Future of the Union 2: Looking ahead to Little Britain

John Osmond rehearses some dilemmas that will face Wales depending on the outcome of the Scottish constitutional debate

Is anyone thinking about the choice that may face Wales within three or four years time – to follow Scotland in accruing greater accountability and responsibility for taxation, or Northern Ireland in maintaining a relationship of grant dependency with the Treasury in London?

This will be a central question facing the new Welsh constitutional commission that I reported on last week here. However, I don’t think its remit, currently being fought over in Whitehall, has been thought of in these terms.

Yet whatever the precise task that will be given the new Commission, and we will know soon after the House of Commons resumes in a couple of weeks, its programme will to a large extent be driven by events in Scotland. Until quite recently I had assumed that, despite the SNP’s crushing victory in the May Holyrood election, the Scots would be highly unlikely to vote for independence in the referendum that is being promised in three or four years time. Instead, they would opt for what the afficionados call ‘devolution-max’, that is to say for full fiscal devolution with control over taxation, a middle way between the status quo and independence.

First Minster Alex Salmond has set out six amendments he wants to the Scotland Bill. Although these fall far short of ‘devolution-max’ they’re currently stalled in the House of Lords. He wants:

  • The right to levy corporation tax.
  • Borrowing powers for the Scottish Government to be increased from the proposed £2 billion to £5 billion.
  • Access to income from offshore renewable energy.
  • Scottish control over the duties the Scottish Government would raise through legislating for a minimum price on alcohol.
  • Devolution of broadcasting.
  • More influence within the European Union.

If these amendments are not approved then there is every chance that the Scottish Parliament will not approve the Westminster Parliament’s Scotland Bill. As it stands, the main effect of the Bill would be to enact the Calman Commission’s proposals to give the Scottish Parliament ability to vary income tax up to 10p in the £ up or down, but with a corresponding reduction on the Westminster block grant.

The Scottish Parliament’s approval of the Westminster Scotland Bill is necessary because of the so-called Sewel convention in which any Westminster change to Scottish legislation has to be accompanied by agreement with Edinburgh.

The Scottish Secretary of State, Liberal Democrat Michael Moore hinted earlier this year that the Westminster Government reserved its position about the possibility of following the Sewel Convention in relation to the Scotland Bill if it were to be vetoed by the Scottish Parliament. However, if that were to come about it would place the Unionist side heavily on the backfoot when it comes to the independence referendum. The politics would be awful and I cannot see a Westminster government walking into that trap.

Yet the difficulties are plain to see, with the House of Lords Committee Stage of the Scotland Bill now deferred for at least three months, taking us beyond Christmas, while the Westminster Government ponders what to do about Salmond’s six demands. From Westminster’s point of view, apart from allowing an increase in borrowing powers, it has profound difficulties with all of Salmond’s demands.

In fact, the Unionist side of the argument in Scotland looks increasingly in a difficult place regarding the way the argument is unfolding.  In the first place it is locked into a black and white position over independence, either Yes or No. In contrast, in his rhetoric on independence Alex Salmond has softened the edges with his demands on the Scotland Bill and also talking about a ‘devolution max’ option being included in the forthcoming referendum. Increasingly, the Nationalist side in Scotland is wrong footing its opponents by taking ownership of the whole territory beyond the status quo.

Certainly, the ‘Unionist’ side – and in itself that is also becoming a disadvantageous nomenclature in the debate – is being increasingly distanced from ‘devolution max’ where majority opinion in Scotland currently seems to reside. If the debate continues in this vein it is not impossible to imagine the Unionist side losing control of the argument.

In any event the three options that could face the Scottish people in the forthcoming referendum are as follows:

  1. The Status Quo, which could be one of three possibilities by the time we get to the referendum: (i) the present position; (ii) the present position plus the new powers conferred by the Scotland Bill; or (iii) the present position plus the new powers conferred by the Scotland Bill but with Alex Salmond’s amendments included.
  2. Devolution Max – which is the third of the status quo options, but with full fiscal powers over taxation added, including some control of oil revenues.
  3. Independence.

In these circumstances what would the ballot paper the referendum look like? There could be two questions to which you would need to answer Yes or No to both:

  • Do you prefer Devolution Max to the Status Quo?
  • Do you prefer Independence to Devolution Max?

If you want the Status Quo you vote No, No. If you want Devolution Max you vote Yes, No. If you want Independence you vote No, Yes.

All this sounds far too complicated to work out this way, but it gives you an idea of how the Scottish debate is currently unfolding. The point of rehearsing it is to return to the beginning of this article and ask what it means for Wales. In particular, what will it mean for our own Constitutional Commission that will shortly begin work? There are a number of points to make:

  1. Regardless of its terms of reference the Commission is likely to be asked to report by the end of 2013 at the latest.
  2. This means it will report before the outcome of the Scottish referendum which is likely to create a completely changed set of circumstances for Wales, whatever the result.
  3. If the Scots opt for Independence Wales will be left as a member of Little rather than Great Britain, with a completely new context within which to consider its constitutional future.
  4. If Scotland goes for ‘Devolution Max’ there will be a need to completely recast the way funding is distributed to the remaining devolved territories. Only Wales and Northern Ireland will be left in receipt of a block grant. How will that be calculated?

As I asked at the outset, would Wales want to follow Scotland in accruing greater accountability and responsibility for taxation, or Northern Ireland in maintaining a relationship of grant dependency with the Treasury in London?

All this suggests that if the new Welsh Constitutional Commission is not to be hamstrung by irrelevance, even before its membership and terms of reference have been officially announced, it is going to have to think in terms of varying scenarios, and come up with recommendations according to the likely outcomes in each case.

John Osmond is Director of the IWA

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