The Smith Commission’s report on Scottish devolution will prove a momentous change in the UK’s constitutional history. Unfortunately it defies the relatively simple headlines put forward by the media in this age of sound bytes; it deserves more scrutiny not just about what is in it, but about what it may mean including beyond Scotland.
The momentous change is essentially the proposal that the Scottish Government and Parliament be made permanent in legislation – in other words that absolute Parliamentary sovereignty be ended and that, in the case of Scotland, national sovereignty effectively be pooled between Westminster and Holyrood. This constitutes a clear shift towards federalism, which may soon be matched in Wales (it is effectively already the case in Northern Ireland but in a different manner, as its devolved institutions are formed under an international agreement).
Structures under a Memorandum of Understanding are required to manage differential tax and welfare systems. Their establishment sets a precedent which could then be repeated in Northern Ireland and Wales.
Income tax (on earned income, not dividends or savings), aggregates levy and air duty are fully devolved in the report. The latter of these was already the case in Northern Ireland, but Scotland may now compete. Income tax is not as dramatic as it first seems – it accounts for only about a quarter of all UK tax receipts and the likelihood is Scotland will not differentiate significantly (it hadn’t used its 3% option either way).
VAT and Corporation Tax, which had drawn attention in Northern Ireland, are not devolved. An announcement on the latter will follow next week, but it remains hard to see Corporation Tax being reduced in Northern Ireland without Scotland demanding and getting the same right soon after (as has happened with air duty).
However, the first ten points of VAT are assigned to the Scottish budget, which has the effect of raising the Scottish budget in the case of raised VAT receipts in Scotland comparative to the rest of the UK, and vice-versa – a similar system operates in Germany.
The National Minimum Wage remains reserved, so common UK-wide. This limits potential for “Living Wage” campaigns in any particular part of the UK.
Notably, Scotland takes full responsibility for any differential in administrative costs from applying different tax rates. That is a precedent which will be noted in Northern Ireland and Wales.
Scotland gets almost every individual aspect of working-age welfare devolved except the biggest, namely Universal Credit. It is entitled, even with Universal Credit, to use its housing powers and to vary the timing of payments. This is effectively the same as Northern Ireland, except Universal Credit is devolved there too in theory, right through to the requirement that Scotland meet any additional costs (administrative or otherwise) of doing things differently, although the concept of “parity” (making Scotland pay for its entire system if it does things differently) would not in effect apply.
Pensions and benefits to do with children/parenting are not devolved in the report. They are devolved to Northern Ireland but it is a convention (albeit one challenged by some Unions) that those powers are not applied and that pan-UK arrangements are maintained.
Scotland has discretion to introduce extra welfare payments in devolved areas with no prior consent necessary. A similar idea has been proposed using Northern Ireland’s powers to break the current welfare deadlock.
Other than pooled sovereignty, perhaps the most significant move in the report is the consultation with devolved Ministers on European issues and potentially even the representation of UK interests by devolved Ministers (thus access to the Council of Ministers). This applies to Northern Ireland (and, where appropriate, to Wales) just as to Scotland.
Most of the administration of the Scottish Parliament itself and of elections to it (and Scottish Councils) is fully devolved, but notably changes to some electoral arrangements (e.g. the number of MSPs) require a two-thirds super-majority to pass. That same super-majority has been proposed by some to replace “cross-community” (designation) votes in Northern Ireland.
The role of the Joint Ministerial Committee is enhanced and a joint Parliamentary body is proposed. Are there lessons to be learned from the North-South Ministerial Council on the island of Ireland, which does something similar?
The holding of Scottish Parliamentary elections in the same day as UK General elections (or any other elections) is prohibited. This is not the case in Wales or Northern Ireland, and indeed Northern Ireland Assembly Elections and Council Elections were held on the same day in 2011.
Scottish Ministers gain a consultative role in areas of broadcasting and regulation. These are markedly different across the UK. Regulation is devolved in Northern Ireland in some cases (Ofcom operates there but Ofgem does not; in the case of electricity, regulation is carried out on an all-Ireland basis in effect); S4C is a unique arrangement in broadcasting in Wales.
Comsumer advice and protection and certain aspects of supplier obligations with regard to energy efficiency are devolved to Scotland in the report. These are already devolved to Northern Ireland (often in the case of energy with a cross-border aspect).
Most aspects of employment are effectively devolved to Scotland in the report, but Equality is not. There is a view that abortion should be devolved to Scotland. Equality and abortion are both devolved to Northern Ireland.
Speed limits are proposed for devolution to Scotland in the report. They were already devolved to Northern Ireland.
The report is fairly comprehensive and sets some very interesting precedents. It is also notable for some omissions. It does set the scene for a Federal UK, yet significant powers remain reserved. Although the focus is on income tax, that may prove one of the least interesting aspects of how the new powers are devolved and used in practice.