Devo Mac: An Invitation From Lord Smith Of Kelvin

DSCF0005 - Copy (600x450)In the recent referendum on Scottish independence 63% of those eligible to vote declined the opportunity to make Scotland an independent nation (c.2 million voted against and another 0.8 million didn’t bother to turn out).

On the face of it this might look like an overwhelming majority of Scots are in favour of continuing with the current arrangements for government in which the UK parliament grants some powers to the Scottish parliament. But support for the status quo is by no means as strong as the referendum result implies.

Along with every single one of the people who voted for independence (1.6 million of them) there are substantial numbers of No voters who are disillusioned with the way in which politics are done in the UK and would like to see reforms that make democracy work much better than is currently the case. In the last few days before the referendum even the cloth-eared members of the UK political establishment could hear the rising clamour of discontent as the polls narrowed and the result became too close to call.

In a panicky attempt to secure a No vote the main UK parties joined forces and made a promise to devolve more powers to the Scottish parliament. Lord Smith of Kelvin has been give the task of facilitating discussions and coming up with a set of recommendations of what this might involve. The Smith Commission will be meeting with the great and the good from political parties and civic institutions over the next few weeks to discuss the options and seek consensus on what should be done.

In recognition of the unusual levels of grass-roots participation in the independence debate Lord Smith has also asked for submissions from the public. I have no idea if anyone will read these submissions, let alone allow any of the ideas that they might contain into the discussions around the top table, but having been invited to contribute I feel that we should respond, ideally in our hundreds of thousands. As well as demonstrating to Lord Smith that the appetite for change runs wide and deep a deluge of submissions would remind the political establishment on both sides of the border that they are negotiating for us, the electorate, not their own party interest.

Earlier this week I sent the following submission to haveyoursay@smith-commission.scot :

“Our democracy is crude and ineffective. It no longer has the confidence of the electorate and it must be reformed. Your Commission has a unique opportunity to instigate reforms that will benefit the whole of the UK.

With this in mind I would like arrangements between Scotland and the UK to be developed around the following principles.

Sovereignty:

The union of the United Kingdom is officially acknowledged (e.g. by treaty) to be a voluntary partnership of nations, each of which may determine its own arrangements for government.

The sovereignty of the people of Scotland is made explicit (e.g. by statute).

Responsibilities:

The Scottish parliament has sole responsibility for all matters relating to the governance of Scotland, except those which are explicitly shared with the UK by mutual agreement. Shared responsibilities include:

  • Currency
  • Monetary policy
  • UK fiscal policy
  • Defence
  • Foreign policy
  • International organisations (EU, NATO, etc.)
  • Common standards and services (e.g. vehicle licensing)
  • Reciprocal access to separate services (e.g. NHS)

Representation:

Scotland ceases to elect MPs to the House of Commons.
Parliamentary business in Westminster is categorised as UK (inc. Scotland) and rUK (excluding Scotland).
Any MSP may attend Commons debates on UK business.
An agreed number of MSPs (e.g. 59) may vote on any piece of UK business in the Commons.
MSPs’ voting rights in the Commons are assigned by an appropriate proportional method.

The Scottish parliament appoints members to the House of Lords by an appropriate proportional method.
Scottish members of the Lords may only participate in UK business.
The business of the Scottish parliament remains outwith the scope of the House of Lords.

The Scottish parliament appoints ministers to UK government departments in which shared responsibilities are administered.
Scottish ministers in UK departments work on behalf of and report to the Scottish parliament, not the UK government.

Taxation:

Existing UK taxes continue to be levied and administered in common across the UK.
The Scottish parliament receives a per captia share of total UK revenues (replaces Barnett).
The Scottish parliament has the right to levy within Scotland whatever additional taxes it deems appropriate.

Spending:

The Scottish parliament has 100% control of all spending on all matters (Scottish and UK).
Scottish contributions to shared responsibilities are periodically negotiated and agreed by the Scottish and UK governments.

Borrowing:

The UK Treasury facilitates borrowing on behalf of the Scottish parliament, up to an agreed limit that is subject to periodic review.
The Scottish parliament determines the timing and value of any borrowing that it may require, up to the agreed limit.

The UK Treasury is legally responsible for servicing all Scottish national debt.
The Scottish parliament is legally responsible for compensating the UK Treasury for all servicing costs associated with Scottish national debt.”

I’m not expecting much (if any) of the foregoing to become part of the recommendations of the Smith Commission, but if one politician or civil servant reads what I’ve written and it helps him or her to understand that we’re out here and we want radical reform of our democracy, then it will have been worth the effort.

7 thoughts on “Devo Mac: An Invitation From Lord Smith Of Kelvin

  1. Malcolm

    I believe there is a deal of merit in what you propose but am concerned about your recommendations regards taxation.

    You appear to suggest that the UK taxes continue to be levied across the UK and centralised in Westminster. From there the Scottish Gov will be allocated their share on a per capita basis replacing Barnett.

    This is the trap we were warning about pre-referendum. It is beyond dispute that Scotland contributes more than it takes in tax revenue; the only contention being whether this surplus is reliant on oil and gas. The Barnett formula as we are all aware goes a small way to compensating for this and recognises the economies of scale involved in delivering public services in rural areas to good Skye men such as yourself. Any which way you slice it Scotland’s tax take (T) and block grant (B) presently reads:

    T – x = B

    Your solution would lead to

    T – 2x = B

    And to remedy this shortfall your proposal is that we raise further taxes specific to Scotland. Clearly this will have implications for our competitiveness within the Union.

    I have watched you banking video and it is clear you have a far better grasp of financial dealings than me. Therefore I am surprised that there appears to be such a basic flaw in your proposal. If I have somehow misinterpreted it I’d be keen to hear from you.

    • David,

      All of the data that I’ve seen on tax raised in Scotland suggest the annual total would vary significantly from year to year thanks to the relatively high proportion of oil revenue and the volatility of the oil price. In the long run no-one can be sure that these peaks and troughs will average out as more revenue for Scotland than is currently provided by the Barnett formula. A sequence of several “bad” oil years would certainly mean we’d be worse off, which would lead to a rapid increase in the national debt.

      So, from a Scottish perspective there are advantages to sharing the broad, deep tax base of the whole UK to provide a more predictable revenue stream. A high-level fiscal union also reduces the scope for competitive tax cuts (“race-to-the-bottom”) and makes cross-border business much easier to do.

      Also, the potency of the “fiscal levers” is overstated. The power to tax is limited by what the electorate will thole, and that limit won’t be much different in Scotland than it is in the rest of the UK. The real power lies in being able to choose how the money is spent.

      If Scotland has a per captia share of UK revenue, plus whatever Scottish revenue it cares to raise with national and local taxes, plus borrowing, we will have a lot more spending power than we currently do under Barnett. And we’ll be able to choose how to spend 100% of all of that money.

      Under my proposal Westminster will have to negotiate with Holyrood over how much Scotland contributes to UK departments, and we – the electorate – can have a say in that. For example, if we elect a Scottish government on a ticket that says zero funds for Trident, then we pay zero.

      The need for greater spend per captia in rural Scotland will be one of the factors that our politicians will have to consider when deciding what and how much to spend on UK matters.

      We must also recognise that there is scope for developing national and local taxes that raise significant chunks of money without making Scotland a less attractive place to live or do business. For example, replacing non-domestic rates and council tax with a Land Value Tax would transform land use and directly benefit most people on low incomes.

      • Malcolm

        The so called ‘volatility’ of the oil markets dictates how much more Scotland contributes rather than whether Scotland is a net contributor. It quite simply is and always has been since the arrival of NSO and the discovery of new fields allied to ever reducing worldwide production ensures that will be the case for our lifetimes. The most ardent (sane, honest) Conservative Unionist would agree this. Sharing the broad tax base of the UK is of little benefit when the UK is essentially a bankrupt state reliant on eye-watering levels of borrowing.

        I don’t want to get into a broader economic debate with you as it is outwith my area of expertise. I’ll simply stick to my main point about Barnett: that is it is a better deal for Scotland than a per capita share. All of the other points you raise e.g. national/local tax and borrowing hold true whether we retain Barnett or not so why would you propose getting rid of it?

        • David,

          I’m proposing a trade-off. Abolish Barnett in return for power to decide where and how 100% of public spending is made and the power to levy whatever taxes we want in Scotland.

          What we lose in revenue (average £6.4bn over the last 5 years) we gain in being able to direct spending away from stupid UK stuff (Trident? Middle East wars? HS2? – take your pick) into more productive things. We also gain from being able to redesign local and national (Scottish) taxes. The opportunities to transform peoples lives for the better outweighs (in my mind) the nominal loss of a few billion of tax revenue each year.

          Scotland is just as “bankrupt” as the UK. The GERS figures suggest that Scotland, had it been independent, would have run an average fiscal deficit of c.£10.3bn for the last 5 years, which is 8.2% of the average UK deficit (within the margin of error for per capita equivalence).

          Sharing the borrowing power of the UK and the broad tax base are two of the main advantages of Scotland remaining in the UK.

          • What you are proposing is basically independence. The ability to opt out of UK defence policies and costs is pie in the sky under any form of devolution.

            I came up with a rather glib assessment some time ago for the reasons people would vote NO; selfish, stupid or scared. I have seen or heard nothing over the last year to dissuade me from this until I came across you. I just don’t get why you are so keen for an extreme version of devolution and not willing to go all the way. You want to remain part of a militaristic state run by right wing loons for (debatable) enhanced borrowing powers?

            • I know lots of No voters who are neither selfish, stupid, nor scared. Likewise I know lots of Yes voters who aren’t selfish (it’s Scotland’s oil and we’re keeping it for ourselves), stupid (we’ll have a currency union and they can’t stop us), or scared (we’re doomed if we stay in the UK).

              Voting No doesn’t mean that I “want to remain part of a militaristic state run by right wing loons”. Voting Yes wouldn’t guarantee an iScotland free from militaristic right wing lunacy, or protect us from the effects of the loons south of the border.

              I’m asking Smith for a form of federalism that I think would benefit both Scotland and rUK. Of course there are problems with what I’m suggesting, but I think they are less difficult to solve than the problems that would have been thrown up had Yes won the referendum.

              That’s not to say that independence couldn’t work. I’m sure it could, but only if the details were much more carefully thought out in advance.

              This is why I voted No: https://malcolmhenry.com/2014/09/02/scottish-independence-status-quo-whatever-you-want/

  2. Pingback: Smith Commission | wfihoweoffife

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