An accelerated timetable to give more tax and spending powers to the Scottish parliament was backed by Labour, Tory and Liberal Democrat leaders in Edinburgh on Tuesday, but divisions remain about exactly what those powers should be.
Alex Salmond, Scotland’s first minister, said the plan was mired in “confusion” and was a panicked attempt to persuade Scots to reject full independence in next week’s referendum.
Gordon Brown, the former Labour prime minister, said on Monday that he hoped for a cross-party agreement on “modern home rule” for Scotland by January as he put himself at the forefront of the campaign to save the union.
David Cameron welcomed “the Labour initiative” for a firm timetable for more devolution which is being promoted as a signal to Scots that “voting No is not voting for no change”.
Mr Brown gave the impression that all three parties would agree a common programme for more devolution of power to Scotland, but on Monday it emerged that they may still offer different versions of “home rule” in their 2015 election manifestos.
A Better Together insider said that while Labour, Tories and the Lib Dems might be able to agree a broad package of tax-raising and welfare-spending powers for Scotland, “minor differences” might remain.
Ed Balls, shadow chancellor, has said that Labour would not have its manifesto dictated by other parties and has been more reluctant to cede full powers over income tax rates to Holyrood than the Tories or Lib Dems.
For example Labour’s plans would allow the Scottish parliament to raise the top rate of income tax from 45p, but not to cut it – the party fears this could lead to a tax-cutting “race to the bottom”.
But Mr Balls said the proposals to deliver the majority of income-tax responsibilities would be in the first Queen’s Speech if Labour wins in May 2015.
Johann Lamont, Scottish Labour leader, said that by setting out a timetable for further devolution the No campaign was showing it was “possible to vote No as a patriotic choice and also to show you are voting for change”.
Ruth Davidson, Scottish Tory leader, said that by giving Holyrood more powers over revenue raising it would create “a parliament that can look taxpayers in the eye”.
She said the broad parameters of a cross-party deal were already in place: all three parties have set out plans to give Holyrood more control over tax raising and welfare spending.
The parties have also rejected the idea of allowing Scotland to set its own rate of corporation tax.
But Mr Salmond said that “there is nothing new on offer that wasn’t on offer in the spring” when the three main unionist parties set out their various proposals to transfer more powers to Holyrood.
David Cameron rejected the idea of a “three question” Scottish referendum, where voters would have been given a choice between the status quo, full independence or more devolution.
The prime minister thought he could beat Mr Salmond in a straight fight on independence; he was also concerned that asking voters three questions would create an unclear outcome.
But Mr Cameron has been persuaded by Mr Brown to be more specific about a timetable for further devolution as a means of trying to win back potential Yes voters in the final days of the campaign.
Scotland Act 1998
Scotland voted by a huge margin for its own parliament, which was established in Edinburgh’s Palace of Holyrood in 1999. This came 20 years after a slim majority voted for a Scottish Assembly, a move which failed because the required 40% of total registered voters did not support the idea.
In the new parliament, Scottish MSPs were elected through the so-called additional member system. This allowed Scottish voters to cast two votes, one for a constituency member, and a second for a party list. This was done to bring in an element of proportional representation, and intended to prevent any one party gaining a majority – making the Scottish National party’s majority in 2011 all the more unexpected.
Scottish voters also backed the parliament having tax-raising powers, which gave the newly-established Scottish Executive the power to vary the standard rate of income tax by 3 percentage points from the rest of the UK. This power has never been used and Scotland maintains the same tax rates as those south of the border. The Scottish Executive was renamed Scottish Government in 2007.
Other powers that were devolved were those concerning agriculture, education, environmental policy, health, housing, local government, the fire service, growth policy and parts of transport. The English and Scottish legal systems, meanwhile, have always been separate.
In practice, health and education became two of the most extensively used powers, with the Scottish executive offering free personal care for the elderly and free university tuition for Scottish students.
Westminster kept control of foreign policy and defence, as well as energy, immigration and trade. Technically, the Westminster parliament still had sovereignty, so it could overrule the Scottish executive if it deemed it necessary. It never has.
A major criticism of the 1998 bill was that, although it gave the new Scottish Parliament extensive responsibilities for public spending, equivalent responsibilities for raising revenue were not included apart from council tax and business rates.
Scotland Act 2012
The Calman Commission on Scottish devolution was set up in 2007 by the Edinburgh parliament to review the original devolution settlement and recommend further changes. It deemed devolution a success and suggested further powers be passed from Westminster to Scotland. The UK coalition government elected in 2010 pledged to implement Calman’s findings, which formed the basis of the Scotland Act 2012.
The main power added to those granted in 1998 was further scope to adjust income tax. From April 2016, the UK government will reduce the main UK rates of income tax in Scotland by 10 percentage points and the Scottish parliament will be required to set a Scottish rate of income tax to replace them.
Other taxes were also devolved to Edinburgh, including control of stamp duty on property and landfill tax. The SNP has proposed making the tax progressive, meaning buyers only have to pay higher tax rates on the proportion of the sale price that comes above a certain threshold. This would end the anomaly of a higher sale price potentially meaning less money for the vendors if the price crosses one of the stamp duty thresholds.
The act allowed the Scottish government to borrow up to £2.2bn of its budget for capital expenditure, giving it the power to issue its own bonds.
Other more minor powers were also handed over, including more control over gun licensing, drink driving and speed limits. The SNP is pushing ahead with plans to cut the drink drive limit from 80mg of alcohol per 100ml of blood to 50mg, which could put drivers over the limit after a single pint of beer.
The SNP initially resisted the moves, trying to keep the focus on the question of full independence. Eventually however, the party’s representatives voted for the measures, while insisting that they were second-order issues.
The effect of the fresh tax powers, in addition to those already granted, would be to give Scotland responsibility for raising just over a third of the budget revenue for which it is responsible.
Future Scottish devolutionBoth the Conservatives and the Liberal Democrats would hand over full control of income tax to a Scottish government, allowing it to set its own tax rates and bands. The definition of what counts as income would remain one taken in Westminster under the Tory plans.
The Lib Dems have also suggested devolving inheritance tax and capital gains tax, in what they say would amount to a federal Britain.
Labour has been less radical, offering only extra leeway within bands, promising an extra five pence of movement, taking the Scottish component from 10p in the pound to 15p. It would ban the Scottish government from cutting the rates of the higher bands only, such as the coalition government in Westminster did in 2012.
On welfare, the Tories and Labour both suggest devolving housing benefit and attendance allowance to Scotland, saying this fits with the fact that the Scottish government already has powers over housing. The Lib Dems, however, suggest housing benefit should be set by Westminster but “in consultation” with Holyrood.
One of the most contentious points between the governments in London and Edinburgh has been air passenger duty, which the SNP argues disproportionately harms Scotland. The Conservatives recommend devolving it completely, while Labour, having previously proposed this, now says it is “not convinced”.
All three parties say the Barnett formula, the calculation which sets the block grant of government money from Westminster to Edinburgh, should be reduced or reformed, forcing a Scottish administration to raise more of its own budget through the new tax powers. The Tories believe this could create a renaissance in Scottish conservatism, with voters holding their government to account for the taxes they charge as well as how much they spend.
Scope for further revenue-raising powers is limited by the fact that EU rules prevent member states from levying different VAT rates inside their borders; VAT forms a major part of total government revenues.
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