Enduring the Settlement - what the Draft Bill means for Scotland

1. Scotland – Enduring the Settlement
“If Britain doesnotchangeof its own volition,Scotland will demand,ata minimum, “homerule
within theUK”,and could forceupon the wholecountry a systemof governmentasclose to
federalismas you can havein a nation whereone partforms85% of thepopulation.Butwhatis now
at stakeis more seriousthan even that:the nationalistswould consign thevery idea of the “United”
Kingdomand of “Great” Britain to thepast.”
Gordon Brown, The Guardian, Monday 9 June 2014 20.00 BST
http://www.theguardian.com/commentisfree/2014/jun/09/scottish-referendum-not-britain-v-
scotland
Gordon Browncharacterisedthe debate surroundingScotland’sreferendumasone between
federalismandindependence.Thiswasthe choice thatmost people thoughttheyweremaking,
betweenafederal UKstate with devolutionof mattersotherthanDefence andForeignAffairsto,in
Scotland’scase the ScottishParliament.If thatwaswhatwe votedfor,is that whatwe got?
Whenwe talkabout federalismwe use the termasmeaningfiscal federalism, the control over,most
importantly,taxationwiththe ScottishParliamentable toalterthistosuit the changed
circumstanceswe findourselvesinovertime.Isthiswhatthe nationhasseendelivered?
A detailedstudyof the proposalssetoutinthe UK Government’sCommandPaper“Scotlandinthe
UnitedKingdom –an enduringsettlement”followsbelow lookingatwhathas and has not been
transferredandthe limitationsplacedupon those thingswhichhave beentransferred:
https://www.gov.uk/government/publications/scotland-in-the-united-kingdom-an-enduring-
settlement
Lord Smithof Kelvinwasfacedwithashort timescale toreachhisconclusions.Essentiallyhe hadin
frontof hima fork inthe road. He couldheadone wayand plotout a Devo-Max parliamentwithfull
powersovertaxesandspending,the scenariothatGordonBrownwaspresentingashisalternative
to independence.Suchachoice providedanopportunitytoreacha settlementwhichcouldendure.
That was notthe road chosen.
Smith’schosenroute of travel chartsa verylimitedchange inthe ScottishParliament’spowers over
taxation.We are givenmuchwidercontrol overthe Parliament’spowerstospend.Itisa diminutive
versionof devolutionwhichI’mhappytoChristen“Devo-Dim”.No-one canlookatthe powers
transferredandconclude thatthese will endow the ScottishParliamentwiththe resource itneedsto
create a powerhouseeconomy inanenterprisingnation.We can’tevensetupan Enterprise Zone.
The choice made has negatedourchance of an “EnduringSettlement”.
PoweroverTaxation PoweroverSpending
PoweroverEconomy

2. PowersRetained
Policy Area Proposal Power Transferred Power Reserved
CorporationTax No transferof Power None All areasReserved
Value AddedTax No transferof Power None All areasReserved.Cannotadjust
rates.Police/Fire expensesVATnot
recoverable.
Inheritance Tax No transferof Power None All areasReserved
Capital GainsTax No transferof Power None All areasReserved
National Insurance No transferof Power None All areasReserved
Excise DutyRates No transferof Power None All areasReserved
Defence No transferof Power None All areasReserved
ForeignAffairs No transferof Power None All areasReserved
MacroeconomicPolicy No transferof Power None All areasReserved
InterestRate setting No transferof Power None All areasReserved
The Constitution No transferof Power None All areasReserved
Immigration&Asylum No transferof Power None All areasReserved
Broadcasting No transferof Power None,rightto consultre BBC Charter
MoU to governoperationsof BBC
All areasReserved
CompetitionPolicy - CMA No transferof Power Will have rightto consultationandto
requestEnquiriesandfull CMA
Phase IIInvestigations
Some Changes
Regulationof Energy - OFGEM No transferof Power Will have rightto consultation andto
requestEnquiriesandfull CMA
Phase IIInvestigations
Some Changes
Regulationof Telecoms - OFCOM No transferof Power Will have rightto consultation &to
appoint1 OFCOMBoard Member
UK Secretaryof State can veto Board
Appointment
CrownEstate No transferof Powerovermain
assets
T/f of PoweroverLand & Propertyin
Scotland(Inc.Shoreline)
Defence,Security,Oil &Gas and
EnergyReserved
Offshore Oil &Gas Licensing No transferof Power None All areasReserved
Offshore Oil &Gas Taxation No transferof Power None All areasReserved
Pensions No transferof Power None All areasReserved

3. Policy Area Proposal Power Transferred Power Reserved
BorrowingLimits No transferof Power None All areasReserved
PowerforbodiestoreclaimVAT No transferof Power None All areasReserved
ScottishBudget No transferof Power None,Mustremainbalanced. All areasReserved
Rightto Levynewtaxes No transferof Power None All areasReserved
Tax Rate on Savings No transferof Power None All areasReserved
Tax Rate on Dividends No transferof Power None All areasReserved
Tax Reliefs&Allowances No transferof Power None All areasReserved
Pensions No transferof Power None All areasReserved
Universal Credit Scotlandto doAdminof UC here. Rightto be Consulted.Righttovary
frequencyof payments –notrate.
Rightto pay Landlordsdirectly.
Some changes
Migrant Benefits No transferof Power None All areasReserved
Maritime & CoastguardAgency No transferof Power None. MoU to governoperationsof
MCA
All areasReserved
Oil & Gas Decommissioning No transferof Liabilities None WestminstergotTax receipts&must
carry the costs.
EqualityAct2010 No transferof Power None All areasReserved
Special ImmigrationAppealsCttee No transferof Power None All areasReserved
ProscribedOrganisns.AppealsCttee No transferof Power None All areasReserved
PathogensAccessAppealsCttee No transferof Power None All areasReserved
InvestigatoryPowersTribunal No transferof Power None All areasReserved
Powerto create Enterprise Zones No transferof Power None All areasReserved
Renewableenergyincentives
ROCs,FITs, RHIs
No transferof Power None,will have righttobe consulted All areasReserved

4. PowersDevolved
Policy Area Proposal Power Transferred Power Reserved
Votesfor16-17 YearOlds T/f PowertoScottishParliament Parl & Council ElectionsinScotland ReservedforUK& EU Elections
SetStamp Dutyrates inScotland T/f PowertoScottishParliament Yes None
SetLand Tax ratesin Scotland T/f PowertoScottishParliament Yes None
SetLandfill Tax ratesinScotland T/f PowertoScottishParliament Yes None
SetIncome Tax Rate in Scotland T/f PowertoScottishParliament Powerto setBasicRate +/-3p in£
Powerto setHigherRate +/-3p in £
-cannotvary +/- rate for each band
Powerto setzerorate band
Powerto setPersonal Allowance
BarnettFormulaadjustedforchange
BorrowingfromNational Loan Fund Grant PowertoScottishParliament Yes Limitsetby UK Parliament£300m
BorrowingsubjecttoUK agreement
EstablishaCash Reserve Grant PowertoScottishParliament Yes Limitsetby UK Parliament£125m
BorrowingsubjecttoUK agreement
ScottishBlockGrant Up if ScotsIncome Tax receiptsrise
fasterthan the UK’s.Down if Scots
Income Tax recptsrise more slowly.
Proposed.Potentiallycatastrophicif
oil pricesfall.Shouldbe counter
cyclical if oil price falls - butisn’t.
Potential tocollapse the Scottish
Economywhenoil pricesfall and
expandthe economywhentheyrise.
AirPassengerDuty T/f PowertoScottishParliament Yes BarnettFormulaadjustedforchange
AggregatesLevycanbe altered T/f PowertoScottishParliament Yes BarnettFormulaadjustedforchange
BenefitsSpending(ExceptPensions) T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
BedroomTax T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
NewBenefits Powerto create newBenefits Yes None,notsubjecttobenefitscap
HousingBenefits T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
CrisisLoans T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
CommunityCare Grants T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
Attendance Allowance T/f PowertoScottish Parliament Yes Sec of State forWork & Pensionsto
agree changesinScotland

5. Policy Area Proposal Power Transferred Power Reserved
Carer’sAllowance T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
DisabilityLivingAllowance(DLA) T/f PowertoScottishParliament Yes BarnettFormulaadjustedforchange
Personal Independence Payt(PIP) T/f PowertoScottishParliament Yes BarnettFormulaadjustedforchange
Industrial InjuriesDisabilitiesAllow T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
Severe DisablementAllowance T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
ColdWeatherPayment T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
Funeral Grant T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
MaternityGrant T/f PowertoScottish Parliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
WinterFuel Payment T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
DiscretionaryHousingPayment T/f PowertoScottishParliament Yes Sec of State forWork & Pensionsto
agree changesinScotland
Cost of Renewables
decommissioning
T/f PowertoScottishParliament Yes BarnettFormulanot adjustedfor
change & potentiallyhuge cost
PaydayLoans Shops T/f PowertoScottish Parliament Yes None
FixedOddsBettingShops T/f PowertoScottishParliament Yes None
Social SecurityTribunal T/f PowertoScottishParliament Yes None
Criminal InjuriesTribunal T/f PowertoScottishParliament Yes None
InformationRights Tribunal T/f PowertoScottishParliament Yes None
Onshore oil &gas Licensing T/f PowertoScottishParliament Yes Can’tlevya royaltyon production.
AppointRail Operator T/f PowertoScottishParliament Yes None,canbe a publicsectorfirm
PoweroverRoadSpeedLimits T/f PowertoScottishParliament Yes None
BritishTransportPolice T/f PowertoScottishParliament Yes None,butwhogetsVAT onspend?
EnergyEfficiency T/f PowertoScottishParliament Yes How to Payfor it- Reserved
Fuel Poverty T/f PowertoScottishParliament Yes How to Payfor it- Reserved

6. Further Observations
Under Chapter2: Fiscal frameworkonPage 33 we are toldthat:
“The Scottish Governmentwill not thereforebeisolated fromall risks, so will need toolsto manage
appropriaterisks.If Scotland experiencesan economicshockwhen the restof the UKdoesnot,the
funding modelwould notprovidetheScottish Governmentwith additionalto offsetits lower tax
receipts or higherspending pressures”
We are also told:
“Borrowing could be undertaken to respond to a shock,buta clear plan will be needed to repay the
debtincurred in order to ensurea sustainablefiscalposition”
Remember,we were toldabove thatif Scotland’sshare of income taxes forthe whole UKfallswe
will see acut inour share of the Barnett Formulagrant.Thisis hardlya hypothetical position,itis
preciselywherewe are now.If oil pricesfall jobsinScotlandwouldbe lost.The UKas a whole would
benefitfrom afall inoil & gas prices,these wouldboostcompanyprofitsandwagesinthe restof the
UK. In Scotland,ourshare of income tax receiptswouldfall.Inthe eventof acrisisin Scotland,the
UK’s “EnduringSettlement”couldwell make things worse. A cutto Barnettformulafundingfor
Scotlandwouldfollow ourfall inincome tax receipts.Norwouldwe be able toborrow more without
permission,norwouldwe be able toalterany othertaxesinresponse tothe crisis.
Conclusion
It isdelusional giventhe diminutivenature of the powersoverthe economytransferredunderthis
settlementtosuggestthatthisformulawill be one whichendures.The faultisnotLord Smith’s.He
was there toact as a cipherforthe political partiesroundthe table.He didhisjob.Whatwas put
togetheressentiallyreflectsthe viewsof the Con-Dem-Labcoalitionfora“No” vote.Havingwon
theywere unwillingtoenhance the powersof the ScottishParliamentinanymaterial way. Faced
withthe threatfrom the three amigos towalkaway if theirview didn’tprevail the SNPandthe
Greensgot the bestdeal theycouldinthe circumstances.Thatit isn’twhatthe publicexpectedor
wantedisclearfrom the SNP’smembershipquadruplingsince the referendum.
We are leftwitha Parliamentwhichhaslotsof control overspendingbutlittlesayonhow taxesare
setand the moneyraisedtopay for it.Few thingscan be changedwithoutaconsequence forthe
BarnettFormulanegatingthem. Yetagain,powerdevolvedispowerretained.
We’ve oftenheardthe argumentmade thatthe pro-Unionistpartiesfeara“Neverendum” more
than anything.Clearlythis can’tbe the case.If it wasthey’dhave giventhe peopleof Scotlandwhat
theyaskedforand expected,properFiscal Federalismwithpowersover“tax”as well asover
“spend”. Devo-Max thissettlementain’t.If the pollsare tobe believedthe Con-Dem-Labcoalition
mightbe regrettingtheirlackof magnanimity invictory onMay 8th
.
DerekW Louden
AbbianHouse
TowerStreet
Tain
Ross-shire IV191DY
Tel:01862 892734
Mob: 07876 774412
Email:LoudenDW@aol.com