Eurfyl ap Gwilym looks at the Strathclyde Commission and asks what it means for Wales.
The Conservative Party in Scotland established in 2013 a commission under the chairmanship of Lord Strathclyde to consider which further devolutionary steps, if any, it should take if there is a No vote in the Scottish referendum in September of this year. In its recommendations published on 2 June the Strathclyde Commission has sought to strike a new balance between the devolution of additional powers to the Scottish Parliament whilst maintaining the union.
Under the Commission’s proposals the Scottish Parliament would have greatly enhanced powers over income tax. With the exception of the personal allowance threshold and income tax on dividends and interest payments, the Scottish Parliament would have power to set both the thresholds and the rates of income tax. There would be no sharing of income tax with the UK Government and there would be no lock-step. Thus Scotland would gain the ability to implement an income tax system best suited to the needs of the people of Scotland and one which is much more far-reaching and flexible than the system introduced under the Scotland Act 2012 or that proposed for Wales under the current Wales Bill going through Parliament.
The Commission’s proposals in the case of income tax are a marked departure from current arrangements in Scotland which were only enacted in 2012 following the Calman Commission (yet another commission). The Conservative proposals for income tax compare favourably with the half baked proposals of Labour which promises, in the event of a No vote, that the Scottish Parliament could raise higher income tax rates but not reduce them unless it reduced the standard rate by the same amount as well. Such a model would ensure the continuation of the discredited lock step albeit in a more limited form. To make matters worse under Labour’s proposals the tax thresholds would still be determined in London. As the Conservatives have claimed under Labour’s proposals the Scottish Parliament would still be a ‘pocket money parliament’.
The Strathclyde Commission also recommends that serious consideration be given to revenue from Value Added Tax being partly devolved on an assigned basis. The Commission notes that it would have favoured the devolution of VAT but that such a move is outlawed by the EU. The Commission recommends the devolution of Air Passenger Duty: this follows the recommendation of the Silk Commission in the case of Wales but does not limit such a change to long haul flights. The Commission was against the devolution of national insurance, capital gains tax, corporation tax and inheritance tax.
No mention is made of the way in which the block grant and changes to it are determined. Given that the Holtham Commission estimated that Scotland was over-funded to the tune of £4,000 million a year perhaps this is not surprising. The Labour Party’s commitment to retain the Barnett formula will also have encouraged the Strathclyde Commission to leave the subject well alone.
In another move the Strathclyde Commission recommends the devolution of housing benefit, attendance allowances and possibly in the future other supplementary welfare benefits closely related to devolved policy areas.
The Commission recommends the establishment of a Committee representing the parliaments and assemblies of the UK ‘to consider the evolving role of the United Kingdom, its parliaments and assemblies and their respective powers, representation and financing’. Although the Commission notes the McKay Commission which was established by the UK Government to address the ‘West Lothian question’ and urges that all MPs, wherever they are drawn from, be treated as equal, the Commission fails to address the question of whether it is acceptable for MPs from countries with devolved administrations to be able to vote on matters to do exclusively with England. This issue will continue to fester.
In a swipe at the current Scottish Government the Commission recommends that ‘the centralisation of powers from local to central government should be reversed and real devolution should be given to individuals with a greater role for civic society and local government’.
Where does this leave Wales? As was pointed out when the Silk Commission published its first and second reports Wales is once again in danger of being left behind and disadvantaged. The current Conservative-LibDem coalition has weakened the Silk Commission’s income tax proposals by insisting on the lock step which makes the income tax sharing powers proposed by the Silk Commission of very limited value. Given the Conservatives change of heart in the case of Scotland is it too late for the coalition in Westminster to amend the current Wales Bill to remove the lock step?
At the same time Labour is running scared of devolving income tax powers to Wales and is insisting on reforming the way Wales is funded as a precondition knowing full well that this is unlikely to happen. While Labour has committed to retaining the current funding formula in the case of Scotland which according to calculations by the Holtham Commission results in an over-funding of ~£4,000 million or £750 per person per year it has resolutely failed to commit to any reform of funding in the case of Wales which according to the same commission results in an underfunding of ~£400 million or £130 per person per year.
The conclusions that can be drawn from the manoeuvrings of the unionist parties in the run-up to the Scottish referendum are that if there is a No vote in September then if the Conservatives win the 2015 UK General Election there will be further, substantial fiscal devolution to Scotland. If Labour wins then there may be further fiscal devolution in terms of legislation but in practice it will be worth little. The Conservatives in their fiscal proposals for Scotland have displayed a much more far-reaching, pragmatic and realistic approach to devolution within the union compared with Labour’s ideological approach which still hankers after its last century model of a centralised, UK state.