Conundrums and codswallop on United Kingdom constitutional reform

Constitutional change in the United Kingdom is now inevitable. It is being driven by the pledge to devolve to Scotland powers additional to the 2012 Scotland ACt, which will come into being in 2015 and 2016.

The only question is what form that constitutional change will take, with federalism a logical development most seem to favour on all sides and at all levels.

This is a matter For Argyll will come to shortly in a companion article to this one, taking into account a prepared damage limitation strategy against the very real continuing threat that Scotland may leave the Union.

The England conundrum

The asymmetry of the volume of powers which will then be held by Scotland alone amongst the members of the Union will create unsustainable relationships, particularly in regard to England which has no devolved authority at all over it own affairs. In addition to MPs representing English constituencies, Old Uncle Tom Cobley and all in the United Kingdom government are entitled to discuss and vote on English matters – and most do.

All the parties, however, are refusing to lift their heads out of the sand and recognise that the increasingly tatterdemalion United Kingdom ‘constitution’ cannot this time be sorted by some sort of ad hoc fudge.

Prime Minister, David Cameron, has now committed fully to delivering ‘English votes for English matters’. This is indisputably a fair and necessary reform but Labour is fighting hard against it – in its own narrow political interests.

The current position is that Westminster – bicamerally – decides the overall budget for the United Kingdom – the process necessary for a union to act in concert in addressing difficulties and inequities and in going for growth. Westminster also comes to decisions on the other matters central to the operation of the Union in its entirety – such as welfare policy, international affairs, defence, national security, some energy issues and international aid, which can be military as well as monetary.

But it also decides  – and also bicamerally – upon matters specific to England, like education, health, local government, housing, planning, transport etc.

No other member of the Union has legislation on its internal affairs scrutinised by the upper house of the government of the United Kingdom.

No other member of the union experiences MPs representing constituencies outside its boundaries impacting as of right upon decisions on its affairs in these respects.

And no other member of the union would tolerate such a situation for one minute.

The codswallop objections

There is a fundamental illogicality in each of the arguments against the imperative to redress this wrong, since they are both based on the assumption of a continuing fudge.

• There is talk of the impossibility of having two ‘classes’ of  MPs – if some could vote on English matters and others could not.
• Labour are concerned that they have 41 Scottish MPs whose votes would then not be available to vote on English issues, meaning that Labour could fail to have its way on English issues since the number of its MPs representing English constituencies would not be enough to carry.

Neither of these objections would apply if England had the devolved authorities enjoyed – variously – by its three partners.

With the necessary matters devolved to England, Labour would  be unable to hope to hold sway over decisions for England on such issues. But it is morally indefensible that it should have such authority; and it only does so because of the incomplete devolution that is part of the Blair legacy.

Labour says: ‘But we would be unable to get our policies through’ – where the majority in England would not have voted for such policies? This is indefensibly anti-democratic.

If Labour wishes to impact on decisions for England it will have to do what all political parties must do to hold legitimate power – perform better at the ballot box in more English constituencies.

English devolution would require what ought to have been the case since 1998 – a reformed central government of the Union, with fewer MPs, an agenda devoted to core issues and a radically reformed second – revising – chamber which is not, as in many cases it is today – a non-job for life.

Gordon Brown, who – by default – rammed through more powers [unspecified] for a devolved Scotland in the last throes of a faltering pro-union independence referendum campaign, is now applying to this issue one of the most blatant arguments based on party political vested-interest.

Referring to Mr Cameron’s vow, two days before the referendum vote, to deliver the draft clauses for another Scotland Bill on schedule by January 2015, he yesterday [6th October] accused the Prime Minister of: ‘an unstatesmanlike error when, three mornings later, he tried to rewrite his vow with a proposal for restricting the rights of Scottish MPs to vote at Westminster. This plan directly affects Scotland’s status and that should have been explained in advance of voting.’

This is a knowingly deceptive argument. The proposal does not restrict the rights of Scottish MPs ‘to vote at Westminster’. It restricts the rights of Scottish MPs to vote on the affairs of a nation they do not represent. The fact that such votes take place at Westminster – where votes on United Kingdom core issues also take place – is confusing but irrelevant. Scottish MPs would, as would Welsh and Northern Irish MPs,  continue to vote normally at Westminster on the core common issues they do have the right to help to determine.

And starting from this naked political vested interest expressed in dishonestly inflammatory terms  – for politicians, deliberately inflaming the public for political advantage is only reprehensible when somebody else does it – Mr Brown finishes with a rhetorical hypocrisy of which he should feel ashamed.

He says: ‘Maintaining the Union will never be easy again. But if we can avoid making  mistakes, rise above narrow, partisan interests and remain statesmanlike in seeking unity above cries that spread discord…’

This is one for Mrs Doasyouwouldbedoneby.

SNP MPs routinely do not vote on English matters – a commendably correct stance.

Additional powers for Scotland and the test of their appropriateness

Until the Smith Commission presents its recommendations, it will not be certain what the promised new matters devolved to Scotland might be.

However, there has to be a concern that – conducted at the speed to achieve the pledged timetable – such devolved powers might actually bring about a situation not unlike that rightly deemed unacceptable to the secure operation of a currency union.

We suggest that the stability and efficiency of the currency union that underpins and underwrites the United Kingdom’s operational transactions should be the a major test for the appropriateness of all additional powers considered for transfer to Scotland.

It was proposed by the SNP themselves – and fully accepted by the adherents of Scottish independence – that an independent Scotland would accept the political limitations of monetary and fiscal control by the Bank of England in return for a Sterling currency union.

It would therefore be wholly unobjectionable for Scotland, as a continuing member of the Union and in common with other members, to exercise forms of fiscal, spending and welfare authority that did not prejudice the stability of the currency union within the continuing United Kingdom.

The timetable

The timetable towards the delivery of additionally enhanced devolved powers for Scotland is the one Gordon Brown bounced the UK Government into accepting and pledging to deliver. It is the one now governing the work of Lord Smith’s Commission.

• 19th September: commencing the process of identifying the new powers to be devolved t Scot;land. Achieved – with the Prime Minister’s announcement that morning of the appointment of Lord Smith of Kelvin to lead a commission to establish swiftly what the powers in question should be.
• 10th October: Deadline now announced by Lord Smith for submissions to the Commission on possible devolved powers.
• End of October: Proposal paper from Smith Commission to United Kingdom government on recommended addtional devolved powers for Scotland – to  be discussed with relevant bodies.
• November: White Paper to be produced by United Kingdom government.
• January 2015: Draft clauses produced for new Bill.

Fiscal Powers already or about to be devolved to Scotland

The 1998 Scotland Act gave the Scottish Government the power to vary income tax by 3% either way – but no government, including the SNP, has ever used that power.

From April 2016, under the updated Scotland Act 2012, the Scottish Parliament will manage Scottish income tax from a point 10% below that set for the rest of the United Kingdom. The Scottish budget will be adjusted accordingly, leaving its final level in the control of Scotland itself through its setting of the overall personal income tax rates.

The Scottish Parliament will decide whether to set  income tax for Scotland for that and successive years at a rate up to 10% below, level with or above the Union rate, with the Scottish rate implemented as usual by HMRC.

Whatever variation Scotland applied to any band of income tax, would have to be applied similarly to all tax bands – so, say a 2% rise above the Union rate of the Scottish basic income tax band would have to be applied similarly to the other tax bands.

Westminster would continue to set personal allowances and the thresholds of tax bands.

The 2012 Scotland Act also devolves to Scotland from April 2015, next year, two specific taxes ln which to set the rates for Scotlnad and collect the duty through a new body, Revenue Scotland. These are:

• the Stamp Duty on property sales
• Landfill Tax

The Scottish Government has recently estimated that Stamp Duty and Landfill Tax will each bring in around £600 Million a year in revenues.

When outstanding EU legal issues relating to the Aggregates Levy are resolved, this too will be devolved to Scotland. In the meantime, appropriate revenues from this tax will be assigned to Scotland.

Powers for possible enhanced devolution initially identified

Each of the three main parties has indicated its initial thinking on the sort of powers that might be additionally devolved to post-referendum Scotland.

They essentially agree on many specifications of such matters, with the Liberal Democrat proposition being markedly the most extravagant and unfettered.

All agree on tax varying powers, with Labour suggesting a 15% variation authority in advance of the 10% variation coming in under the Scotland Act 2012. Both the Conservative and Liberal Democrat propositions are more generous, saying that Scotland should be wholly in charge of personal income tax, of rates and bands; with Westminster deciding for the Union as a whole on personal allowances and on the point at which income becomes taxable.

Labour would devolve Progressive personal income tax powers to Scotland, enabling it to apply different rates to different tax bands, as in applying a higher rate to the higher tax bands without having to do the same to the basic rate band. They say this could see Scotland raise an additional £2 Billion per annum over what will be possible under the 2012 Scotland Act settlement.

Both Conservatives and Liberal Democrats see business taxes, and taxes on savings and investments as matters reserved to Westminster to set for the Union as a whole. Labour sees business taxes as a reserved matter but has not yet said anything on savings and investment taxes.

All three agree that National Insurance and Corporation Tax should be reserved to Westminster for Union-wide application. The Liberal Democrats however, suggest that the proceeds of Corporation Tax from Scotland should go to Scotland, as motivation to create a strong Scottish economy.

There is a potential problem with Corporation Tax continuing to be applied on a standard rate across the Union. As the only member to share a land border with a state outside the Union, Northern Ireland suffers from a competitive disadvantage with the Republic of Ireland in attracting business. The devolution of Corporation Tax to Northern Ireland is therefore known to be under consideration.

If that comes about, Scotland will argue for the same powers but there is a very real counter-argument evident from the Northern Ireland experience with a shared land border – that internal competition amongst members states on the United Kingdom mainland damages the Union as a whole.

Labour believes that VAT should be a matter reserved to Westminster for application Union-wide; but the Conservatives would be willing to devolve VAT. However, since such devolution would run counter to EU law the Conservatives have suggested that a share of VAT revenues from Scotland should be returned to Scotland so that the country might benefit from any internal economic upturn.

Both the Conservatives and the Liberal Democrats are prepared to devolve Air Passenger Duty

The Liberal Democrats are the most generous in proposing that Capital Gains Tax and Inheritance Tax should be devolved.

All of these suggestions are of course, not necessarily identical to the developed submissions each of the three political parties will present to the Smith Commission in four days time, on 10th October.

For the moment

Scotland will get new powers on the agreed timetable – but the outstanding issue surrounds the grossly unfair democratic deficit suffered by England – and whether that will be resolved by an energetic seizing of the opportunity for the necessary radical constitutional reform of the Union – or by the great British fudge-off, which lames the Union’s ability to organise and grow.

Note 1: There will shortly be a companion article to this piece, on issues around the much fancied confederation option for constitutional reform; and the need for specific protective actions to be taken against the now enhanced likelihood of Scotland separating from the United Kingdom.

Note 2: The precursor to this article was published on 5th October: United Kingdom devolution a dog’s dinner to herd cats.

Note 3: In the article above, we have made use of some factual material from fiscal briefing papers on the Scottish devolution settlements produced by Burness Paull – who are not responsible for the interpretation of that material.