If the vote is No, would we get more powers? What difference would they make? (1)

The Question

At first sight the referendum offers a simple choice: a Yes vote for independence or a No vote for the status quo. The reality is less straightforward. Other contributions in this book look closely at what independence means for the Yes side. They show that what is on offer in many respects involves a lot more continuity in Scotland’s relationship with the rest of the UK than the word ‘independence’ might usually suggest.

Likewise what the No side is offering is not simply about an unchanging status quo. Change is going to happen anyway – in 2012 a new Scotland Act was passed which boosted the powers of the Scottish parliament by giving it a new ability to tax and borrow along with a small number of new policy powers. Much of this is already in place, but the most important new measure – giving the parliament partial control over setting income tax rates in Scotland – is still to come into force in 2015.

Since the 2012 Act the pro-‐union parties have been in a debate about whether to go further still. Each set up their own commissions to come up with proposals for more devolution. The Liberal Democrats reported first in late 2012. Labour followed in March 2014 and the Conservatives in June.

The various proposals differ in detail and emphasis but have plenty of common ground, especially around more devolution of tax and some welfare policies. The three parties came together around this common ground in June 2014 with a joint pledge to ‘strengthen further’ the Scottish parliament and to put their proposals in their respective manifestos for the May 2015 UK General Election.

Why all this is important

The pro-‐union parties are signalling that No doesn’t mean the status quo, or even the status quo plus the new powers of the 2012 Scotland Act, but a Scottish parliament with significant extra powers beyond that.

The Liberal Democrats have long argued for more devolution, but Labour and the Conservatives are more recent converts. While some in each party genuinely support a stronger parliament, there is also a strong whiff of tactics here. Opinion among Scottish voters doesn’t correspond neatly with the Yes/No choice we have in September. It is split three ways: one third support independence, one third the status quo, and one third a middle ground in between (sometimes known in shorthand as ‘devo-‐plus’ or ‘devo-‐max’).

The middle ground voter prefers a stronger Scottish parliament than now, but not independence. Here is a key battleground for the two sides in the referendum. The Yes side’s offer of independence with all sorts of continuities with the rest of the UK (currency, broadcasting and all the rest) is aimed at that middle ground. So too is the No side’s offer of more devolution.

What the No side says

Tax devolution has been the most high profile issue in the debate about more devolution. The Scottish parliament currently has little say about raising the money it spends beyond setting council tax and business rates. Instead the great bulk of the parliament’s funding comes from a block grant from the UK Government. The size of the block grant is set by the so-‐called Barnett formula and enables the parliament to spend more per head of population in Scotland than is the case in England (which at times provokes controversy in England).

Many argue that this situation of very limited tax powers and block grant funding encourages irresponsibility in spending decisions. Others think the parliament doesn’t have the right incentives to look to grow the Scottish economy if it has no stake in the tax receipts from economic growth. The tax proposals of the pro-‐union parties are attempts to tackle these arguments. If the parliament had to make more tax decisions itself to fund its spending, and justify those decisions directly to Scottish taxpayers, it might think more carefully about what it spends. And it might look more to do things which boosted the economy and with that its own tax receipts.

The tax proposals fall into two categories. One is simply to give the parliament some or all of the power to set the bands and rates of particular taxes. Air passenger duty – a surcharge on every air ticket – is one which the Conservatives and Liberal Democrats, but not Labour, would want to see devolved. The effect (at least if the duty were cut) might be to boost tourism or open up new business opportunities by encouraging airlines to introduce new routes.

The most important differences are about income tax. The Liberal Democrat and Conservative proposals would give the Scottish parliament full control over tax bands (currently basic, higher and additional) and the rates at each band (currently 20%, 40% and 45% depending on income level). With these powers the Scottish parliament could create different bands compared with the rest of the UK and set rates higher or lower than in the rest of the UK. Labour’s proposals do not offer flexibility on bands, which would still be set UK-‐wide. But they would allow variation in tax rates, including a new ‘Scottish Progressive Rate’ which could increase (though not reduce) the higher and additional rates in Scotland relative to the standard rate.

The effects of decision-‐making powers on income tax, whether the more limited Labour version or the fuller Liberal Democrat/Conservative version, would be very visible in people’s pay packets and tax returns. Any changes would certainly prompt public debate and require the Scottish parliament to justify more fully the spending proposals that would be funded in this very direct way by the Scottish taxpayer (and rewarded or punished by the Scottish taxpayers’ votes at the next election).

Charlie Jeffery Jeffery WA