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panel 1 300In 1988, a Scottish Consitutional Convention was proposed, leading some years later to a 'Claim of Right' for a Scottish Parliament. After a successful referendum in 1997, a chain of events took place that saw the creation of the Scottish Parliament in 1999.

The Scottish Parliament is a 'devolved' body within the UK, and the powers it weilds have been negotiated over many years from the UK government.

The 2014 Referendum on Scottish Independence catalysed a new release of devolved powers by virtue of 'The Vow' - an agreement signed by the leaders of all three Westminster Parties to grant Scotland 'Home Rule' or 'Near Federalism' if Scotland voted to remain as part of the United Kingdom. The Smith Commission was set up to examine how this would be delivered. Sadly, the powers that have been devolved from the Smith recommendations fall woefully short on what was guaranteed, so negotiations will, no doubt, continue for the foreseeable future.

The powers that have been proposed and agreed will take effect over the life of the next Parliament in Holyrood.

This article covers a brief history of how devolution started and where it is today. It also lists the various devolved powers - both in current use and those that will come into force in the near future. Facts and figures accompany the description of the major new Tax and Welfare powers to be introduced next year.

 

The Establishment of the Devolved Scottish Parliament

We will start with a brief look at the events that have shaped the creation and function of the current Scottish Parliament.

Devolution Timeline 1988 – 1999

Scottish Parliament Logo 200

 

The Devolution of Powers

The Scottish Parliament and Scottish Government were established in 1999 by an Act of the UK Parliament.

Under this Act (the Scotland Act 1998) a range of powers were transferred (devolved) to Scotland. Table: 1 shows these devolved powers and Table: 2 shows the powers that were retained by the Westminster Government.)

 

Table 1: Major Devolved Powers

  • Agriculture, Forestry and Fisheries

  • Culture and Creative Industries

  • Economic Development

  • Education and Training

  • Fire Services

  • Health and Social Services

  • Housing

  • Justice

  • Local Government and Local Government elections

  • Social Work

  • Sport

  • Tourism

  • Transport (excluding most of the power over Aviation, Shipping, Road Traffic Law, HGV and Bus Driver, Vehicle and Operating Licensing

 

Table 2: Major Reserved Powers

  • Broadcasting

  • Constitution

  • Consumer Protection

  • Defence and Security

  • Employment

  • Equal Opportunities

  • Energy (excluding the promotion of Renewable Energy Generation and Energy Efficiency)

  • Economic and Monetary Policy, including Currency and Interest Rates

  • Foreign Policy

  • Immigration

  • Social Security

  • Telecommunications

  • Trade and Industry

 

Since 2000 there have been amendments made to Schedule 5 of the Scotland Act 1998 which have devolved power to the Scottish Parliament, for example, in 2004 the power to legislate in relation to the promotion and construction of railways, which start, end and remain in Scotland.

In addition, further powers have been devolved to Scottish Ministers since 2000. These powers have included responsibility for the Scottish rail franchises, initially transferred in 2001. Whilst the functions are now exercised by Scottish Ministers, the subject matter remains reserved.

In 2012, following the recommendations of the Calman Commission, a further transfer of powers took place. (Table: 3)

 

Table 3: New Powers under the Scotland Act 2012

  • Air Weapons (power to make law relating to the use and regulation of most air weapons in Scotland)

  • Borrowing Powers up to £2.2 billion (Capital) and £500m (Revenue)

  • Drink Driving alcohol limits

  • Scottish representation on Boards of the BBC and Crown Estate

  • Landfill Tax from 1 April 2015

  • Scottish Rate of Income Tax (SRIT) From 1 April 2016. The UK Government will deduct 10p in the £ from Basic, Higher and Additional rates of income Tax and the Scottish Parliament will have the power to levy a Scottish Rate across these three bands.

  • Stamp Duty Land Tax (SDLT) from 1 April 2015

 

 

Further Powers for The Scottish Parliament – The Smith Commission

The outcome of the Scottish Independence Referendum in 2014 was a vote for Scotland to remain in the Union. The final days of campaigning were hectic and the polls showed both sides neck and neck. In the last few days, a poll showed the Yes campaign (those who wanted independence) ahead of the No campaign (those who preferred to stay within the Union). This was the first time the Yes campaign had out-polled the No campaign. As a result, the three leaders of the main Westminster Parties signed a pledge to deliver substantial new powers to Scotland in the event of a NO vote. 'Near Federalism' or 'Home Rule' was promised, allowing Scotland autonomy within the United Kingdom, offering the 'best of both worlds'.

The vote was 'NO' and Scotland remained as part of the Union.

On the morning of the day after the vote, David Cameron, Conservative Prime Minister of the UK announced the creation of a Commission to determine the shape and form of the new powers that were promised. The Commission was chaired by Lord Smith of Kelvin and became known as 'The Smith Commission'.

The Commission was populated by two representatives from each of the Holyrood Political Parties - with the Noble Lord chairing the proceedings. This resulted in 11 members in all. Negotiations were conducted among these 11 members and representations were received from a multitude of external bodies during the formation of the eventual proposals.

The recommendations from the Smith Commission were somewhat watered-down from the enthusiastic promises made during the referendum - and the Scotland Bill that followed watered them down even more.

The timeline (below) shows the main events since the SNP majority in Holyrood, 2011. Due to a manifesto commitment, the SNP promised (and delivered) a referendum on Scottish Independence which took place on 18 September 2014. From that event, the Smith Commission and the Scotland Bill followed.

Devolution Timeline 2011 – 2016

 

 

The main areas of further devolution proposed by Smith and the Scotland Bill 2015-16 are taxation and welfare (Table 4).

 

Table 4: New powers under the Scotland Bill 2015-16 [As at 12 November 2015]

  • Air Passenger Duty and Aggregates Levy

  • Partial assignment of VAT Revenues

  • Income Tax (including setting rates and thresholds)

  • Consumer Advocacy and Advice

  • Crown Estate (Management of, and revenues from, its economic assets in Scotland)

  • Scottish Parliament elections and the Local Government Franchise. Includes regulation of Campaign Spending and controlled expenditure on Scottish Parliament elections.

  • Proposal to introduce specific equality requirements for public bodies

  • Onshore Oil and Gas Licensing

  • Additional health power (abortion)

  • Employment Programmes (power to create employment schemes for those at risk of long-term unemployment and to help disabled people into work)

  • Gaming Machine licensing powers (The powers apply specifically to controlling the number of Fixed-Odds Betting Terminals)

  • Energy Efficiency and Fuel Poverty schemes

  • Transport, including road signs, speed limits and the functions of the British Transport Police

  • Reserved Tribunals (except Special Immigration Appeals Commission and Proscribed Organisations Appeals Commission)

  • Welfare including control over certain benefits outside of Universal Credit (UC) and the power to vary the housing element of UC and to vary UC payment arrangements

 

Let's look at the major new powers in detail.

Taxation controlled by the Scottish Parliament under the Scotland Act 1998, Scotland Act 2012 and proposed under the Scotland Bill 2015

Chart 1: Percentages of Power over Taxation

taxes 01a

Chart 1 shows the percentages of power over taxation according to the previous and current Scotland Act.

Under the Scotland Act 1998, the Scottish Parliament had power over taxation that represented less than 10% of devolved expenditure in Scotland. This will increase under the 2012 Act to around 21% of expenditure and to around 36% when the (current) provisions in the Scotland Bill come into effect.

If assigned revenue from VAT is included, Scotland will receive revenue equal to 48% of expenditure.

 

 

Chart 2: Taxation Breakdown

taxes 01b

Chart 2 gives a breakdown of how the tax is assigned for each Act.

Council Tax and Business Rates were devolved in the 1998 Scotland Act. In the 2012 Act, the additional Tax Powers of Landfill Tax, Land and Buildings Transactions Tax and Scottish Rate of Income Tax (SRIT) were devolved.

The SRIT is an unweildy power that allows for the setting of a Scottish Income Tax Rate, but it does not allow the setting of rates for individual Tax Bands. Instead, any rise or fall in the SRIT affects all bands with the same percentage. This means that a penny on the rate will convert the Basic Tax Band from 20p to 21p - a rise of 5%. The Higher Band Rate must also increase by a penny from 40p to 41p - a rise of 2.5%. This method disdavantages lower paid earners as they part with a higher percentage of their earnings.

SRIT will be replaced by full income tax powers which will allow the setting of Bands and Levels on an independent basis. This will allow the Scottish Government to design a fairer system for taxpayers. The effect of this change is reflected in the Scotland Bill 2015-16 column.

An aggregates Levy and full control of Air Passenger Duty will be devolved in 2017.

 

 

Note: All figures are based on GERS 2013-14. The Scotland Bill 2015-16 figures do not include assigned revenue from VAT in Scotland. Including the assigned revenues from VAT would increase the approximate proportion of devolved expenditure under the Scotland Bill to 48%. 

i  Total current revenue includes a geographic share of North Sea revenue
ii  Totals are the sum of the rounded tax revenues
iii  Under the Scotland Bill 2015-16, income tax will replace the Scottish Rate of Income Tax

 

Welfare

Most welfare benefits are reserved to Westminster and will remain reserved.

These include:

UC is replacing a number of existing benefits and is being introduced on a phased basis across Scotland.

The Scottish Government currently provides welfare support in regard to Council Tax Reduction (previously Council Tax Benefit) and the Scottish Welfare Fund (previously the Community Care Grant and Crisis Loans).

The Scotland Bill will devolve power over a number of welfare benefits to Scotland, as listed below, along with proposals to:

The main benefits, and how much was spent on them in Scotland by the UK Government in the year 2013-14, are shown in the following chart. The right hand column shows which benefits are proposed by the UK Government to be devolved to Scotland. If these benefits were to be devolved then the Scottish Parliament would have control over 17% of spend on benefits in Scotland.

 

Chart 3: Welfare Benefits after Further Devolution

benefits

Note: These figures are based on UK benefit spend in Scotland for the year 2013-14. UC spend has been estimated by adding together the benefits it will replace. UC will replace means-tested benefits for people of working age (that is: housing benefit, income-based Jobseekers Allowance, income-related Employment and Support Allowance and income support) and tax credits for working-age families.

 

Negotiations with the Treasury and Westminster

Currently, a Fiscal Framework has been agreed in principle between the Scottish and UK governments. This will be required in order to implement the proposed powers from the Scotland Bill. Since these new powers are nothing like 'Home Rule', they only provide partial devolution in important areas like Tax and Welfare. This means there must be a reliable method of determining how Scotland will be funded from the non-devolved Tax and Welfare systems. The Smith proposals protect the Barnett Formula and also demand that a policy of 'no detriment' to either government is observed. This has introduced a high degree of complexity into the fiscal arrangements between Scotland and the UK and the agreement of a satisfactory framework took considerable time.

Although the negotiations between the UK Treasury and the Scottish Government have settled on a framework, it still has to be authorised by the Scottish Government Devolution Committee - a cross party body that will examine the proposed fiscal framework in detail.

The need for a fully researched framework is crucial for the wellbeing of Scotland's finances over the next decade. Sadly, the Westminster side have been up to their usual tricks and would have robbed Scotland of £7bn if their proposals had gone unchallenged (the 'no detriment' factor was conveniently ignored). Thankfully, the Scottish Government negotiators (lead by Deputy First Minister, John Swinney) saw the problem and forced Westminster to accept an alternative structure that dismissed the £7bn.

The Devolution Committee will now scrutinise the full set of proposals and once they are satisfied with the framework, will recommend its adoption. If they perceive any problems with the proposed framework, the negotiations will have to be re-opened and a compromise reached.

 

The Members of the Devolution (Further Powers) Committee

committee members

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