Powers for a purpose versus retained for a reason

As we all know the heads of the main Unionist parties (excluding UKIP) issued a vow on new powers The Vow contained the claim that: “The Scottish Parliament is permanent and extensive new powers for the Parliament will be delivered.” UK Prime Minister David Cameron promised on the 15th of September: “a major, unprecedented programme of devolution with additional powers”.  Former UK Prime Minister Gordon Brown said that Scotland would be as close as possible to a federal state within one or two years and finally Danny Alexander, Liberal Democrat Chief Secretary to the Treasury, on the 13th of September spoke of  “effective Home Rule”.

They didn’t put much detail on those vows so… 

A definition of extensive / unprecedented new devolved powers that amounts to effective home rule

Business for Scotland and our members still believe that independence is the optimum governance solution for Scotland along with the 45% that voted Yes in the referendum. However, we accept the political reality that a mandate exists for extensive new powers and we see this as an immensely positive step, when compared to the slow pace of minimum devolution that was being pursued by the Westminster parties prior to the referendum.

The definition of extensive new powers is the responsibility of the Smith Commission, but the starting point cannot be the previously stated promises of the Unionist parties, which lacked detail and any real commitment to extensive change. Those proposals offered the Scottish Government no more than 20-30% control of taxes raised, and given they were offered prior to the rise in the Yes vote in the polls, they were therefore effectively rejected during the campaign as not extensive enough by the Scottish voters.

Powers for a purpose v retained for a reason

In its advice on submissions the Smith Commission requested that people focus on the reasons for powers to be devolved, and that is right and proper. However, given the significant support for maximum devolution for Scotland within the United Kingdom a fair check and balance on the process is that there must be a reason for retaining a power at Westminster. If the retention of a power that falls within the agreed definition of maximum devolution or near federalism could have a negative effect on Scotland, it should be devolved. The Smith Commission should therefore not start its consideration from the point of view of what new powers can the Scottish government justify, but from the position that all powers should be devolved unless there is a mutually agreed reason for not devolving that power.

The principle of maximum devolution within the UK

The Scottish Parliament is directly elected by the people of Scotland via a fair and proportional electoral system. All of the decision makers represent Scottish constituencies and Scottish voters only. Those MSPs are closer to the problems, issues, opportunities, needs and wishes of the Scottish people and are therefore best placed to make the majority of the political decisions that affect the people of Scotland.

Substantial new powers for a purpose

Any form of maximum devolution must involve extensive fiscal responsibility for the Scottish Government. Current proposals from the Unionist parties only offer limited control – 20-30% of taxation raised by the Scottish Government. In business terms, running Scotland as an independent profit centre will provide the twin benefits of localised decision making leading to bespoke taxation and spending priorities for Scotland, whilst also ending years of confusion over who subsidises who, which will lead to better financial governance for all the constituent parts of the UK.

Extensive / full fiscal responsibility

All taxation raised in Scotland should be under the control of the democratically elected Scottish Government. This would also allow the Scottish Government to set taxation rates that are tailored to specific economic development, environmental and social welfare based needs.

For example: Scotland’s economy is more reliant on manufacturing and exports than the UK as whole, and because innovation policy is set for the whole of the UK it is not optimised for Scotland’s needs. Although there is leading research taking place in Scottish universities there is a disconnect with innovation in the private sector. Research by independent innovation-focused charity NESTA reported that by increasing R&D spend in Scotland to the same % of GDP in other small European nations (3.4%), Scotland’s economy would grow by up to £12bn over the next five years. With the power to reduce corporation tax for companies that invest more heavily in R&D, the Scottish Government could grow Scotland’s economy and in the medium term increase the level of corporation tax raised.

There are many other policy options and such policies will be decided by future Scottish Governments but the power to operate with maximum fiscal responsibility is very definitely one with the purpose of growing Scotland’s economy, creating jobs and prosperity and raising the Scottish tax take.

Full fiscal responsibility would also require control not only of tax raising policy but control over all domestic spending powers, including pensions and welfare, given the interconnectivity of tax, spend and powers that can be combined to provide maximum benefit to the people of Scotland.

With full fiscal responsibility all future debt generated in Scotland should be allocated to Scotland and all sovereign debt generated outside Scotland should be allocated to the rest of the UK. Scotland cannot exercise full fiscal responsibility when it is possible that a situation may arise where paying a population percentage of the debt interest on debts generated outside Scotland may severally impact on Scotland’s budget in years when Scotland’s accounts might be in surplus. Likewise all historical debt and share of debt interest payments should be allocated to Scotland’s accounts on a contribution basis, not a population percentage basis. In this way Scotland does not start to manage its own finances either paying less debt than it actually generated, nor would it pay more than it was responsible for.

Conclusion

Constitutional change for Scotland is as yet still “unfinished business”. There may not be a fully developed list of what actual powers should be devolved until after the report of the Smith commission but the voters will be able to tell easily if it meets the definition of unprecedented devolution, substantial new powers and effective home rule or federalism.

If the powers on offer end up weak, watered down or worse still are effectively blocked by Westminster MP’s as seems likely then we can expect both support for independence to rise substantially and for an opportunity to finish this business sooner rather than later.

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