We Are Not Men We Are Devo

o-ONE-NATION-570By Doug the Dug

The current meme being promoted by the unionist side is that the independence referendum is now not about a choice between independence and the status quo but between independence and more devolved powers. However no political party has laid out how these powers will benefit Scotland or given a firm UK conference or manifesto commitment to devolve more powers to Scotland. It must be true because Severin Carrell has said so on the Guardian, David Torrance has said so on ThinkScotland and even Ed Miliband has said that, “if elected, he would move to further empower the Scottish Parliament in the event of a no vote next year.”

There has also been a busy year of devolution reports and committees. The Devo Plus report by Reform Scotland came out in May 2012, the Lib-Dems Scottish branch came out with their “Federalism: the best future for Scotland” report in October 2012 and the Devo More report by the IPPR came out in January 2013. The Scottish region of the Labour party announced their own Devolution Commission in March 2012 and even the Conservatives’ regional Scottish leader Ruth Davidson has recently started to make noises about more devolution.

Look at these dates and work back to the SNP majority victory in May 2011 and it’s quite obvious what is driving the flurry of reports and endorsements for more devolution. Since the purpose of devolution has always been to try and divert or let off nationalist steam in Scotland the timing of these reports and activities is no surprise.

I was going to do an article specifically on the Devo More report but for the reasons I’ll outline below it is really no different from the other two except for the Lib-Dems’ lukewarm reiteration of their threadbare federalist principles.

The commitment of the unionist parties to handing Scotland more devolved powers is, as always, suspect. Given the choice of defining and supporting a second “more powers”, option on the referendum ballot paper they turned it down even though it would have been an independence killer and Labour who are the only party who really count in the in devolution of more powers have as yet not even produced their own report. Only Labour count because the Conservatives are intrinsically hostile to devolution and the Lib-Dems will never get a majority in Westminster. Even as a coalition party with the Conservatives the Lib-Dems couldn’t get proportional voting in the UK so their hopes of pushing through their devolution scheme in a future Conservative coalition are nil. Therefore they can write and promise what they like secure in the knowledge that they will never be asked to implement it.

The strategy of “Jam Tomorrow” is quite obvious. Make approving, non-committal noises about more devolution for Scotland throughout the campaign in the hope that the electorate will believe that the vague promises about more devolution are a better bet than independence.

The Lib-Dems will almost certainly promise more devolved powers for Scotland before the independence referendum because they can promise what they like as a minor party with no hope of power but there is also the possibility that towards the end of the referendum campaign Labour may actually produce a definite promise of more powers for Scotland. However they will have to be very careful what they promise as giving Scotland more control of anything after a no vote in the referendum will not be popular in Westminster or Whitehall. Then again to put it bluntly what do they care what they promise. After a no vote what can Scotland do if Labour don’t keep their word?

How much can Labour offer if they do promise more devolution? When thinking about devolution it’s a good idea to start at the top and work back. Ask the question, “what are the general limits of devolved power within a nation?” and the answer is pretty close to the idea that Scotland controls everything but defence, foreign affairs, its borders and the central bank.

Control of the income from natural resources can be handed over without breaking up the nation. An example is Alaska in the US which gets all its own oil revenues from state controlled land and sea areas. Control of almost all taxation can be handed over except for VAT which within the EU has to be at one rate within a member state. Control of health and welfare could be handed over although in most countries it is funded from the centre on condition that certain minimum standards of support must be adhered to within the states/provinces who deliver it.

So what stops this devo-max solution being offered to Scotland?

The proposal that Scotland can control all but its own borders, defence, foreign affairs and central bank is in accord with the general limits of devolution but Britain has its own limits or more precisely its own specific limit and that limit is the idea of fiscal equality across the UK. This also chimes with Labour’s current “One Nation” campaign strategy.

These quotes from Devo Plus, Devo More and Federalism: the best future for Scotland make that principle clear.

Devo Plus

[Problems with Scotland raising all its own revenue would be that]…”One of the major principles of fiscal federalism, equity, will not be adhered to across the UK as there would be no UK support for devolved spend to achieve an equitable level on service (within a small amount of deviation which is standard in most ‘federal’ nations)”

Devo More

“The remaining part of devolved spending would continue to be funded by a grant from the UK government, which for the time being would most effectively be calculated on the basis of spending need rather than fiscal equalisation. Such a grant provides a key underpinning for cohesion and fairness across the UK.”

Federalism: the best future for Scotland

“Fiscal federalism would be assisted by a new needs-based payment system, to be agreed by the federal United Kingdom Government, the Scottish Parliament and the relevant assemblies to ensure fiscal equity across the UK. The report accepts that the Barnett Formula would continue to operate until a new formula is agreed.”

In simple terms Scotland’s public services must not get any more money than any other region of the UK. With that in mind it’s quite obvious that it doesn’t matter what basket of taxes Scotland nominally controls as its funding will be linked directly to the funding of English public services via the financial control exerted by the top-up grant. In Devo Plus the top up grant is 40% of the total, in Devo More it’s 36% and with the Lib-Dems it’s 45%. The philosophy behind all these reports published so far is simple. If Scotland wants to keep its services in a better state than England’s then it will have to hit its population with big income tax increases because that is the biggest Scottish controlled tax proposed in the Devo Plus, Devo More and the Lib-Dem reports and it’s very unlikely that the Labour produced report on devolution will be any different.

The taxes given to Scotland by these devolution proposals combined with the top up grant based on English funding directly link public services to income tax in Scotland. If you want better public services than England you’ll have to pay more income tax than England. If you want to pay less tax than England you’ll have to accept poorer public services. In a normal country there are several options open to increase funding for public services. The Scottish Parliament could increase revenue by raising banking taxes, business corporation taxes, oil taxes, VAT, alchohol duty or tobacco duty but it doesn’t control these in Scotland. It could cut defence spending by phasing out nuclear weapons but again defence is not under Scottish control or it could go for an overall increase in revenue by growing Scotland’s economy and reap the benefits of that but all the benefits of this growth would go to the Treasury to be parcelled out to the rest of Britain to preserve fiscal equity. No other country in the world has this direct linkage between income tax and public services.

There is one other point, Devo Plus and the Lib-Dem reports all want to shift away from Barnett formula funding. This would bring the current funding down from 115% of English spending to 105% for the needs based assessment wanted by Devo Plus and the Lib-Dems but Devo More wants to use “fiscal equalisation”, which will fund Scotland about the same level as English funding which is a drop from 115% to 100%. These changes would require income tax increases just to maintain the current level of public services in Scotland.

If Labour firm up on their vague jam tomorrow promises then it will be done purely for the political purpose of trying to win the independence referendum. What they will offer will be not be any more than the current three reports are offering and will have to be a lot less to even have a chance of getting through Westminster after a no vote. The problem for Scotland is that it doesn’t matter if Scotland gets given control of dog licenses or gets given full control of income tax it will never get rich on its pocket money from Westminster under the principle of fiscal equality and that principle is the one that makes all the devolution schemes proposed so far interchangeable.

The Yes campaign has to expose the emptiness at the heart of the “No Scotland” jam tomorrow strategy as its vague promises can easily be dismissed as a political tactic to try and put a shine on Scotland’s future after a no vote. What the Yes campaign also has to do is make plain that even if the “No Scotland” campaign switch from these vague promises to a promise of defined powers it really makes no difference. Under devolution there never will be any jam tomorrow for Scotland.



Categories: Commentary

3 replies

  1. Very good article Doug the Dug. Your article encapsulates the points I was attempting to make to Jamie Maxwell on another thread. This explains it much, much better than I was doing! It only relatively recently that I have come to the conclusion that devolution has reached its limits, or is approaching it. People like you, Peter Bell, Stuart Campbell and others were instrumental in this, particularly the explanation of why this was the case. A No vote is not a vote for the devolving of substantially more powers for Holyrood, its is a vote for the status quo or worse.

    • muttley79:

      When reading these reports on Scottish devolution there’s a fairly easy formula to understand what is going on.

      1. A controlled tax is that part of the block grant which the Scottish government collects.
      2. An assigned tax is that part of the block grant which is labeled as something else.
      3. A top up grant is that part of the block grant which is left after removing the controlled taxes and assigned taxes from the block grant.
      4. At the end of the day Scotland will still get the same amount as the block grant.

      It makes cutting your way through the happy clappy “Scotland will now control x amount of its finances”, a lot easier.

  2. Good work. It is important to expose the detail. They may want to give the impression of jam tomorrow but the reality is they want to curb the powers of the Scottish Parliament to pursue different solutions. In their view the link to income tax, and income tax only, will make the Scottish Parliament more “accountable” ie voters won’t vote for higher taxes so Scotland will have to lump UK neo-liberalism.

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