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No means what?

Proposals for further devolution after Scotland’s referendum.

This week’s joint announcement by the three unionist parties makes clear that whichever way Scotland votes on 18 September, change is coming to the constitutional settlement of Scotland and the UK. A new Institute for Government project explores the challenges of providing effective government as relationships between London and Edinburgh move into a new phase.

As the independence referendum draws near, the three pro-Union parties have published a joint statement in support of further devolution in the event of a no vote on 18 September. This follows the publication of separate proposals by the three parties over recent months. The joint statement highlighted the areas of crossover between the three parties and promises to "strengthen further the powers of the Scottish Parliament, in particular in the areas of fiscal responsibility and social security" in the event of a no vote. The parties agree on the general direction of future devolution: all believe that Scotland should raise more of what it spends and propose transfer of tax raising powers to Holyrood; all agree to some devolution of welfare policy and spending. However, there remain significant differences in what the parties are offering, which means that the shape of any new devolution settlement would depend upon negotiation after the referendum. The Liberal Democrats’ Campbell II report and the Scottish Conservatives Strathclyde Commission would give the Scottish Government full control over both the rates and bands of income tax, whereas Scottish Labour’s Devolution Commission proposes a more limited power for Holyrood to vary the rate of income tax. The Liberal Democrats would also devolve Air Passenger Duty, Capital Gains Tax and Inheritance Tax, as part of a wider federal settlement: under Labour these taxes would remain reserved, while the Conservatives propose devolving the former but not the latter two taxes. The Institute for Government will bring together a panel of speakers from each of the three parties to discuss the differences and similarities between their positions at a public event on 1 July. Of course, in addition to any new powers that might be devolved post-referendum, a number of significant reforms are already in train. The terms of the Scotland Act 2012 are yet to come into force: from 2016 there will be a Scottish rate of income tax. The Act also extends Scotland’s borrowing powers and fully devolves both landfill tax and stamp duty. The welfare reform agenda has also already necessitated the devolution of aspects of welfare policy – such as the discretionary social fund (now the Scottish Welfare Fund) and the Council Tax Reduction scheme. The Wales Bill also begins the process of fiscal devolution to Wales, while in Northern Ireland there remains cross-party support for the devolution of corporation tax. What this all means is that while attention naturally focuses on the referendum itself, there is also a need for thinking about how the post-referendum period should best be managed in the interests of all sides. The four governments of the UK (as currently constituted) will need to continue to cooperate on overarching issues that affect all citizens (such as serious organised crime and climate change), as well as working effectively on projects and programmes that do not stop at national borders (electricity networks, road and rail links and marine policy). Even if Scotland votes against independence, thought will need to be given as to whether current mechanisms designed to facilitate inter-governmental relations, such as the Joint Ministerial Council and its various sub-committees, should be reformed or strengthened – especially if major new policy areas are devolved away from Westminster. Several Whitehall departments must also be prepared for change. For instance, HMRC and DWP – which are accustomed to managing uniform UK-wide systems – may need to adapt to more decentralised tax and benefits regimes. These are among the issues that the Institute for Government is exploring as part of a new ESRC-funded project called Governing After the Referendum. As part of this work we are assessing how well the different governments work together at present, considering how their relationships may change and how to ensure continued effective government across these islands in the months and years after the referendum.

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