If the referendum result tells us anything, it’s that most people living in Scotland want a big change in how we are governed so that we can can seriously address poverty and inequality. This means that further devolution has to be more than just tinkering at the edges.
As Lord Smith started his work with the Scottish Devolution Commission, he urged the parties to show "courage and compromise" in reaching an agreement. He also recognised that a lot of thinking has been done on what we could do – now is the time to agree on what we will do.
While there are differences between the published proposals of the parties, there is also common ground. Perhaps the biggest challenge is for Labour, whose fiscal plans were the weakest. If the ‘change’ mantra is to be credible, Labour needs to be more radical in its approach to the Commission. Without such a change, the much quoted ‘slippery slope’, will rapidly become a cascade to independence.
That common ground starts with fiscal powers. Fully devolving income tax, including the power to vary the rate in tax bands, is the starting point. I would also add National Insurance, as government and the people need to see the full impact of taxation on incomes. Together with already largely devolved property taxes, this would put Scotland in the same league as Germany and Sweden with one of the most devolved tax revenues in Europe. There is very little support for devolving business and consumption taxes and in any case EU rules place limitations on variable rates within states. Some have argued that revenues from these taxes could be assigned to Scotland, but that would be largely cosmetic if the Scottish Parliament had no power to vary the rates. At this stage of the devolution journey, we should not be engaging in cosmetic change.
The other, often missed, aspect of fiscal devolution is greater borrowing powers. The Treasury approach to new borrowing powers under the 2012 Act has been typically orthodox. It is simply absurd that devolved administrations are left with weaker powers than the prudential regime in local government. With flexible borrowing powers we could finally stop wasting scarce resources on private finance schemes.
The case for fiscal devolution is not the alleged ‘moral hazard’ of a parliament spending money it doesn’t raise. It’s the ability to travel in a different direction in Scotland, without suffering the full financial consequences of decisions taken over public services in England. There would still need to be a Barnett Formula style balancing mechanism that recognises the value of fiscal solidarity across the UK – something that a clear majority of voters supported last week.
While fiscal devolution is important, we should not lose sight of other powers that should be devolved to Scotland. The principle should be subsidiarity; the idea that decisions should be taken at the lowest practical level in order to allow people the biggest feasible say over their lives. In UNISON’s ‘Fairer Scotland- Devolution’ plan we set out a range of new powers that match the radical mood that the referendum debate has engendered in Scotland.
Some additional powers will tidy up the current mismatch of devolved and reserved competences. The best example is Housing Benefit, because developing a coherent housing policy requires control over all the finances. This argument also applies to employment programmes. Energy generation is another where shared competences have led to confusion and disinvestment. Devolving the voting franchise would enable us to extend the voting rights of 16/17 year olds to all the elections the Scottish Parliament has responsibility for.
Other powers can be devolved to reflect different Scottish circumstances, or just because we might want to do things differently. The strength of more federal governance arrangements is that new ideas are more likely to be tried and delivered quickly in devolved administrations. This then becomes a learning experience for the UK as a whole. Health and safety, labour market regulation (including the minimum wage) and equal opportunities are good examples of this. As the Mather Commission report shows, we can do industrial relations better in Scotland. All of this would enable the Scottish Parliament to make a difference on the social justice themes that dominated the referendum campaign.
Adopting the principle of subsidiarity also means that devolution should not stop at Holyrood. Looking at the devolution proposals of the parties, Lord Smith should have less difficulty in reaching agreement on this point. The constitutional role of democratically accountable local government should be recognised in any devolution settlement, including greater control over their finances. The Strengthening Local Democracy Commission and the Christie Commission before it highlighted that Scotland has the most centralised local democracy in Europe. We should rebuild local democracy, not take it further away from the people through privatisation, mergers and centralisation.
So what about the rest of the UK and England in particular? As the leading constitutional expert, Vernon Bogdanor has said – English votes for English laws is a kneejerk absurdity. Unless the Tories are advocating Devo Max, a concept untried anywhere in the world, it is not possible to separate English matters from Scottish. Variation in spending on English services has a knock on effect on Scotland and a government has to be responsible to parliament for all its policies. There does need to be careful consideration of wider UK constitutional change, but this shouldn’t be done as a quick political fix.
In this debate we should always remember that we seek greater devolved powers for the purpose of improving peoples’ lives. Constitutional mechanics are a means to that end – not an end in themselves. The process for change must also go beyond the existing model where government consults with communities and involve genuine ownership of the process by the people.
This is a slightly longer version of my Sunday Times, 28 September, opinion column.
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