Devolution revolution- The Sunday Herald


Tom Gordon, The Sunday Herald, 14 June 2009

Holyrood should have direct control over around £6 billion worth of tax income to make it more accountable for its spending decisions, the Calman Commission on devolution will say tomorrow.

According to a leaked email, the Commission will call for MSPs to be given control of around half the £10bn of income tax raised in Scotland each year, with around £1bn of other taxes, including stamp duty, devolved outright. A "national piggybank" will also be created using North Sea oil revenue.

The cross-party Commission also says Scottish ministers should be allowed to borrow money for large infrastructure projects such as a new Forth Road Bridge, subject to approval by the Treasury.
The current limit of £500 million has not been reviewed since devolution began in 1999.

The law on licensing airguns – but not other firearms – should also be given to MSPs, raising the prospect of an all-out ban on the weapons. Campaigners have demanded a ban since 2005, when two-year-old Andrew Morton from Easterhouse in Glasgow was killed by a pellet from an airgun fired by a drug addict.

The report will also call for a new era of "mutual respect" between the Edinburgh and London governments, with more meetings between MPs and MSPs, and between Scottish and UK ministers.
Last night the SNP government, which has largely ignored the Commission because it refused to consider Scottish independence, questioned the value of the tax plans, as the greater control would be offset by cuts in the annual £30bn block grant from Westminster.
One source said Calman seemed a "completely fatuous and irrelevant exercise" that would "give with one hand and take away with the other". And Michael Russell, the constitution minister, said anything short of full fiscal autonomy – ie, Scotland raising all its £35bn budget – risked being a "messy fudge". He added: "We must not have a system imposed by Westminster which could leave Scotland worse off than at present."

However, the Commission is still offering the prospect of the biggest shake-up of devolution in a decade. The UK government – which will decide which proposals, if any, become a reality – will give its response tomorrow, after Sir Kenneth Calman, the commission\’s chairman, unveils his report in Edinburgh.

The financial plans are revealed in a leaked email sent by Robin Hayes, secretary to a commission sub-group on finance, last week. It recommends: "Devolving half of income tax and four minor taxes to the Scottish Parliament, with a commensurate cut in block grant. The Commission also accepts findings in relation to borrowing and natural resources."

Under the Scotland Act, Holyrood can vary the basic rate of income tax up or down by 3p, although the power, known as the Tartan Tax or Scottish Variable Rate (SVR), has never been used.
Calman proposes extending the SVR from 3p to 10p and applying to all tax bands. Any change in one rate would mean the same change on all the rates, preventing tax hikes exclusively on high earners.

Income tax is the largest source of public sector revenue in Scotland, raising £10.5bn a year, with around 90% from the basic 20p rate.
Calman also recommends devolving four other taxes outright – stamp duties, air passenger duty, landfill tax and the aggregates levy paid on mineral extraction – which together raise around £900m a year.
The proposal on "natural resources taxation" in the email would see some North Sea oil revenue assigned to Holyrood, allowing for the creation of a Scottish oil fund as a national piggybank, but again this would be offset by a cut in the Westminster block grant.

The other key theme of the report is fixing the fractious relationship between Edinburgh and London. It says MPs and MSPs should attend each others\’ committees in non-voting capacity, that the Scottish Secretary should give evidence to MSPs after the Queen\’s Speech in London, and that the first minister should speak to MPs after he sets out the Scottish Government\’s legislative plans.
There should also be more joint ministerial committees, including one on finance, to bring Scottish and UK ministers together to avoid disputes.

Conservative Party leader David Cameron, who recently called for such co-operation, will meet Annabel Goldie, the Scottish Tory party leader, and shadow Scottish secretary David Mundell in London on Tuesday to discuss the report.
However, the Calman Commission does not recommend devolving other major areas of social policy, such as drugs, abortion or immigration.

Ben Thomson, chairman of think-tank Reform Scotland, said the income tax plan was "a real step forward" but did not go far enough.
David Simpson, former economic adviser to Standard Life, said: "Income tax is one of the last taxes you would choose in isolation to affect your economy. If you raise it, you become a high tax economy; if you lower it, you might have to cut vital front-line services.
"On its own, it\’s just not that useful, which is precisely why no Scottish government has yet used it.”