The Smith Commission Report is short, but packs a big punch

Iain McLean argues that the Smith Commission has astutely wrought concessions from the main political parties involved, and packs quite a punch for a short (28 page) document.

The Report of the Smith Commission on further devolution of powers to the Scottish Parliament is a modest document – only 28 pages long. But it packs a big punch. In summer 2014, Lord Smith delivered the Commonweealth Games in Glasgow without fuss and to budget. By some magic, he has now got all five parties in the Scottish Parliament to agree to a set of proposals, which the UK Government also endorsed as soon as they were published on 27 November.  The process involved some huge compromises, on all sides.

Smith got all-party agreement to:

  • Embed the Scottish Parliament so that it cannot be abolished by an Act at Westminster;
  • Make statutory the rules for inviting one parliament to tread in the patch of the other;
  • Make the Scottish Parliament responsible for franchise and electoral regulation for all Scottish elections;
  • … and for the Scottish operations of the Crown Estate;

On tax-and-spend, the agreement covers the devolution of four taxes and the assignment of revenues from a fifth:

  • Some welfare responsibilities , including the so-called ‘bedroom tax’, and the corresponding block grant;
  • all income tax rates, bands and thresholds (but not the personal allowance, nor income tax on savings and investments);
  • Aggregates Levy and Air Passenger Duty (APD); and
  • assignment of the proceeds of the first 10 percentage points of VAT raised in Scotland (not to devolve VAT because EU law prohibits that).

The agreement promises to retain the Barnett formula for financing the difference between tax raised in Scotland and public spending in Scotland.

So what are the huge concessions that Lord Smith has cajoled out of the parties?

  • The SNP: for two months it was rumoured that they would denounce Smith and walk out. They haven’t. Of course they have attacked Smith’s proposal as inadequate. But they have accepted them. Their first responses from John Swinney and Nicola Sturgeon were eloquently silent about Smith’s recommendation not to devolve North Sea Oil revenue. After 40 years of insisting that it is Scotland’s oil, the SNP has maybe started learning to beware what it wishes for. Especially in a week where the oil price has plummeted, it must be secretly glad that the UK continues to bear the resulting pain.
  • The Labour Party was opposing the full devolution of income tax until the last moment, based on a fear that this would be fatal to Scottish MPs’ powers or numbers at Westminster. Facing an SNP wipeout, they have switched. There will still be enough for Scots MPs to do (declaring war and peace for instance).
  • The UK government parties have made concessions that were unimaginable before the now-notorious September ‘Vow’. They have conceded control of some cherished DWP functions, including the widely hated ‘bedroom tax’, and of the Scottish operations of the Crown Estate. They have abandoned the insistence that the Treasury can unilaterally set the rules for devolution funding. They have accepted that further devolution to Scotland has been delinked from English Votes on English Laws (although the Prime Minister does not seem to have read that bit).

In promising to protect the Barnett formula, they were promising less than their readers may have realised. Contrary to widespread misconception, Barnett does not protect the relatively higher public spending per head in Scotland. If allowed to run on, it erodes it. That will now happen.

The day after Smith reported, there was a powerful English backlash, and hence a Scottish backlash to the backlash (a “frontlash”, perhaps). The Prime Minister immediately said that Smith made English Votes on English Laws (EVEL) more essential than ever, and specifically that Scottish MPs should be banned from voting on UK income tax rates. This despite an explicit promise to the contrary in the report that had been endorsed by his party’s delegates: MPs representing constituencies across the whole of the UK will continue to decide the UK’s Budget, including Income Tax. It is surprising when a Prime Minister does not read a report that his own party has signed off. The PM has proposed that a scheme for EVEL will be ready in the new year, although there are no signs that his Cabinet committee on that difficult subject, headed by William Hague, is ready to report, nor that it has got round some well-known problems with EVEL.

Some of the backlash seems misplaced. APD is a tiny tax (worth about £2.8 bn in the UK, about 0.5% of tax receipts). It is imperceptible: as it is rolled into the price of air tickets, passengers are unaware that they are paying it. And the English airport most affected (Newcastle) is 100 miles of single-carriageway road away from the nearest Scottish commercial airport. But for the sterling efforts of the director of Newcastle Airport, nobody in England would even notice if Scotland abolished APD altogether. And, of course, if it does that, or cuts any other tax, it has to make up the difference elsewhere, or cut spending to match. Smith continues what the Calman Report of 2009 started: the task of making the Scottish Parliament fiscally responsible.

All in all, not bad for a 28-page report.

Iain McLean is Professor of Politics, Oxford University. He is co-author of Scotland’s Choices (2nd edition 2014) and co-editor of Enlightening the Constitutional Debate. This post is from Democratic Audit, which can be found here:

6 thoughts on “The Smith Commission Report is short, but packs a big punch

  1. But surely you forgot to mention the most important aspect of the report ………….. ‘its recommendations will cause neither the UK Government nor the Scottish Government to gain or lose financially simply as a consequence of devolving a specific power.’

    Plus ça change!

  2. Devolution has gone to far.WE are a small Nation and there should only Be ONE Government,every time a concession is made it costs Money. Both Scottish and Welsh Governments should be Abolished.

  3. Politically the Smith Commission report attempts to deliver the Unionist parties’ ‘Vow’ within the very short time scale set. Neat footwork perhaps, but do the recommendations truly measure up to the promises made by Gordon Brown (‘a modern form of home rule… taking us within a year or two to a position of being as close to a federal state as you can be in a country where one nation is 85 per cent of the population’)? In fact Westminster has clung on to control of 70 per cent of the Scottish tax take. What is really relevant will be the electoral progress of the SNP in the next two years. If the SNP really succeeds in inflicting a heavy defeat on Labour next May, as suggested by current polls, then the pressure will be on to go much further. If London refuses, the scene will be set for a further referendum, perhaps within a decade from now. Of course, opinion polls can change but nothing can be predicted with any certainty.

  4. Professor McLean has very neatly summed up the significance of this report and the recent events surrounding it.

    The London media picked up on the income tax story very quickly because it is the first step in changing the financial relationship between Scotland and England forever and significantly was offered by the guardians of the English national interest, the Conservatives.

    Once the principle of all of one tax being devolved to Holyrood is established, then the precedent for devolving other taxes completely is also established. The end journey is the situation espoused on the This Week programme by Alex Salmond, i.e. all taxes will be raised in Scotland and the Scottish Parliament will then pay Westminster for the provision of UK wide services. We are already hearing calls from the Scottish Government for the devolution of corporation tax, given that this will be offered to the Northern Ireland Assembly. How long that journey takes depends on the political circumstances of the time. But a recent Lord Ashcroft opinion poll published on the 1st December makes interesting reading.

    Taking into account undecided voters, the SNP is showing 40% support for the next General Election with Labour on 20%. When undecideds are taken out of the equation, then the SNP are on 49% and Labour are on 25%. The one word of caution is that these results are based on a sub-sample of 92 respondents. However it does show an increase on the Survation November result of 45% for the SNP and Labour showing 23%.

    (The data above has been drawn from an article that appeared in The National on 2nd December.)

    What is the significance for Wales in all of this? Well currently Wales, through the voice of the First Minister, has adopted a completely different stance. His position is that Wales has been a good boy/girl, and that we should be rewarded for doing so since we haven’t been threatening to break up the Union or voting for independence. Therefore offer us exactly the same as Scotland and then we’ll decide which of those powers we want to accept, a negotiating position with maximum wiggle room.

    Welsh Labour currently is in the lead on this by virtue of being in Government. Plaid Cymru’s position has been less realpolitik and more widening the vision thing. The dream of independence has been moved on, since the reallty is that only 3% of the electorate currently supports it.

    Crucial to how these positions are played out will be the General Election result on the night of 7th May. But if the polls are to be believed, then Westminster will be negotiating from a position of relative weakness. If the SNP performs according to the polls, then Labour will be denied an overall majority. And with the threat of UKIP on the way, the Conservatives don’t look well placed to be in a powerful position to negotiate anything, including EU reform. Couple that with the news that weak tax receipts will require an increase in borrowing, thus undermining the loong-term economic plan, suggests that Westminster’s attention will be on tackling the failure to bring borrowing down rather than holding the Union together.

    To pick up on Karen’s point, the crucial wording here is “simply as a consequence of devolving a specific power’. It is very rare in politics for anything to be the simple consequence of anything else. It’s a phrase that shows a desire to act in good faith but any practical assertion of this point would soon become mired in the complexities of a modern economy and the volatility of UK political debate for the foreseeable future.

    So it’s all to play for and I calculate that we’ll be repeating that assertion from now until the General Election and beyond.

  5. Big Punch? 85% of welfare and 75% of taxes remain at Westminster, even IF these recommendations are ever implemented. Pretty pathetic considering 66% of Scots want all powers except defence and foreign affairs, not to mention the 45% of them who desired outright independence.

    Denying Scots the Home Rule they aspire to will undoubtedly lead to the break-up of the UK sooner rather than later. That is something that I would welcome, and therefore Smith is a step in the right direction in that sense.

  6. Dave @
    Good for Scotland maybe, but where does Wales end up? Does it get it’s own enhanced devolution, or does it more likely end up even more under the foot of England? If most people in Wales really don’t want any meaningful independence, then surely gradual (or maybe not so gradual) assimilation is the only alternative, given Wales’ long and ill-defined border and pathetic economy. Welcome to West Anglia?

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