Issues for the Union

What would be the constitutional implications for Scotland of a No vote in the forthcoming referendum?

The question formed the theme for a half day seminar in the University of Glasgow on 28 January. Organised by the Scottish Constitutional Futures Forum, the independent discussion framework set up jointly by the law schools of the Scottish universities, six speakers from the law and other disciplines grappled with various aspects of the current governance arrangements and how these might develop post-September. This feature attempts to report on some of the principal themes, though space precludes covering all the ground discussed.

Opinion polls that have explored the subject indicate widespread support among the Scottish electorate for an enhanced form of devolution, beyond that which has already been achieved. But with each of the three main Unionist parties in Scotland formulating different proposals for further reform – proposals which may in turn differ from what their UK parent might favour – what are the prospects for a mark 3 devolution settlement, going beyond the Scotland Acts of 1998 and 2012?

More devolution – how?

A useful starting point is the perspective offered by Adam Tomkins, John Millar Professor of Public Law in the host university and a prominent pro-Union campaigner. Attempting to answer the question of what further powers might be devolved to the Holyrood Parliament, Tomkins pointed out that it is already a “hugely powerful body”. Responsible for about 60% of public money spent in Scotland, it already compares favourably in terms of vires with the state governments in Germany, Canada and Australia, and has many more powers than the individual states making up the USA.

Of powers not yet devolved, he added, by far the largest in spending terms is welfare benefits, and the largest element of those is the state pension. But do Scots want their benefits to be any different from those of the rest of the UK? Although there is a case, Tomkins recognised, for devolving individual types of support such as housing benefit or child benefit, which tie in more closely to already devolved powers, he maintained that the evidence supports a popular view that the state pension should be uniform across the UK – and paid for from the UK Exchequer.

There is, on the other hand, Tomkins continued, a much stronger case for further fiscal devolution, as he himself would favour. Although the Parliament is responsible for about £35 billion of spending annually, it will only be responsible for raising about a third of the money it spends, even after its additional revenue raising powers come into force in 2015. It would be in the interests of the Union, he argued, to close this gap as far as can be achieved without jeopardising the Union: it is a failure of devolution to date that, contrary to hopes and expectations at the outset, it has not put paid to the “grievance culture” that leads Scots of various political persuasions to blame the English if they are unable to deliver on promises.

To what extent this balance can be achieved was questioned by David Heald, Professor of Accountancy at the University of Aberdeen, who pointed out the conceptual, and political, difficulties involved where the revenue generated in, say, income tax does not match the proportion of public money spent on the population.

But what do Scots really want by way of a division of fiscal powers and responsibilities? It may be hard to get an accurate view, especially as one survey suggests that only around one in seven have a good idea of Holyrood’s current powers. The same poll found twice as many believing that taxes would go up, as that public services would improve with further devolution. As with most surveys, Tomkins noted , the results depend how you ask the questions. It would not be too surprising, however, if many Scots are comfortable with being allocated a larger-than-average slice of the UK spending pie.

Money from where?

A key question, if the Union is to continue, is the settlement of the Scottish share of UK public funds. Since the late 1970s this has been governed by the so-called Barnett formula, under which Scotland’s share of UK public expenditure (and subsequently also that of Wales and Northern Ireland) has been given a favourably weighted adjustment, due to the different social and geographic factors at play. This was the subject of David Heald’s paper.

Though Barnett was never intended as a long-term solution, and has been criticised on all sides – in that everyone believes their part of the country gets a bad deal out of it – London attempts to rebalance the formula have been resisted over the years, as defending the formula became a political objective of Scottish Office ministers. (The fact that in recent times Treasury ministers have always included one or more Scots has helped beat off moves to change the formula, Heald said.)

One major advantage it offers the Scots is flexibility. Because Scottish Government finance from Westminster is provided through a block grant, applying the formula allows the now devolved administration to decide its own spending priorities for the total sum, and if (as at present) budgets for health and education in England & Wales are protected, the beneficial effect on the block grant enables Scottish ministers to protect other spending priorities of their choosing. Operating a needs assessment-based system would be difficult, costly and politically explosive by comparison – and “No one would trust the UK Treasury to do it.”

Heald’s presentation also illustrated the different ways in which Scotland’s contribution to, and receipts from, UK revenues can be measured – another recurring theme in the independence debate, but beyond the scope of this article.

Further issues arising from the Barnett formula, Heald continued, will feed into the decisions that the Scottish Parliament will require to make from next year regarding the Scottish rate of income tax. Currently, the actual application of the formula is obscured in a fog of Treasury reclassifications and other adjustments, but, he argued, that will have to change: “The Scottish rate of income tax is unusable unless there is a securely anchored, verifiable and transparent devolution funding system.” Otherwise, the Treasury could find reasons to withhold part of the block grant if Holyrood set a different rate – whether higher or lower – from the 10p baseline that would retain equivalence with the rest of the UK.

Comparing other countries, he noted, systems vary enormously, and something that sets out as a revenue-based system can quickly become subverted, as with the Northern Ireland Stormont administration post-1921. In any event, the fiscal structure of the UK “points strongly towards the use of an expenditure-based rather than revenue-based system”, because of imbalances between where revenue is raised and spending is directed. His “big worry” was that the Calman tax-varying powers would atrophy through non-use, like the original “tartan tax” powers post-1997. “You have to decide exactly what you want by way of taxation powers, and be willing to use them”, he concluded.

Case for a Convention

It is all very well talking about more devolution for Scotland, but would it be delivered following a No vote? Different speakers touched on this, among them Dr Nicola McEwen, a senior lecturer in politics at the University of Edinburgh. While her main theme was inter-governmental working between London and Edinburgh, she asked what leverage would Scotland be able to exercise to obtain more devolution in the event of a strong No vote, as compared with a weak one?

Answers, of course, are speculative, and will depend as much as anything on the colour of the UK Government after the 2015 general election. As already mentioned, there is no consensus as to what further powers for the Parliament might be on offer.

In this context the question of whether we need a Constitutional Convention for the United Kingdom was addressed by Dr Mike Gordon of the University of Liverpool. Such a body – to be distinguished from a Commission such as Calman through being more representative of the population, rather than selected public figures – has also been proposed in Scotland’s Future as the means by which the constitution of an independent Scotland would be settled.Further, a report from the House of Commons Select Committee on Political & Constitutional Reform (March 2013) concluded, albeit not unanimously, that regardless of the referendum result, there is “a need to consider both how the increasingly devolved parts of the Union interact with each other, and what we, as residents of the UK, want the Union to look like going forward”.

Why? Most importantly, because of the pace and scope of constitutional change in the UK since 1997, including devolution, House of Lords reform, human rights, freedom of information, the Supreme Court – and further reforms have been attempted unsuccessfully by the Liberal Democrats in the coalition Government. It is time now, the PCRC concluded, to take a step back, review the impact of these changes, and think about the future direction of reform.

The advantage of a Convention, it is said, is that it can take a strategic rather than an ad hoc, reactive approach – though Gordon did raise the question, as a counter, of whether it would be sufficiently grounded in reality.

But the major issue here is not Scotland, but England, the “elephant in the room” in this discussion, given that it contains 84% of the UK’s population. The PCRC report preferred a solution for England that would allow local authorities “to choose, or not to choose, devolved powers from a menu of options agreed between local authorities in England and Government”; and the question should be addressed in a “pre-Convention” or similar forum, ahead of a UK-wide review. In Gordon’s view, however, it would “seriously undermine” the prospects for a UK Convention if the English question had to be settled first.

However it is addressed, he added, the position of England is “very challenging”. There is a further issue with Constitutional Convention-type bodies. As previously noted by Andrew Tickell (Journal, December 2013, 10 at 12), recent similar exercises in Canada and Iceland have failed at the stage of securing the necessary political backing to implement their conclusions. Gordon added questions of his own as to the public support for, or level of interest in, such a body – and whether it would enjoy the legitimacy assumed by its proponents. The present UK Government rejected the PCRC recommendation, citing such reasons, though it remains to be seen who will be in power after May 2015.

Despite these difficulties, Gordon declared himself in favour of a Convention, on balance. Tomkins was less enthusiastic, but recognised that it might have a role if, as he argued, we have now gone as far as we can in delivering devolution in “silos” – considering each part of the UK on its own. He also pointed out that there is already a level of resentment in England at what Scotland has gained, sentiments that help feed into the rise of UKIP.

Centralised government

A final question, recognised by more than one speaker, but in particular Professor James Mitchell, of the Chair of Public Policy at the University of Edinburgh, is, what is the future of devolution within Scotland? While this will be a significant issue regardless of the referendum outcome, Mitchell claimed that centralising tendencies have dominated under the devolved Scottish Government, but public services require a much more individualistic, personalised approach, delivered differently in different parts of the country. The questions being posed by the “Our Islands Our Future” campaign (Journal, January 2014, 33) need to become part of the public debate.

By its nature, the seminar aimed to highlight and explore issues rather than come up with answers, or indeed policies. It is clear that there are many questions to be faced regarding the future government of Scotland, and the UK, even in the event of a No vote, and no common view even as to the forum within which they will be addressed. But with the SNP remaining in power in Edinburgh until May 2016 at least, it would not only be the Unionist parties that would have to face up to them.

Other angles For previous Journal features relating to the independence referendum debate, see Tsagourias, June 2013, 14 on the prospects for recognition of a newly independent Scotland by various international bodies; and O’Neill, December 2013, 10 on the constitutional aspects of the Scottish Government’s pro-independence white paper Scotland’s Future.