A Moment for Reflection and Radicalism
The Scotsman, May 26th 2010
The first Queen’s Speech of the Con-Lib Dem government provided the opportunity to show how much they understand Scots (along with Welsh) sensibilities. We are different up here, driven by different political motivations, and with an entirely different set of political dynamics. So apparently the key word is ‘respect’, despite its overuse and misuse by the Blair Government for dodgy initiatives involving czars!
Whatever we think of the Calman Commission’s proposals the next stage of Scotland’s constitutional journey has begun. No matter the road we take the direction will be clear: towards greater fiscal autonomy and responsibility.
Calman’s tax powers are widely seen as the weakest and most flawed part of the package so it is not surprising that the Con-Lib Dem coalition have hesitated on this.
Danny Alexander, Secretary of State for Scotland, and David Mundell, his Deputy, have made it clear where they stand on the Calman tax powers. They have gone out of their way to give no clear ‘commitment’ to implement the powers, while also saying that it was their eventual ‘intention’ to do so if everything goes according to plan.
They underlined as pivotal in this discussions with the Treasury and Scottish Government – the latter of which does not have a ‘veto’. It is no coincidence that these are two of the biggest opponents of the Calman tax powers for opposing reasons: the Treasury because they see them as a threat and too radical, and the SNP because they don’t think they go far enough.
The Calman tax powers are arguably the most ill-conceived proposals ever put together in modern Scotland. They would damage Scotland’s finances and economy, not increase fiscal autonomy, undermine fairness and not in any way advance transparency. Importantly, for a pro-unionist document they would exasperate potential conflict between the Scots and UK Governments over assessing the Scots tax take, crucial in how you estimate how much of the Block Grant the UK Government withholds.
Some have gone as far to stretch the hyperbole and claim that the Calman tax proposals could be as disastrous as the poll tax. They point out that the tax powers have the potential to deflate the economy, or reduce the amount of money coming to Scotland, while aiding Treasury coffers.
The Calman proposals are not a radical step in the direction of full fiscal autonomy. They don’t allow for control over tax revenues and rates, off-shore revenues and the issue of oil, regulation and competition policy. Most crucially they only give the Scots the right to raise monies on one major tax: income tax, ignoring all the others and in particular, VAT and corporation tax.
Calman has for all its faults begun a worthwhile debate, but we need more research and work on the detail of different schemes of fiscal autonomy. The two main options are clear. The first is full fiscal autonomy along the Basque Country model where Scotland raises all its taxes and pays a portion back to central government. The second is assigned revenues where Scotland collects an agreed proportion of all taxes.
Both of these approaches are much bolder, simpler and fairer than Calman. The Calman Commission has started a debate we now need to build on – improving and moving beyond its flawed tax proposals.
This may sound like heresy but we have been here before. The Scottish Constitutional Convention is hailed by many as the epitome of consensus and politicians working together for the better good.
Yet, its final devolution plans were in many respects, cautious, unsure proposals, hesitant on how far they could push Westminster and in particular, itemising one by one the devolved powers coming back to Scotland. Instead, the Scotland Act 1998 in a much more bold and far-reaching way, listed the powers which were to be reserved at Westminster, which meant that everything else was devolved. Such a radical approach would well serve us again today.