiscal responsibility”, otherwise known as “devo-max”, the devolution of everything to Edinburgh barring defence and foreign affairs. London is not, however, willing to countenance a settlement it believes would be bad for Scotland (the Institute for Fiscal Studies predicts a funding gap of more than £7bn).

Rather, David Cameron has said he’d prefer to implement the cross-party recommendations of the Smith Commission first (which urged full devolution of income tax and greater control over some areas of welfare), while promising to “look" at any proposals for additional powers after that. Handily, the Scottish government has a shopping list of what it calls “priority devolution”, which includes National Insurance, welfare and employment law.

Both sides claim a mandate for change: the SNP points to its 56 MPs and near 50 per cent of the vote (in Scotland) as an overwhelming endorsement of its preferred settlement, while the Conservatives believe their majority win (on the basis of a manifesto which included the Smith proposals) and the SNP’s involvement in the Smith process constitutes a basis for proceeding more cautiously.

To a degree, both sides are being unrealistic. Although “full fiscal responsibility” sounds simple, in reality it would be highly complex and potentially costly to the Scottish government. This is why it has clearly scaled back its demands to “priority” devolution. And although the Smith Commission was a cross-party exercise, it was drawn up in a hurry and has now very obviously been overtaken by events.

A lot of voices, both inside and outside the UK government, believe the Prime Minister should go much further, viewing the election result as an opportunity to do something much more radical in constitutional terms. On election night London Mayor (and newly-elected Tory MP) Boris Johnson used the “f” word (federalism), while party grandees like former Scottish and Foreign Secretary Sir Malcolm Rifkind have urged a Royal Commission to look at the constitution in the round.

Whether Cameron, now in his second (and final, according to an interview he gave during the election campaign) term, is willing to invest such a huge amount of political capital in an ambitious project unlikely to yield many votes remains to be seen, but there are strong arguments for doing so: not only to preserve the Union in the face of a renewed threat from the SNP (although another referendum isn’t as close as it might look), but also to secure a significant historical legacy from his premiership.

In September last year the Society of Conservative Lawyers published an interesting report called “Our Quasi-Federal Kingdom”, which might constitute the basis of a plan: drawing together different constitutional debates in Scotland, Wales, Northern Ireland and England into a more holistic plan for the UK as a whole. And given the Chancellor’s zealous commitment to a “Northern Powerhouse”, not to forget Greg Clark’s appointment as Local Government Secretary (he’s a committed decentraliser), in certain respects it’s a no brainer.

But the UK government has to bear in mind that the SNP is not fundamentally interested in reforming the UK, which after all it wants Scotland to leave. Following today’s meeting in Edinburgh the First Minister said the “ball” was in David Cameron’s court and that she was “going into this in good faith”. But of course, if the SNP deems the Prime Minister to be in breach of that faith then it’ll have no hesitation in exploiting that politically.