Why Calman Report could bring Salmond and Cameron together

Iain Macwhirter assesses the importance of the recent Calaman report into the funding the Scottish Parliament:

Iain Macwhirter is a Scottish journalist. This report first appeared in the Sunday Herald on 21 June.

The report of the Calman Commission on Scottish devolution will almost certainly never be implemented, yet it remains a landmark document – arguably as important as the 1988 Claim of Right and the 1997 Devolution white paper. By making the intellectual case for a degree of fiscal autonomy so cogently, it has set Scotland on a new course which should lead, at the very least, to a new federal United Kingdom within 10 years.

The original Claim of Right, produced by the Scottish Constitutional Convention in 1988, established the sovereign right of the Scottish people to have a parliament of their choice; Donald Dewar’s sensational white paper Scotland’s Parliament a decade later confirmed the Scottish parliament’s right to legislate on all areas of government except those specifically reserved to Westminster. Now, finally, the Calman Commission’s report has made the case for giving the parliament proper economic powers to reflect its political competence. Constitutional, legislative and now economic – the home rule project is nearing completion.

The most astonishing thing about the Calman Report, though, for anyone who has followed Scottish politics for the last 30 years, is that its findings were unanimous. Even the Scottish Conservatives, who bitterly opposed devolution 10 years ago, have now put their names to the most radical home rule document in a decade. I had to pinch myself, and so did the former Tory Scottish secretary, Lord Forsyth, who came out of political retirement to condemn it. He knows what Calman means even if Annabel Goldie, the Scottish Conservative leader, doesn’t.

Meanwhile, the Scottish National Party, true to form, disowned it. It is an ironic footnote to modern Scottish history that the SNP has boycotted all three of devolution’s landmark reports, while also being the beneficiary of their intellectual groundwork. The Nationalists will also, I suspect, ensure that the Calman proposals aren’t introduced, at least in the form set out last week.

So why, if it won’t be implemented, is Calman so important? Well, firstly because of its intellectual authority. This is not only a serious and scholarly piece of work, it is also a model of clarity – hopefully the last word on the endless debate about the Barnett Formula. It eschews fiscal metaphysics and argues in plain language why, after 10 years, it is necessary for Holyrood to move from being a pocket-money parliament dependent on handouts from London to a grown-up legislature responsible for raising money as well as spending it. Barnett is toast, even though its crumbs may still be around a while yet.

Calman argues that any new fiscal regime must meet the requirements of equity, autonomy and accountability. It must be fair to all regions, redistributing from wealthier to poorer; it must give the Scottish parliament freedom in matters of taxation, spending and borrowing; and it should make the parliament responsible by raising the funds to implement its policies, from free prescriptions to road bridges. Sir Kenneth refers to another criterion which is equally important: transparency. The new fiscal regime should make much clearer to Scottish voters how much is spent in Scotland and how much is raised in taxation from all sources, including revenues from North Sea oil. These principles transform the Scottish parliament into a genuine national legislature – like a child riding a bike, this is the moment when the stabilisers are taken off.

The concrete proposals are more controversial. Calman said the Scottish Parliament should have the power to levy a “Scottish rate” of income tax of up to 10p in the pound; that Holyrood should have its own standalone taxes such as stamp duty; that it should have the power to create its own taxes, subject to Treasury approval; and that it should be able to borrow, like local authorities, on an annual basis. It also asserts the right of the Scottish parliament to introduce new local taxes, such as local income tax, without any financial penalty from Westminster.

There are numerous questions here: why only half of income tax if the principle is accountability? Why should borrowing powers be constrained annually? Why are oil revenues not devolved if stamp duty is? Calman’s basic argument is that it is in Scotland’s economic self-interest to remain in a reformed “social union” with the UK. Oil revenues for example can fluctuate from £1bn to £12bn in a few years, wreaking havoc on the Scottish budget. Better, according to Calman, for revenues to be “pooled” and handed back to Scotland on an annual basis through a son of Barnett.

Now, critics argue that it should really be down to the Scottish parliament to decide whether or not it can cope with fluctuations in revenues. The SNP say that by denying Scotland autonomy in this important area, Calman contradicts its own principles. Actually, the report makes clear that while it doesn’t think oil revenues should be devolved “at this stage”, it does not rule out the creation of an oil fund in future. These and other issues, like corporation tax, will provide a decade of debate, but conducted on the basis of the intellectual framework established by this report.

So if it’s so good, why won’t it be implemented right away? Well, for one reason, because the economic and financial climate has changed beyond all recognition. Calman was conceived during the boom years of devolution, when money was pouring into the Scottish government faster than it could spend it. The idea of setting up a form of tax-sharing, with a new apparatus to administer it, seemed a perfectly reasonable proposition when public spending was rising year on year, but it becomes a nightmare when it is falling off a cliff. Gordon Brown may talk about introducing the new system before the next election, but that is surely wishful thinking. A reform of this complexity would require the active support of the Scottish government, and if the SNP are still in charge, that support will not be forthcoming. The SNP will demand an oil fund before they enter the room.

More likely Calman will be the starting point for negotiations between Alex Salmond and an incoming Conservative government under David Cameron. Eager to address the West Lothian question and under pressure from English Tories to curb spending in Scotland, Cameron might well consider full tax autonomy for Holyrood in exchange for the abolition of Barnett and a reduction in the number of Scottish MPs. And he can use the arguments supplied by a Labour-inspired committee. So, as well as making an honest person of the Scottish parliament, Calman could be the spark that leads to a constitutional transformation in Westminster.

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