New Scottish commission will impact on Wales

John Osmond says we should be taking more notice of developments in Labour’s devolution thinking north of the border

As far as I’ve heard an announcement made in Scotland over the weekend has received no coverage in the Welsh media. However, it promises – perhaps threatens would be a better way of putting it – a major impact on Welsh finances in the coming decade.

In a move that surprised some commentators, Scottish Labour leader Johann Lamont signalled that the party is to embrace radical new powers for the Scottish Parliament that would bring wide-ranging control over taxation and benefits to Edinburgh. Options being considered by a powerful new commission on further devolution Lamont has set up include the transfer of powers to raise all income and corporation tax and to gain further control over the welfare system and oil revenues. The motivation is clear. Scottish Labour wants to be able to present a concrete vision of what new powers it believes the Scottish Parliament should adopt before the independence referendum in 2014. This is to let voters know what is on offer following a No vote.

Such an alternative option will be demanded to be set out in concrete terms because many in Scotland have a neuralgic memory of what happened during the run-up to the 1979 referendum. At that time on behalf of the Conservatives the late Lord Home said voters should reject the Scottish Assembly Labour was offering because it was inadequate. Vote No, he said, and the Conservatives will bring forward a better deal. In the event Scotland voted yes, but not in sufficient numbers to satisfy the notorious requirement that at least 40 per cent of the electorate should do so. So the proposed Assembly fell, and nothing was heard again of Lord Home’s promise.

Why is all this relevant to Wales? Because any change on the magnitude being contemplated by the new Scottish commission will have a fundamental effect on the rest of the UK. The present mechanism for funding the devolved administrations via the Barnett formula will be history. Scotland will become semi-detached financially, and a question mark will be raised over the future funding arrangements for Wales and Northern Ireland.

In a recent speech on these issues (here) Carwyn Jones has described the present devolution set-up in the UK as ‘asymmetric quasi-federalism’. If Labour’s Scottish proposals were implemented it would be a giant step towards a more fully-fledged federal, or even confederal system. In these circumstances the relatively generous fiscal transfers into Wales and Northern Ireland which occur under the present system could not be guaranteed

Of course, Scotland has just received a fistful of extra taxation and borrowing powers as a result of the Scotland Act passed earlier this year which implemented the Calman Commission proposals. The Scottish Parliament now has control over 35 per cent of income tax raised in Scotland. This was judged by Calman to be about as far as you could go in devolving tax without interfering with the financial system in the rest of the UK

The further step now being considered would change all that. It would be bound to have a political backwash as well, with the demand for English votes for English laws at Westminster – presently being considered by the McKay Commission – ratched up another notch.

How likely are we to go down this road? Significantly, Johann Lamont’s 11-strong commission includes Duncan McNeill, the Labour MSP who has played a prominent role in the Devo Plus campaign, which has been arguing for a transfer that goes beyond the limited control over income tax that has been conceded by the UK government.

Serving alongside McNeill will be Scottish Labour deputy Labour leader, Anas Sarwar, shadow Scottish secretary Margaret Curran, Holyrood finance spokesman Ken McIntosh MSP, and the Westminster shadow Minister for Work and Pensions Gregg McClymont. Other appointments to the body are: Jackson Cullinane of the Unite union, Scottish Labour chair Vicky Jamieson, Aberdeen councillor Willie Young, and the Scottish Labour MEP Catherine Stihler.

There are also advisory roles for Professor Jim Gallagher, of Nuffield College Oxford who was secretary to the Calman Commission, and Professor Arthur Midwinter, a finance expert from Edinburgh University. These two academics will prepare an interim report on enhanced powers for Holyrood in time for next year’s Scottish Labour conference in the spring, with a final report ready ahead of the 2014 independence referendum.

Sources in Scotland say McNeill’s presence increases the chances of Labour arguing for the sort of settlement envisaged by the Devo Plus campaign, which would see income and corporation tax as well as some responsibility for welfare benefits coming to Holyrood.

Here in Wales I’m told the Silk Commission, which is looking at the finances of the National Assembly and also the case for further powers, has signed off its first report on funding, which will be launched on 19 November. Perhaps it had better take another look at what it is suggesting in light of these developments in Scotland.

John Osmond is Director of the IWA

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