Tag Archives: devo max

Scottish constitutional change always seems one step behind the national mood – but we finally have a chance to get it right

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It is 19 years since George Robertson declared famously that Scottish devolution would ‘kill nationalism stone dead’. It remains one of the most important, symbolic, phrases because it sums up one of the worst sentiments in British politics: constitutional change seems, too often, to be a stitch up by one or more political parties at the expense of the others.  Too often, we have seen unionist parties produce deals amongst themselves rather than engage meaningfully with nationalist parties like the SNP.

The main result is that Scottish constitutional change often seems out of step with the national mood. The Calman Commission, established in 2007 by Labour, the Liberal Democrats and Conservatives, produced the Scotland Act 2012 that seemed out of date before it was implemented. The Smith Commission was established in 2014 and, although it produced its recommendations in a ridiculously short space of time, they already seem like the starting point for discussion, not a new devolved settlement.

Yet, it was not always this way. For a brief period, from devolution in 1999, we talked more about ‘new politics’ than independence. This is partly because many of the parties involved were more inclined to do the right thing than Robertson’s comment suggests. Scottish Labour didn’t hold hands with the SNP, but it made sure that it got SNP support during the Yes to devolution campaign in 1997. The parties (including Scottish Labour, Liberal Democrats and what would become the Scottish Greens) also thought about how political reforms would go hand in hand with constitutional reform, encouraging some debate about new forms of deliberative and participatory democracy.  They engaged ‘civil society’ groups, and the campaign for devolution had a strong focus on gender and the participation of women in public life. In short, they had a Scottish Constitutional Convention. This period of reform in the 1990s should provide some lessons today.

It is too tempting to argue that the incredible rise of the SNP, and its likely dominance of Scottish seats in Westminster, will produce a constitutional crisis – a UK party only governing with the consent of the SNP will reinforce a broad sense that ‘The Scots appear fed up with the English, and the English with the Scots’. Simon Jenkins suggests, rather provocatively, that the current union is dying and that ‘Some new format is required that must embrace parliamentary disengagement, devo-max or indie-lite or whatever. The task for Cameron or Miliband is to be architect of that format’.

Yet, this conclusion is not inevitable and the solution is not quite right. In particular, we do need to rethink the plans for further constitutional change that were produced so hastily by the Smith Commission for the sake of party politics rather than sensible constitutional redesign. However, a new constitutional convention should be the architect, not the leader of one political party doing a deal with another.

If you look at the rhetoric of the main parties, a new convention in Scotland is just the ticket. It suits Labour’s ‘no deals with the SNP’ stance, since a convention is a way out: it could be portrayed as an attempt to go beyond party politics and engage Scottish civil society. It suits the SNP, looking to maximise its influence but not be stuck with the idea that all it wants is ‘devo max’ or ‘full fiscal autonomy’ as a stepping stone to independence.  It might even suit the Conservative party if it squeaks into government again with the Liberal Democrats, since a convention may be the only way to generate a sense of legitimacy in Scotland if it has few or no MPs in Scotland.

The alternative for the UK parties (apart from the UK-wide convention proposed by Labour, which seems separate from Scottish reforms) is to stick with Smith and exclude the SNP, which seems like an untenable position for parties that claim to want to reform the Union to protect it. Only the SNP benefits from the stand-off, and only a constitutional convention provides anything close to a competing story of Scottish legitimacy to the one crafted so well by the SNP.

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3 reasons why devo max won’t happen

For our purposes, devo max means the devolution of everything except foreign and defence policy.

  1. It wasn’t offered by the three main UK parties, even if many people claimed that it was. The three party leaders made ‘The Vow’, which is a vague commitment to ‘extensive new powers’ and not what we think of when we say devo max. In fact, the vow includes a commitment to the Barnett formula, which suggests that most fiscal powers won’t be devolved (and we already know that monetary policy will remain at the UK level). In a separate post is a list of examples of media stories and politicians telling people that devo max is coming, but it’s not coming. You can believe that these devo max predictions either betray some loose, or deliberately misleading, language (or a mix of both), but they were made by people not in a position to deliver on devo max promises.
  2. Those UK parties remain at the heart of the decision. The Smith Commission is asking for views from the public and ‘civic leaders’, but it is working to a wacky timetable determined largely by the UK political parties, the commission is stuffed with representatives of parties, and the proposals will be taken forward by one or more parties. It is not one of the old-style constitutional conventions with widespread membership, and it is not set up to maximise public engagement. Instead, it is there to turn three separate plans on further devolution, made by three different parties (discussed well by the IFG), into one coherent plan (while, somehow, incorporating the SNP’s push for devo max).
  3. It’s too easy to argue that people seem to want the ‘devo max’ powers but not the outcomes. Recent polls suggest that, when asked directly, a large majority of respondents favour the proper devo max not on offer. However, when asked about the consequences – such as raising and spending all finance in Scotland, and/or producing the potential for different tax rates and social security spending (e.g. the state pension) – that support falls. As John Curtice suggests, this is partly a consequence of a binary yes/ no debate which did not allow us to clarify the practical meaning of devo max. Consequently, political parties have the wiggle room to argue that most people don’t really want devo max (and that it’s not a good idea).

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Devo-Max: Does it mean the maximum you WANT or the maximum you CAN HAVE?

Let me show you a very important distinction between two kinds of devo max:

  • the big one that people often seem to support, but can’t get; and
  • the smaller one that seems to be on offer, that people confuse with the big one they can’t get.

The big one that people often seem to want but can’t get

If you look at opinion polls on devo-max, the understanding is this:

Devo max This term has become short hand for the idea that the Scottish Parliament should become responsible for nearly all of Scotland’s domestic affairs, including taxation and welfare benefits, while foreign affairs and defence would remain the responsibility of the UK government (What Scotland Thinks glossary). The BBC has reinforced this definition: ‘Devo-max, n.The devolving of all powers to Holyrood other than defence and foreign affairs‘. The Scotsman has plumped for ‘most powers short of defence and foreign affairs’.

Then, this is what people respond to in opinion polls:

  • ‘59% agree that the Scottish Parliament should become primarily responsible for taxation and welfare benefits, the two principal areas of domestic policy that are still reserved to Westminster’ (John Curtice 15.9.13)
  • Pensions might go up or down or stay the same if the ‘Scottish Parliament made all decisions for Scotland apart from defence and foreign affairs’
  • Maybe Scotland should leave the UK “If 75% vote for ‘full financial independence’

So, this is the maximum devolution that many/ most people seem to want.

The smaller one that seems to be on offer, that people confuse with the big one they can’t get

Yet, this is not on offer, partly because no party is offering it, and partly because they can’t offer it. Instead, some parties have begun to think about offering the maximum devolution you could expect to get if you stay in the UK and want a UK-wide economic policy framework. This kind of devo max is not about autonomy over economic policy as a whole. It is about devolving some more income tax, and maybe some other taxes, and maybe more of the social security system. And yet, what you read is that you are now being offered devo max:

This is ‘devo max’ only if ‘devo max’ means the maximum you can reasonably expect to get under devolution. It does not mean becoming responsible for ‘taxation and welfare benefits’.

So, the crap thing about the public and media discussion so far is that most people say they have heard of devo max in much the same way that they might respond to the question: ‘have you heard of that EU guy?’

Neil McGarvey and I wrote this (in Scottish Politics) when the discussion was more popular:

devomax Cairney McGarvey 2013 p241

See also

 

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Under ‘Devo-Max’, ‘Fiscal Autonomy’ is an illusion

OED definition of autonomy: a.  The condition or right of a state, institution, group, etc., to make its own laws or rules and administer its own affairs; self-government, independence.

devo max tweetThe Scottish independence debate lacks clarity at the best of times, and many debates rely on its participants guessing or assuming the positions of others. In particular, the ‘further devolution’ options are not well defined, partly because ‘devo max’ will not be debated before a referendum.  Most discussion of devo max so far has exposed widespread confusion about its meaning.  Perhaps the most common mistake is that it involves, ‘a proposal in which Scotland would have full economic independence from the United Kingdom but would still remain a part of it and be governed in specific areas such as foreign policy and defence’ . Devo max is not about autonomy over economic policy as a whole. Indeed, even independence would not guarantee such autonomy if the plan is to keep the pound (interest rates would be ‘set’ by the Bank of England, and the Scottish Government’s fiscal policy would be influenced strongly by discussions with the UK Government).

A lack of clarity on ‘fiscal autonomy’ under devolution is particularly unfortunate because we know that the Scottish population seems to want it without knowing what it is. ‘Fiscal autonomy’ implies the right of the Scottish Government to set its own tax and spending regime.  Yet, most proposals are nothing of the sort.  Instead, we are talking about autonomy over particular tax instruments, not them all – and, therefore, no way to vary the balance between taxes.

Treasury figures for the UK as a whole* give us a rough-and-ready guide to the proportions involved:

  • The main taxes already devolved account for 8% of UK government receipts (business rates and council taxes are both 4%).
  • The ability of different regions within a single EU member state to have different rates for corporation tax (8%) and VAT (17%) is limited.
  • Income tax accounts for 26% (or 25% if we include tax credits), a figure kept low by the separate collection of National Insurance (18%) as a tax on employment income (it is an indicator of entitlement to certain benefits, but goes into the same pot)
  • Excise duties are 8% and ‘other’ is 14%.

The breakdown gives us a sense of proportion about the current devolution of taxes and the rather limited fiscal autonomy of the Scottish Government even if it gains, under the Scotland Act 2012, its new ability to vary income tax by ten pence in the pound (a one pence, or 4%, change in income tax might change the Scottish Government budget by little over 1%).  It is also unable to vary the relative difference between lower and higher tax bands and, more importantly, to adjust overall mixes of taxes and spending to influence economic growth (and therefore tax revenue).  The more significant development may relate to a new ability of the Scottish Government to borrow.  The Scotland Act 2012 gives the Scottish Government the ability to borrow up to £2.7bn from the UK Government, subject to Treasury approval.

So what does this all add up to? In my opinion, the further devolution of a small number of taxes does not deserve the title ‘fiscal autonomy’ (indeed, the Scottish Government wouldn’t be much more fiscally autonomous than local authorities, who raise a small proportion of their own income). All it does is allow some parties to look like they are promising significantly more devolution without it doing anyone any good. Or, it gives the impression that the Scottish Government would be increasingly responsible for raising the taxes it spends without giving them the ability to do much with them. It’s a ‘fiscal autonomy’ trick that no one should be invited to fall for.

Qualification 1: focus on what leaders say, not what people say they say

To be fair to David Cameron, a lot of the discussion is by people putting words in his mouth. What he said was vague: “Vote no – that can mean further devolution……more power to the Scottish people and their Parliament”.

A similar, but more detailed, emphasis can be found in the Scottish Labour Devolution Commission’s Powers for a purpose (p5) which talks about ‘scope to enhance the autonomy and accountability of the Scottish Parliament through an extension of tax powers’.

Qualification 2: the production of these figures is political

*Consider three different ways in which to make the calculations outlined above . One method is to adopt the same approach but use figures from the Scottish Government’s Government Expenditure & Revenue Scotland documents which now attempts to take into account a geographical share of North Sea oil taxation revenue. The pro-independence group Business for Scotland uses Table 3.3 to produce its own table which puts, for example, income tax at 20.4%.

Another method is to describe these calculations with reference only to the devolved Scottish Government’s budget, which is approximately 60% of spending in Scotland. This is the approach taken by Powers for a purpose (p6) which recommends ‘widening the variation in income tax in the Scotland Act [2012] by half from 10p to 15p … so that it raises about 40 per cent of its budget from its own resources’. The rough-and-ready calculation is that income tax is 20-25% of UK income, and three-quarters (15p of 20p) of that percentage is 15-19%. Adding this 15-19% to 8% (business and council tax) gives you 21-27% of a notional overall income. Then, to express it in terms of the Scottish Government’s 60%, multiply by 10/6 to give you 35-45% of the Scottish Government budget.

A third is to present both types of calculation on the same table, which is done by Reform Scotland, who try to take into account the Scottish Parliament’s proposed larger budget:

Labour Devo Commission - Reform Scotland workings - 20.3.14

 

See also: Scottish independence referendum: What is Devolution Max?  (Michael Moore’s description of devo max as a ‘brand without a product’ was during evidence to the Scottish Affairs committee).

This is an abridged and updated section from Paul Cairney and Neil McGarvey’s (2013) Scottish Politics

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