The next steps on the path of Scottish devolution

The most notable changes the Government has proposed are in the domain of welfare. The earlier version of the bill was due to devolve a number of benefits, mainly relating to the sick and disabled, but the new amendments will empower the Scottish Government to top up the major working age benefits being merged into Universal Credit including job seekers allowance, working tax credit, child tax credit, and income support. Powers to top up housing benefit were in the original bill. Other notable amendments include the devolution of abortion policy and aspects of equalities policy. The fiscal devolution parts of the bill remain largely unchanged and mean that the Scottish Parliament will be able to set all income tax rates and bands on earned income (but not on savings). Air Passenger Duty is also being devolved and half the revenue from VAT raised in Scotland will be assigned to the Scottish Government. The borrowing powers of the Scottish Government will also be extended. The Government’s amendments also contain a new provision that the Scottish Parliament could only be abolished following a referendum, rather than by simple Act of Parliament. This is symbolically important, as it represents a de facto declaration by Westminster that undiluted parliamentary sovereignty is no more. But it is in practical terms irrelevant, as the abolition of the Scottish Parliament by a government at Westminster is no more realistic a policy proposition than an invasion of France to seize back Calais. Unsurprisingly, indeed perhaps inevitably, the two governments have clashed over the adequacy of the revised bill. Secretary of State for Scotland David Mundell argued that the government’s new proposals “put beyond any reasonable doubt for any reasonable person that the Government is delivering the Smith Agreement”. By contrast, Scotland’s Deputy First Minister John Swinney claimed that the amendments “still fail to deliver Smith, and still fail Scotland.” Post-referendum rush The truth is that the Smith agreement was a political deal struck in a post-referendum rush, meaning that much of the detail of how the new powers would be implemented was not considered. A scriptural argument about whether the bill adheres to every last chapter and verse of Smith therefore does not make for the most productive debate. Of course, politics is politics and the two sides will continue to battle over the detail of the bill as next May’s Scottish Parliament election looms. But ultimately, the two governments will have to work together to pass and implement the bill and then to operate the new settlement. As far as its parliamentary progress is concerned, the bill will be subject to the legislative consent convention (itself codified in the bill), meaning that the Scottish Parliament holds a veto on its passage. History suggests that the SNP may criticise devolutionary proposals but in the end usually back them as being better than nothing and a step in the right direction. This was the approach taken to the far more limited Scotland Act 2012. The complicating factor this time round is that the bill is dependent on the two governments reaching agreement on a new fiscal framework. The Scottish Government has said that without satisfactory resolution, it will not give its backing to the bill. Issues to resolve include how the Scottish Government’s budget will be calculated and adjusted in light of the devolution of tax powers, what rules should govern its use of the new borrowing powers, and what sort of intergovernmental machinery should govern the fiscal settlement. Negotiations are ongoing, but will not now be completed in time for the announcement of the Spending Review on 25 November. Assuming agreement is reached in time for the bill to pass before May 2016, the next challenge will be for the governments to work together on implementation of the new settlement. Unlike in wholly-devolved areas such as health and education policy, tax and welfare powers will be divided and shared in a complex and interdependent way between Westminster and Holyrood. Consequently, the two governments will have to work closely together to ensure that necessary machinery and capacity is developed for this new era of differentiated tax and welfare systems. HM Revenue and Customs is already preparing to act as the agent for the Scottish Government in administering the Scottish rates of income tax. The Department for Work and Pensions is likely to take on a similar role in the delivery of benefits that the Scottish Government may choose to vary or top-up. These changes raise a set of governance challenges around data sharing, accountability and management of the interface between reserved and devolved elements of the system. All this must be managed in the context of continuing political disagreement on fundamental aspects of welfare and economic policy, not to mention the constitutional future of Scotland. But in the interest of tax payers and welfare recipients, it is to be hoped that the two governments rise to this challenge.