Where now for Scottish devolution?

A number of distinct formats are on the table, all different from federalism

Paul SuttonThe votes are now in and Scotland has decided against independence. But the issues that prompted the referendum have not gone away. Instead, they have been recast in the form of devolution and federalism – for Scotland and the rest of the UK. On these questions the debates and campaigns will not be as passionate and clear-cut as the simple ‘yes’/ ‘no’ choice of the referendum, but they carry just as much weight for the future of the United Kingdom.

Devolution was a late entrant to the Scottish referendum campaign. It was not until the YouGov opinion poll giving the ‘yes’ campaign a lead of 51% to 49% was published on 8 September that the call for devolution moved from the periphery to the centre of the debate. The possibility of defeat clearly faced the ‘no’ campaign and it spurred drastic action. Within days Cameron, Miliband and Clegg were visiting Scotland to campaign for ‘Better Together’ and within a week more they had published a joint pledge to give ‘extensive new powers’ to the Scottish Parliament. According to this pledge, a new bill for Scottish devolution was to be agreed in Westminster by the end of January and further devolution enacted by whatever UK government emerged after the May 2015 general election.

The speed with which all of this was projected has led to much confusion as to what further Scottish devolution will look like, not to mention the matter of how, and indeed if, it will be distinct from federalism. The referendum campaign in fact delivered proposals for no less than three distinct forms of devolution, all of which are very different from federalism.

The most fundamental form is ‘Devo-max’. This can alternatively be conceptualised as ‘independence-minus’. It gives full powers to the Scottish Parliament in domestic affairs alongside full fiscal autonomy – in other words, tax-raising powers in every area. The only powers not transferred would be defence and foreign affairs which would be jointly shared with the rest of the UK.

However, there are many problems with this proposal which in essence make it unworkable. They include: issues such as tax competition with the rest of the UK (would Scotland be allowed to have a lower corporation tax as proposed by the SNP in its Independence White Paper?), VAT collection (at the moment defined as an exclusive national responsibility by the European Union) and how the revenues from North Sea oil are to be determined (including the apportionment of costs for the decommissioning of exhausted oil fields).

The second is ‘Devo-plus’. The proposals for ‘Devo-plus’ were launched in September 2011 with a report from Reform Scotland entitled Devolution Plus. It argued for the Scottish Parliament to raise more or less enough taxes to cover expenses. The taxes listed included income tax, corporation tax, oil revenue, selected excise taxes such as fuel, tobacco and alcohol duty; correspondingly, the benefits to be funded by this taxation included housing benefit, council tax benefit, child benefit and many others. The report also proposed including a share of government borrowing for expenditure in Scotland, which on 2011-12 figures would make the Scottish Parliament responsible for raising some 73% of its own expenditure through taxes and overseeing some 46% of current benefit expenditure in Scotland.

The intention of the report was to bring revenue and expenditure into closer line in Holyrood in order to encourage greater accountability. It also proposed devolving significant revenue and expenditure downwards to increase the powers and responsibilities of local government. In February 2012 the ‘Devo-plus Group’ was formed to promote these ideas, with membership drawn from former and current members of the Scottish Parliament representing the Conservative, Labour and Liberal Democrat parties.

The third form of devolution is ‘Devo-more’. ‘Devo-more’ and ‘Devo-plus’ are often considered as two ways of stating the same thing. They are not. ‘Devo-more’ seeks to devolve less and is more explicitly ‘pro-Union’ than ‘Devo-plus’. And it seeks to do its work via a different objective: strengthening the ‘social union’ in the UK, rather than the level of political and fiscal responsibility that is at the heart of ‘Devo-plus’.

The concept of a ‘social union’ was a core feature of the Calman Commission which reported on Scottish devolution in June 2009. It argued that, in addition to the economic union between Scotland and the rest of the UK, there was also a ‘social union’ embodying common social rights and responsibilities, expressed in particular in a common system of social security. Examples include the National Health Service, generally available to all on a ‘needs’ basis everywhere in the UK, along with benefits such as state pension and unemployment benefit paid at the same rate throughout the UK and funded by a centrally levied income tax and National Insurance.

An effective ‘social union’ encompasses elements of redistribution in which rich parts of the country make transfers to support poorer areas. It does not rule out devolution, but seeks to marry this to the resources needed to support it and to determine how needs are met. The case for it has most recently been made in a report published in March by the Institute for Public Policy Research entitled Devo More and Welfare.

In essence, then, ‘Devo-more’ seeks to maintain the Union to even out inequality across all of the UK, while ‘Devo-plus’ seeks to maintain the Union to ensure greater fiscal and political accountability. The former is more attractive to the Labour Party, the latter more to the Conservative Party. It’s obvious that around these distinctions significant differences on devolution could well appear.

Lastly, and importantly, devolution is not federalism. Further devolution (excluding ‘Devo-max’) could occur, as has happened in Scotland up to now, without significant changes to the constitutional arrangements of the United Kingdom. Federalism, in whatever form, could not. It is therefore a much more radical proposal than devolution and in consequence much more difficult to agree. At the moment, given the disparity in size between England and the other component parts of the UK, it is even difficult to conceptualise what it might look like. Furthermore, to make it effective and legitimate, it would almost certainly require a constitutional convention, with all that entails, including the prospect of a written constitution. In short, it’s manifestly not the immediate fix to the problem that the ‘Better Together’ parties have promised.

The future is thus likely to be devolution. Not ‘Devo-max’, but some fudge of ‘Devo-more’ and ‘Devo-plus’ around which the major parties can converge, possibly even including the SNP. In that case they are all likely to call it ‘Devo-max’ and every party will claim that everyone has won!

So, it’s back to politics as usual. Or is it?