IPPR Devo More

The IPPR ‘Devo-More’ programme is a welcome addition to the constitutional debate. It seeks to look at the wider implications for the UK rather than Scotland in isolation. This first paper focuses on fiscal devolution and follows many of the arguments in the Red Paper on these issues. The analysis rightly highlights the impact the block grant approach has on different public service approaches in Scotland, rather than the ‘moral hazard’ case that underpins Devo-Plus. 

The paper reinforces the case for devolving property and income taxes to the devolved administrations. Interestingly, it also makes a case for devolving all or part of National Insurance as we argued in the Red Paper. We also agree that Corporation Tax is not suitable for fiscal devolution. However, we are less convinced of the value of assigning VAT or other revenues as this is largely cosmetic fiscal devolution.

While the paper is strong on the mechanisms of fiscal devolution it is, like other proposals, weaker on purpose. The key justification is enabling the Scottish Parliament to develop public services that reflect the preferences of Scottish voters rather than policy led by English choices. The Red Paper argues that this is only part of the story.  We also need additional powers for the parliament to allow for significant redistribution of wealth within Scotland and greater control over the economy by working people.

 

Commenting on the paper Neil Findlay MSP said:

“The Red Paper collective is leading the debate on developing the Labour movement’s radical alternative to independence. This report from the IPPR is an important development I am sure there are themes of common interest that will be examined at our next seminar on 16 February”  

 

Devo Plus for a purpose

This is the text of an article Dave Watson wrote for the Scotsman (Perspective, 21 December 2012) on Devo-Plus and Reform Scotland. It reflects the Red Paper approach that constitutional change has to be about more than mechanisms. It has to have the purpose of creating a fairer Scotland.

Ben Thomson makes the case in this paper (19th December) for Devo Plus so that, “Scotland could move from its current status quo towards a new, accountable and lasting settlement”. What’s missing from this pitch is an explanation of the purpose behind Devo Plus.

Even if Devo Plus does offer a new constitutional settlement, there are a few hurdles to be jumped first. Let’s start with what we agree on. If the No campaign is to be credible the pro-Union parties (or at least enough of them) have to come together in advance of the referendum and agree that when the electorate votes No, it votes not for the status quo but for a set of principles. Devo Plus has also done some valuable work on the mechanisms of extended devolution, particularly in the later papers that cover social outcomes and how a New Union might work. I am sceptical that you can legally enshrine devolution in the way the Devo Plus group describes, but I think they have done a good job in searching for the best approach.

A key problem with Devo Plus is its obsession with fiscal powers, or as Ben Thomson puts it, “This imbalance, where Holyrood has insufficient fiscal powers to run its own affairs, is a disincentive to responsible management of public services”. The belief that not raising income creates some sort of ‘moral hazard’ for legislators underpins Devo Plus at the expense of wider considerations. This leads to their attempt to match income and expenditure at every level of government, in an unnecessary and overly complex mechanism.

In the latest Red Paper publication I also argued for greater fiscal devolution, not because of any perceived ‘moral hazard’, but to support a more radical social and economic strategy. Property based taxes will largely be devolved after the Scotland Act 2012 is implemented. To this I would fully devolve Income Tax and National Insurance to enable a banding system that better reflects Scottish income distribution and progressive policy direction. Business taxes should remain at UK level because tax competition simply encourages a race to the bottom. Consumption taxes (primarily VAT) again largely at UK level as EU rules don’t allow variable rates in the same state. Finally, there should be full prudential borrowing powers including bond issuance.

Wider considerations largely ignored by Devo Plus are the non-fiscal powers of the Scottish Parliament. I would argue the key principle should be subsidiarity, the idea that matters should be handled by the smallest (or, the lowest) competent authority. If we follow this principle a range of further powers should be considered for devolution including; drugs, data protection, firearms, competition law, consumer protection, energy, safety, broadcasting, public sector pensions and elements of equality and immigration legislation. This would enable more joined up policy as well as reflecting different approaches to these issues in Scotland. We also need better policy coordination between Holyrood and Westminster on some devolved and reserved matters as Calman recommended.

The subsidiarity principle also applies to the Scottish Parliament in its dealings with local government because decisions should be taken as closely as possible to the citizen. Given the actions of the ConDem coalition I don’t always feel the need at present to be fair to the Liberal Democrats. However, their community rule proposals are a decent starter on strengthening local democracy and challenging increasing centralisation.

The main problem for Devo Plus is that it provides mechanisms for extended devolution without any stated purpose. This is similar to those in the Yes campaign who argue that we shouldn’t ask difficult questions about independence, because these are matters to be settled by democracy post referendum. Neither position is credible. In my experience of speaking to many UNISON members during our ‘For a Fairer Scotland’ consultation, they had many questions about the consequences of independence. Attempts to fob them off with vague high level assurances will not win them over and I think shrewder thinkers in the SNP, if not the slightly wider Yes campaign, are beginning to understand this.

So what is the purpose behind Devo Plus? For that we need to look at Reform Scotland. Their stated objectives are the apparently, “traditional Scottish principles of limited government, diversity and personal responsibility”. They may be traditional in the offices of Reform Scotland, David Hume Institute, Adam Smith Institute and the Tax Dodgers Alliance, but not anywhere else in Scotland! I would translate these objectives as – small state, privatisation and blame the poor.

Devo Plus when presented by long standing devolutionists like Jeremy Purvis and Duncan McNeil gives the plan credibility. However, when Reform Scotland comes out of the background, we are reminded of the ideological drivers and the financial backers. Rebranding the Tory research department and their ideas as ‘Reform’, doesn’t make them any more credible, or independent. The ideology is sometimes masked, but they have marketisation of public services at their core.

For all the debate around fiscal and other powers we need to return to the question of what we want these powers for. Extended devolution or independence should support the creation of a more equal society that allocates resources to tackle poverty through progressive taxation and welfare support. The role of business is to pay taxes, provide decent jobs and social sustainability in return for state support, while the state promotes collective ownership and management of the means of production.

This has been the focus behind initiatives like UNISON’s ‘For a Fairer Scotland’, STUC’s ‘A Just Scotland’ and the Red Paper. These papers recognise that constitutional change has not so far resulted in the political parties taking radical action to tackle inequality, poor health and deprivation. Unless it is explained how a fairer society is to be achieved, the mechanisms for constitutional change like Devo Plus, mean very little.

Economy key concern in referendum

The economy remains top of voters concerns over independence according to new research by the Scottish Centre for Social Research (ScotCen). They also found widespread optimism about the impact of independence did not translate into majority support for leaving Britain. The findings are based on the Scottish Social Attitudes Survey.

A total of 34% of people said independence would make the Scottish economy stronger, compared with 29% who believed it would become weaker. The report said:

“As yet, a majority of people in Scotland are not convinced that independence would be of positive economic benefit. People’s willingness to support independence does not solely depend on whether or not they have a strong sense of Scottish identity. It would appear that the eventual outcome of the referendum could well turn on which side is thought by the Scottish public to have the better of the economic argument .”

This follows another report by the think-tank Capital Economics which warned that the UK would demand a “near veto” over an independent Scotland’s budget as the price for keeping the pound. This is a point we have made in several Red Paper articles.

ScotCen research also highlights the public’s ongoing confusion over which parliament does what. For example, a quarter of Scots still think Westminster makes the key decisions on health. It works the other way as well because two-thirds though Holyrood makes the key decisions on welfare benefits. That statistic should really worry the Scottish Government!

What it does show is that we shouldn’t take polls that say the public support a particular model of devolution particularly seriously. That is a subtlety the wider public are not yet tuned into.