BarnettMax, Fishfood & DevoCon 2014: Sins of ComMission

And so yesterday the Smith Commission delivered its recommendations in my current place of work – the grand hall of the National Museum of Scotland. A small stage was erected at one of the points where the much-missed fish ponds used to sit in the beautiful open space (fish ponds that were removed by the desire of a director who wanted to ‘make his mark’, no matter what), and the Commission members sat behind Lord Smith of Kelvin as he made his announcement. The task of getting agreement between 5 political parties on an extended package of devolved measures for Scotland within ten weeks had earned the project the nickname ‘ComMission Impossible’. So, would it have been more worthwhile shredding the report’s pages for distribution as some faux fish food for those erstwhile ponds?

Before looking at the nutritional value (or otherwise) of the content, even in simple overview form, it is worth remembering that all the Smith Commission has produced are ‘recommendations’, just as the Calman Commission before did, and there is no certainty that those recommendations will come to pass. For example, the oft-discussed Air Passenger Duty was a recommended area to be devolved by Calman in 2009, but that did not happen. And, as Labour last night ‘demanded’ that English airports are not disadvantaged by the resulting legislation, it is easy to see that that particular proposal might not make it to the final bill without a struggle.

Soon after the announcement, David Cameron used the Smith Commission’s report as a neat springboard to reiterate his intention of bringing forward his English Votes for English Laws (and the tying of EVEL to the Smith Commission may well delay the implementation of the latter), as a response to the West Lothian question of old. And why not? A YouGov poll the other week showed that Scottish voters very much backed the principle of English votes for English laws, with 68% in favour, and only 18% against. Scots don’t seem to have any problem with the idea – but Labour seems to: apparently the spectre of them losing the power to pass their own budget without the support of their Scottish MPs is a very real fear for them.

But the House of Commons is not the only chamber that has to be considered in such a rejigging to accommodate and reflect regional interests. Today I bumped into a colleague on George IV Bridge, whom I first met while he staffed the same polling station as myself on the 18th September. He was dismissive of the Smith Commission (unsurprisingly) – and, after mocking the association of terms like ‘modern blueprint for Home Rule’ ‘Federalism’ or ‘DevoMax’ with these most anaemically modest of proposals, he was clearly enraged by a discussion of EVEL that was completely ignoring an EVEL Elephant in the palace of Westminster. “Nobody’s mentioning the House of Lords!”, he said with exasperation. And it is true – the dominance of the right wing southern England perspective in the House of Lords should not be forgotten, as it is a chamber which has great power to amend or even veto legislation relating to Scotland – and did so without hesitation or so much as a ‘by your leave’ when it came to energy/fracking-related powers for the Scottish Parliament being summarily taken back from Holyrood without warning in December last year.

But back to those recommendations – very similar to Labour’s ‘DevoNano’ (or what one colleague wittily referred to as Labour’s ‘DevoF***All’) proposals before the Referendum. Critically, any additional sources of revenue are explicitly compensated for in paragraph 95, which makes clear that there is always a reduction in the block grant to match any new source of revenue. So – no matter what certain ‘Vow-toting’ tabloids might pretend…no more money for the Scottish Government to spend. Just the extra costs of paying for the administration of collecting some of it – although the fact that this means one less institution to have to pay set-up costs for in the event of independence, is not to be sneezed at.

The actual tax-related powers proposed to be devolved are very telling. Despite the ability to set income tax rates and bands, the taxes relating to personal allowance, capital gains, corporation, inheritance, rates on savings and dividends and National Insurance all remain reserved. Interestingly, the personal allowances for income tax, employers’ National Insurance contributions, inheritance tax and even the power to create new taxes without Treasury approval were all in a November 21st draft of the Commission’s report, within 7 days of its final recommendations being presented. Sources close to the Commission identifed Labour as the principal obstacle to tax proposals – perhaps ironic, given Richard Murphy’s (economist and tax advisor based in England) observation that the only people that the final tax proposals impact on – and does so quite negatively – is working people. So far from an addressing of inequality, a threatened increase of that inequality.

Similarly, in terms of welfare, Holyrood could now (if the proposal goes forward to become legislation) decide on whether to pay housing benefit weekly, fortnightly or monthly – beyond that (and some incapacity benefits) pretty much every other aspect of welfare benefit remains reserved. Although throughout the Commission’s work the representatives of the Westminster coalition were most interested in welfare proposals, it is apparently the case that in the last two days of negotiation, Labour opposition resulted in a far more substantial welfare package (including aspects of Universal Credit) being removed from consideration, to leave only this wizened and restricted effort behind. One wonders what differences in social support might have been possible, had this omission not occurred in the last phase.

But what did make it through to the Report are moves to allow 16/17 year olds to have the franchise for Holyrood elections, the option of public ownership of rail franchises, and some controls ceded over Crown Estates and fracking. These may not go far, but have to be clearly acknowledged as ‘good things’. [Therefore, unlikely that they, along with Air Passenger Duty, will all make it on to the devolved statute books.]

So – not exactly Gordon Brown’s promised “near Federalism”. And definitely pretty far short of that mythical, rarely seen (rarer than the water beastie in Loch Ness) but often discussed beast – DevoMax.

DevoMax (aka Full Fiscal Autonomy – Scotland standing on its own two feet, with no Barnett Formula, and paying a lump sum to Westminster for shared services, rather than receiving devolved funding back, as currently) was never on offer, despite media attempts to conflate what was ‘on offer’ with that (thanks again to political pundit Jackie Bird, famous impersonator of journalists) to the extent that ‘any further devolution’ became synonymous with ‘DevoMax’. If you like it was a switch from DevoMax meaning ‘the maximum devolution POSSIBLE while still remaining a part of the UK state’, to DevoMax meaning ‘the maximum devolution that Westminster are ever going to ALLOW you to have within the UK state’. Interestingly, amidst this confused bandying around of the term in the run-up to the Referendum, it was observed that support for DevoMax (from the position of it being the preferred option of the electorate) had DROPPED compared to support for full independence during the last month leading up to the Referendum date.

With the release of the Report, the signatories to the notorious ‘Vow’ have predictably been queuing up with unseemly haste and enthusiasm, like goldfish gulping at shreds of paper that they mistake for flakes of fish food at the surface of their tank, to aver that they have delivered on their promise – now please stop asking them for more. Hilariously, I heard Nick Clegg yesterday try to create his own iteration of this ‘Devo’ meme, referring to the proposals as ‘VowMax’, as though he were a) trying to come up with a trendy new term no journalist has thought of and b)trying to preempt the rising arguments of the proposals being much less than expected by ‘Conditional No’s.

Beyond the ‘No’ side enthusing to an embarrassing degree over the Emperor’s dazzling New Tax Powers (less than 30% of taxes set in Scotland, just under 40% of its total expenditure, so not exactly earth-shattering), the conclusions on the ‘Yes’ side are pretty much as predicted ten weeks ago: not only do the proposals fail to meet the aspirations of two thirds of the Scottish electorate for DevoMax (all powers apart from defence and foreign affairs devolved to Holyrood), it merely gives Scotland significant power to spend money, with zero power to create that money in order to spend it. In other words, the same as before – choose which of your existing services you are going to cut, if you are going to use these powers, and have no means whatsoever to make changes that increase the revenue necessary to create Change.

When Patrick Harvie noted that it was “a funding formula for devolution, not the transfer of genuine economic power”, I started to think that these proposals were little more than revising the Barnett arrangement. Some relabeling of the means by which it comes to the Scottish Government, but still ultimately controlled by Westminster. In that spirit, perhaps I can grab the same thistle as Nick Clegg, and describe this set of proposals (highly unlikely to be approved as a bill with no omissions, just as Calman was) as ‘BarnettMax’.

No? Not trendy enough? Oh, well…

Ariel Dorfman remarked that it placed the Scottish Government clearly in the role of Secretary to Westminster as Boss – no ability to make any decisions, but responsibility for all the administration and paperwork. In effect, for as much as we still have to see what will be proposed for legislation on January 25th next year (as one observer put it when the original schedule was announced by Gordon Brown, “St Andrews’ Day and Burns Night – could they BE any more patronising?”), the Smith Commission has given us a valuable insight into precisely how far the Westminster party consensus is prepared to move – the maximum amount of devolution that they are prepared to concede – in order to retain Scotland within the UK.

In a sense – particularly considering how hard they fought to persuade the people of Scotland to stay – it is perhaps surprising that the distance they are prepared to move is so remarkably small. Now there’s fishfood for thought.

 

“There isn’t an effective devolution of tax and yet it says there is an effective devolution of tax. There is no corporation tax devolution, no oil tax devolution, no National Insurance devolution, no capital gains tax devolution, no inheritance tax devolution. The VAT devolution is completely and utterly useless. Only working people in Scotland can be impacted by what is happening. It won’t affect rents, it won’t affect dividends, it won’t affect savings, it won’t affect land distribution…all you can do is change the rates. All in all it’s a disastrous package.” (Richard Murphy, Tax Advisor and Economist)

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