The SNP government in Scotland is in trouble. The coalition agreement with the Greens in Scotland (who are a different party to the Greens in England and Wales) has collapsed over the admission that the Scottish government cannot meet its 2030 climate targets.

The SNP is a minority government now.

Former SNP MSP, Ash Regan, now with Alba, is setting out her terms for supporting the SNP.

And there is a real risk that Humza Yasouf might lose a confidence motion shortly before a general election, which can hardly help the SNP’s electoral prospects in Westminster polling. None of this is good news for the independence movement.

I am not in the business of defending the SNP. I do not do party politics. Nor am I supporting any other pro-independence group, even if my overall bias in favour of the cause they promote is clear. What I am in the business of is spotting political problems, and Scotland has a massive one right now.

Leave aside the fact that it suffers the general problem of attracting seriously competent people into the political arena. Instead note that in Scotland this problem is exacerbated by the fact that the Holyrood parliament might grant titles like first minister, and allow parties to form cabinets, and posture as if they really are governing the country, but they are not.

This is not to say that the Scottish parliament is without powers. It clearly has some. In general, it has used them to Scotland’s advantage. Even in areas like education, where both Scotland and Wales have been criticised for allegedly poor performance it can be argued that is because neither country prioritises the meaningless rote learning that Tories - and Michael Gove in particular - have long been obsessed with. In other words, they have exercised their right to choose.

But - and that is a massive but - that right to choose is quite extraordinarily constrained. Some issues are not devolved to Scotland to decide upon. Others that are cannot be delivered upon because the devolution of financial powers to Scotland is far too limited.

Most taxes in Scotland are subject to decision making by Westminster alone. Corporation tax, VAT, national insurance, capital gains tax, inheritance tax and income tax on anything but work, plus most income tax allowances, are all subject to Westminster control. Almost the only tax levers Holyrood has are over income tax rates, local taxes and some specific charges that raise little.

Since, as I gave long argued, tax is not primarily about revenue raising but is instead a tool for controlling inflation, with massive opportunities for influencing the delivery of all other policy built in, then what is clear is that in the situation in which Holyrood finds itself, there is only a limited chance of ever effecting significant change. That is because the most fundamental range of tools for doing so - called taxes - are beyond Holyrood’s control.

This is why the green agenda of the Scottish government failed, above all else.

And that is why the Bute House agreement between the Greens and SNP has failed.

And this is why any government in Holyrood is destined not to deliver. It can’t, because London created a system that was bound to fail as a way of securing continuous control whilst ensuring that blame would be directed inward in Scotland itself, as might well happen now.

How does the SNP address that? The answer is straightforward. After many years in supposed power the SNP has to say that is not the case. It has to drop its own pretence that it is in charge, when it isn’t. It has to say that there is nothing that can be done about some problems in Scotland because Westminster will not let it act on them. It has to call the Unionist’s bluff, because there is nothing they could do to make things better in the system that they created. And they have to say time and again that if Scotland wants to be different it has to totally reject the failed Westminster agenda.

Bizarrely, Wales’ Labour government will have to do the same thing, even if Labour is in office in London.

The pretence of devolution has to end. It’s time for power to leave London. Unless it does the gross injustice of institutionalised regional inequality in the UK is bound to continue. And to prevent devolved governments taking the blame for that they have to make clear none of that failure is their fault. Only then can things change.

I was on Scotonomics last night, discussing the Taxing Wealth Report, and right at the end its relevance for Scotland.

For reasons I can’t explain the YouTube link will not embed here, but you can watch the video by clicking here. 

The Commonweal think tank in Scotland is the first podcast broadcaster to get in with an edition featuring the Taxing Wealth Report 2024.

Craig Dalzell of Commonweal and I recorded this session on Wednesday afternoon. It is a pretty good introduction to what the report is all about, with a slight Scottish twist.

You can download and so listen to this podcast here.

This tweet was posted over the weekend:

“I’m the Fox Mulder of MMT. I want to believe, but there’s a thing called the current account constraint...”@MkBlyth, professor of internatonal economics at @BrownUniversity savages Modern Monetary Theory at #Scotonomics festival. pic.twitter.com/XotdMBZh1Y

— Ian Fraser (@Ian_Fraser) March 23, 2024

The  interview was by Karin van Sweeden with Prof Mark Blyth of Brown University in the USA, where he is professor of international political economy.

I happen to know both participants, although not well in either case.

I was infuriated by Mark’s comments and posted this last night in response to a typical comment supporting his position:

Mark’s claim was that he wants to believe in MMT but can’t because of the balance of payments problem that he claims it ignores. He summarised his argument on three ways.

First, he said Argentina has a sovereign government and currency and it has not avoided a debt crisis. This totally ignores that fact that Argentina is a still developing economy and is treated as such by much of the world. It also ignores the fact that it borrows in dollars, when MMT very strongly advises no country should borrow in any currency but its own. And ignores the fact that it has to do so because of its decidedly rocky history of political instability. To suggest that Argentina and Scotland are in the same place is, to be polite, crass in that case. Mark would have told any student of his that, I am quite sure. In that case to make the comparison in a public debate really was unwise.

Then he claimed MMT says a government can default on its debts, print some more money and carry on as before. This suggests Mark has never easy anything written about MMT. Anyone who is serious about it has never said such a thing, although no doubt some uninformed enthusiast on the web has. Mark should really be able to tell the difference, and not make such an absurd claim. It’s is unbecoming of a person with some stature to make claims that are very obviously untrue about an opponent’s arguments. Why is it that he and others think it acceptable to do so about MMT?

Third, he then utterly belittled Scotland, saying it had nothing to sell the world and as such its currency would be utterly worthless. As such he claimed that no one would accept a Scottish currency and as a consequence, the MMT argument that Scotland should have its own currency had to be wrong. This argument is utterly absurd, and it is easy to demonstrate why.

If, as Mark claims, Scotland would have nothing to sell in the world after independence (and that was his specific claim), then it follows that his claim that Scottish debts would have to be settled in either US dollars or sterling is the most incoherent position that he could adopt. As a matter of fact, if his argument is true, Scotland would have no means of acquiring those currencies after independence as, he claims, it would have nothing to sell in international markets, which is the only way to acquire them. It would, therefore, automatically default on all debts denominated in pounds or dollars because it would not have them.

On the other hand, it would never need to default on debts denominated in Scottish currency because it could always create that. So, rationally, anybody trading with Scotland in this situation would have their risk reduced by trading in a Scottish currency rather than in pounds or dollars, because at least then they were likely to be paid, which is a much better than not being paid at all, which is the position that he would apparently prefer.

Far from being smart, as he obviously thinks he is being, Mark is as a result actually putting forward the worst case argument that he could create for Scotland given the assumptions that he makes by suggesting it use a foreign currency. In the situation he describes only a Scottish currency could work for it.

But let’s also be honest and say the argument he makes is crass in any case.

Firstly, Scotland is an old country, with an old democracy, and a competent civil service, backed by a legal system with centuries of history behind it, which system is recognised to be stable and enforceable. It also, quite critically, has a strong and functioning tax system, which would, under an independent government, be capable of collecting even more tax than it does at present, and that is the true basis for the foundation of the value of a currency. In other words, every assumption that he makes about Scotland, which can be summarised by saying that he thinks it would be a failed state, is completely wrong.

It is also, very obviously true that his claim that Scotland will have nothing to sell after independence is quite absurd. Let’s ignore the fact that Scotland has, overall, over many recent decades on average run a trade surplus and instead note that Scotland has a greater capacity to create renewable energy in proportion to population than any other country in Europe, and this has to be the strongest foundation for its prosperity that it can have. I should also add that it has a lot of fresh water as well, and that is going to be an incredibly scarce commodity in the world, sometime soon. It also helps that it will have a very near neighbour who will be short of both. In other words, Mark’s claim that Scotland would have nothing to sell is ridiculous. There is in fact every reason to think that the Scottish pound will trade at a higher value than the English pound after Independence, for the reasons I note.

So let’s leave MMT aside for a moment, because Mark has clearly got no understanding of it. Instead let me just make the obvious point that what Mark said was that he thinks Scotland is too wee, too poor and too stupid to be independent, which is a standard Unionist argument that is both party patronising and downright rude. His claim that Scotland cannot pay is not in that case related to a currency question. It is related to his belief that Scotland will be a failed state.

MMT does not prevent states failing. Nor does it create failed states. All it does is describe how money works, more accurately than any other economic model that I know of. Doing so, it roots itself in reality. Indeed, no model is more rooted in the actual capacity of an economy than MMT because it recognises that physical capacity as the real constraint on activity.

MMT does, in that case, have nothing to do with then argument that Mark Blyth presented, which was based solely on wild comparisons between Scotland and Argentina and the absurd suggestion that Scotland creates nothing of value. Of course if you start from false assumptions, as Mark did, you get to absurd conclusions, as he did. But to then claim MMT had any part in that is absurd. It did not.

If an undergraduate student had offered the analysis Mark Blyth did they would have deserved to fail. It was embarrassing to see him make such a fool of himself. The SNP have appointed him as an adviser in the past. I sincerely hope they do not do so again. Someone who so clearly despises the country he left some time ago quite as much as he does really has no place helping the independence movement, in which he clearly has no belief.