The Smith Commission Agreement and the Scotland Bill

The publication today of the Scotland Bill is hugely welcome. The Bill legislates for those elements of the Smith Commission Agreement that require primary legislation. Other elements of Smith will be implemented without the need for fresh legislation. Once implemented the Smith Commission Agreement will make the Scottish Parliament one of the most powerful sub-state legislatures anywhere in the world. In terms of the proportion of public spend that Holyrood will be responsible for, and in terms of the proportion of the Scottish Ministers’ budget that Holyrood is responsible for, the Scottish Parliament will indeed be a powerhouse parliament. This is what we were promised in the run-up to last September’s referendum; and this is what David Cameron’s government is on course to deliver (with the active support, I hope, of the Labour and Liberal Democrat parties).

The Smith Commission Agreement is wide-ranging, and today’s Scotland Bill reflects this. Thus, there are provisions on fracking, equalities, tribunals, road traffic, gaming, employment support, broadcasting, HM Coastguard, fuel poverty, energy and competition policy, as well as a host of other subjects. But at the core of the Agreement, and at the core of the Bill, are two matters: tax and welfare.

A highlight of the Smith Commission Agreement was that Scottish Ministers should become responsible for the setting of all rates and bands of income tax for Scottish taxpayers. Income tax on dividends and savings would remain reserved to Westminster, and the UK’s other main tax on income (national insurance) would likewise remain reserved, but thereafter income tax on earnings would be the Scottish Ministers’ responsibility, not the Chancellor of the Exchequer’s. In addition, a number of smaller taxes would be devolved in full and a share of VAT receipts in Scotland would be assigned to the Scottish Ministers (VAT cannot, alas, be devolved for as long as the UK remains a member state of the European Union, as to do so would be contrary to EU law).

Draft clauses designed to convert the Smith Commission’s “heads of agreement” into legislative provisions were published by the Coalition Government in January. Those clauses succeeded in translating Smith’s proposals on tax into statutory language, as was recognised earlier this month in the very fair and balanced report from Holyrood’s all-party Devolution (Further Powers) Committee, chaired by Bruce Crawford MSP, a senior and very widely respected member of the SNP. The same is the case for today’s Bill. Smith’s recommendations on tax are implemented in full.

In contrast, the Devolution Committee’s report was critical of the way in which the draft clauses dealt with the Smith Commission’s recommendations on welfare. The Committee was right to be critical: in the Times on 26 January 2015 (£) I published an article in which I was similarly critical of the ways in which the draft welfare clauses fell short. In order to understand what had gone wrong we need to understand what Smith agreed on welfare.

The Smith Commission Agreement divides welfare spending in Scotland into three areas: the state pension; working-age benefits designed to assist those with very low incomes; and working-age benefits for those with additional needs. It was agreed that the state pension should remain reserved to Westminster. The main benefit in the second category is universal credit (UC). Smith agreed that UC should remain largely reserved, save that Scottish Ministers should have limited flexibilities to vary its delivery and to vary the housing element of UC (so that, for example, the so-called bedroom tax could not be imposed on Scots without the Scottish Ministers’ consent). As regards the final category, Smith agreed that the vast bulk of benefits for those with additional needs should be devolved in full, including carer’s allowance, attendance allowance, disability living allowance, personal independence payments, as well as others (indeed, the only major benefit in this category to remain reserved is child benefit). Smith underscored that the Scottish Parliament will have the power to create new benefits in all these newly devolved areas. In addition (and it was the Scottish Conservatives who brought this idea to the Smith Commission table) it was agreed that the Scottish Parliament should have the power to top-up any reserved benefit. Thus for example, if the UK Government were to cut a UK benefit (such as child benefit or universal credit) the Scottish Parliament would have the power to cancel out that cut in Scotland by topping it up from its own resources. To pay for this, the Scottish Parliament would either have to find savings elsewhere in its budget, or it could increase rates of income tax, or both.

It was this top-up power — critical (in my mind) to the success of the Smith package — that was mistranslated in January’s draft clauses. But no longer: today’s Scotland Bill gets it absolutely right (the key provision, if you want to look it up, is clause 21; see para 159 of the Bill’s explanatory notes).

The reason why this matters is simple. If Scottish Ministers do not like the tax and spend decisions taken by the United Kingdom Government in Westminster, the Smith Commission Agreement — and now today’s Bill — gives them the power to do something about it. In short, they will be able to put our money where their mouths are. They can fill what they perceive to be gaps in public spending on welfare and social security. They can create new benefits. They can top-up, for Scots, even those benefits which continue to be reserved to Westminster. And they have the tax powers to pay for it all. This is why the Prime Minister said yesterday that it is finally time for the SNP to put up or shut up. At last, we can move the argument on from nationalists’ bleating that they don’t have sufficient powers to a forensic examination of how they choose to use their powers.

Harry Street Lecture: New Union, New Constitution

I was honoured to deliver the 2015 Harry Street Lecture at the University of Manchester in April. I’m now making available the text of the lecture. Drawing on the work I undertook with colleagues at the Bingham Centre for the Rule of Law, whose report on devolution and the future of the Union was published last week, the lecture:

  • explains a number of the differences between federalism and devolution;
  • argues that a number of principles of Union constitutionalism animate and underpin the UK’s constitution;
  • identifies what these are;
  • suggests that they should be brought together in a new Act of Union;
  • and examines the role, in particular, of England, in the UK’s territorial constitution, considering both “English votes for English laws” and City- and city-region devolution within England, with a focus, given where the lecture was delivered, on Manchester.

The lecture can be read here: HarryStreetLecture

Federalism or Bust? How to Save the Union

The most pressing question of statesmanship in the new Government’s crowded inbox is “How to Save the Union?” Safe it is not. The threat of Scottish nationalism has not gone away. After their deserved defeat in September’s independence referendum the SNP has come back stronger than ever. Under a new and brilliant leader they won 56 of Scotland’s 59 seats in this month’s general election, confining the Tories to their single MP north of the border, reducing the Lib Dems from 11 to 1, and killing the Scottish Labour party stone dead. Don’t expect a resurrection any time soon, friends. But there is also a threat from English nationalism. The election campaign finally woke up the constitutionally sleepy English, as they became conscious of just what economic vandalism the SNP were proposing to inflict on what they hoped would be a weak Miliband-led Government. English public opinion may not be much moved by the minutiae of constitutional reform, but public money is a different matter. As the election approached I was dreading the hysterical over-reaction south of the border should Miliband have been shunted into Downing Street on the back of SNP support. Fortunately, this fate has been avoided. But anyone who thinks the Union has thereby been secured is mistaken.

So — how to secure it from here?

Many of the brightest minds around are of the view that the only means of saving the Union is to adopt a fully federal constitution for the United Kingdom. Some have long held this view; others have come to it more recently. Those who have thought about it for a long time tend to know what they are talking about; some of the arrivistes, whilst well-meaning, don’t. What is fuelling the new-found faith in federalism is a strong sense, which I absolutely share, that our constitutional settlement needs to be fair to all the nations and regions of the United Kingdom. The search for a solution cannot be confined to Scotland alone. We need a settlement that is fair to Wales and Northern Ireland, too, and that is fair to all of England — not only to London, but also to the great cities of the North and to the shires and counties of rural England. This is what the Prime Minister said on the steps of Downing Street at dawn on the day after the referendum, and he was absolutely right. A Unionist must see the constitutional argument as being about the whole of the Union, not only about Scotland.

Federalism

What is federalism, and what are the differences between federalism and what we have now? Federalism is a theory of shared sovereignty. Many countries around the world adopt it: the USA, Canada, Australia, Germany and Switzerland are all federal countries. But, like France, the United Kingdom is not and never has been a federal country. Federalism challenges fundamentally a number of the ideas and practices most central to the UK constitution. All federal countries have written constitutions (whereas the UK’s is unwritten, meaning uncodified). In a federal system the centre cannot alter the powers of the regions/states/provinces: rather, these are enshrined in the constitution, with any disputes being resolved by a powerful Supreme or Constitutional Court. Thus, disputes between governments are questions of law for resolution in a court, not questions of politics to be addressed by politicians in inter-governmental negotiations. Federalism would mean an end to the sovereignty of the UK Parliament. Instead, the written constitution as interpreted by the Supreme Court would be sovereign. And federalism would also mean an end to the popular sovereignty of the Scottish people, as expressed in the Claim of Right (and in last year’s referendum). Both the US and Canadian Supreme Courts have ruled that the US states and Canadian provinces enjoy no unilateral right of secession. Plainly, Scotland does enjoy such a right. In this sense, therefore, Scotland currently has more constitutional power than she would have under a fully federal constitution. Federalism would mean Scotland giving something up, as well as Westminster giving something up.

Now, were the United Kingdom Parliament and all the constituent nations of the UK to agree to a new federal settlement, the UK could become a federal state. It is not impossible. But it seems hardly likely at the moment either that Westminster would cede its legislative sovereignty to the courts or that the Scots would cede their popular sovereignty to a new British constitution. Full federalism seems a distant prospect.

This is not to say that it should be abandoned: merely that those who advocate it should do so aware of what a seismic change it would be. The first question for our Unionist statesmen and women, then, is “Do we need an Earthquake?” I don’t think we do.

But this is not to say that there is nothing to be learnt from federalism. On the contrary. Federalism is best seen not as a one-size-fits-all off-the-shelf number, that you either take or leave. Rather, federalism is better seen as a spectrum — as a menu of ideas from which one can pick. There are certainly ideas from within federalism that the United Kingdom should now adopt.

A New Act of Union

To start with, we need a clear and authoritative statement of what our Union is and what it is for. We have taken it for granted for far too long but, in the course of the long Scottish independence referendum campaign unionists did start to articulate why they are unionists. Unionism was forced out of its passive, default mode, into something more demonstrative. The Union is about the pooling and sharing of risk and resources. It’s about solidarity. It’s about standing together, collective defence, social security. It’s about having a single economic framework which gives Scots a domestic market ten times the size of Scotland to trade with, to live and work in, and to retire to (should they wish to) with no impediments at all.

We need a new Act of Union that sets all this out, clearly, simply and authoritatively. That Act of Union should also set out the principles that underpin and shape devolution in the United Kingdom. As well as having separate legislation for Scotland, Wales and Northern Ireland, we should have a single, over-arching statute that sets out what devolution is and what it is for.

It has been said many times that “devolution is a process and not an event”. Maybe so. But as a process it has become messy, over-hasty and extremely poorly understood. A clear re-statement of Union would clarify what can and, just as importantly, what cannot be devolved within the Union state. If the Union is about the pooling and sharing or risk and resources, we ought to have clear statutory guidance that policies designed to engineer that pooling and sharing cannot be devolved. This would rule out the devolution of national insurance, for example, and of the state pension. If the Union is about social solidarity across the whole of the United Kingdom, this ought to explain why so few of the UK’s welfare programmes can be devolved. Reluctance to embrace extensive welfare devolution, on this view, is not a matter of unthinking political intransigence, but of deep and perfectly rational unionist principle.

One of the best-known definitions of federalism is that it combines self-rule with shared rule. Devolution in the United Kingdom has delivered the former far more effectively than the latter. In Scotland we have a powerful Parliament, responsible since 1999 for almost two-thirds of public spending in Scotland and soon to be rebooted with broad tax powers that will begin to match its already formidable spending powers. That’s the “self-rule” bit. But the “shared rule” bit has not happened. Everyone who has ever looked at this has said it needs to happen, from parliamentary committees to the Calman, Silk and Smith Commissions, to think tanks such as the Institute for Government and the IPPR. The UK’s inter-governmental machinery is not fit for purpose. It has no legal foundation. It is utterly opaque. Parliaments do not hold ministers to account for what they do (or what they fail to do) in inter-governmental meetings. There is no effective dispute resolution procedure. The UK Treasury and Cabinet Office are far too controlling. And there is no effective means of joint policy-making. All this has to change, and quickly. Effective inter-governmental machinery, including for joint policy-making, should be included in the new Act of Union.

As should a revised, transparent and fair system for funding devolved government. One of the running scandals of UK government is that the system we use for funding devolved government is manifestly inappropriate. Not only is the Barnett formula archaic, inherited as it is from an era when we did not even have devolution, but it is also unfair, certainly to Wales (which is underfunded despite being one of the poorer parts of the UK) and probably also to England (or, at least, to much of England). We can learn a lot from federal countries about how public money should be transferred from the centre to the devolved nations. There always is such a transfer: no federal country anywhere in the world runs along lines of “full fiscal autonomy” or “devo-max” and, were the UK to agree to the SNP’s insane policy on full fiscal autonomy, not only would this be a short-cut to the break-up of Britain, it would also the high road to economic ruin for Scotland. Lest there be any doubt about this, just take a look at Kevin Hague’s detailed, expert and repeated demolitions of the SNP’s position.

A new Act of Union should also set out the constitutional rules for secession referendums. Self-determination should be subject to the rule of law, just like any other process of constitutional governance. They need a clear legal basis and the law should provide for such matters as who may vote and how frequently such referendums may be held. “Once in a generation” should be a matter of law, not a matter for the First Minister or her predecessor randomly to determine.

Smith plus?

It goes without saying that the Smith Commission Agreement should be legislated for, delivered and implemented in full and without delay. David Cameron’s government is rightly committed to doing exactly this. If the Scottish Government (or SNP MPs) wish to add to the Smith Commission Agreement, the Prime Minister has graciously said that his government will consider carefully any sensible suggestions, even though there is unlikely to be anything the SNP suggests now that wasn’t suggested by them when the Smith Commission was meeting. We had good reasons in Smith for rejecting the devolution (for example) of employers’ NI contributions, of the national minimum wage, and of corporation tax. Any of this can be revisited, but the SNP is going to have to make a more compelling case now than it was able to in the autumn of 2014 if they want to convince unionists to overturn decisions all five Scottish parties agreed to last November.

Do I think the Smith package alone will be “enough to save the Union”? Of course I don’t. But surely we have learnt by now that funnelling further powers from Westminster to Holyrood is ineffective as a means of stemming the nationalist tide? It did not work in the 1990s, when George Robertson bragged that devolution would kill nationalism dead. It did not work with the Calman Commission and the Scotland Act 2012. And it won’t work with Smith, either, despite the fact that the SNP was one of the five parties that negotiated and agreed to Smith. The reason for pressing ahead with delivering Smith is not because this is how we’ll defeat the nationalists. It’s because it’s the right thing to do. It’s right as a matter of principle to increase Holyrood’s fiscal powers, so that its responsibilities start to match its spending powers. It’s right as a matter of fairness to meet the concerns of so many of those who voted Yes in 2014 out of fears over welfare and social justice. There are limits as to how much welfare devolution can be contemplated within a Union devoted to the pooling and sharing of risk and resources, but Smith was right to introduce into Scottish devolution an element of welfare spending.

Should we draw the line here, or should we go beyond Smith? It’s a no-brainer. Of course we should go beyond Smith. But “going beyond Smith” does not mean, for me, adding to the already bulging list of powers and responsibilities to be devolved to Holyrood. It means thinking afresh about what, in addition to devolution, we need to do to save and secure the Union in the longer term. Devolution is necessary; but it is hardly sufficient. If devolution is the limit of our unionist thinking, we will fail.

I have already suggested that we need a new Act of Union, to set out what the Union is for, that we need to create new mechanisms of shared rule and joint policy-making, and that we need an open, transparent and manifestly fair funding formula for all of the nations and regions of the UK. But, in addition to all of this, we need to find ways of making the Union really matter to people, of making it come alive, of showing people how it makes a real difference to their lives. In this, we need to be bold and, while action is needed urgently, we need to be patient. Results will not appear overnight.

Every government minister should have on their desk this question: What am I doing today to bring the United Kingdom together? We have huge powers at our disposal to help achieve this. Britain is the soft power super-power of the world. Our cultural capital is second to none. Programmes such as those run by the British Council are global leaders. But the effort is expended overseas, not at home. A comprehensive programme of nation-building is called for (terribly unBritish though it may be). I live in a city (Glasgow) where there are thousands of children who have never been to England, and who regard London as being as much of a foreign capital as Paris or Berlin. Let’s twin every schoolchild in Scotland with one in England, and let’s pay for them to visit each other and learn each other’s ways. We live in a country where high-speed rail is being used to shave a few minutes off the journey time from London to Birmingham. Transport and Treasury ministers should turn the map upside-down and think about joining Glasgow to Manchester or Edinburgh to Leeds. Of course we need HS2 (and more) but we need it in the north of Britain, not in the already over-congested south-east. Let’s build that bridge from Scotland to Northern Ireland. Let’s put right the madness that the only airport in Scotland to be connected by rail is Prestwick. Let’s use the great cultural power of football and have Glasgow’s big clubs competing with those in Manchester and London, rather than playing Motherwell and St Mirren every other week. None of these things on its own will secure the Union. Some will work and others may not. Each will have its opponents and naysayers. But making the Union of our great family of British nations come alive for the people who live here is, in the longer term, likely to be a far greater driver of success than adding a few more tax and welfare powers onto Holyrood’s list of responsibilities.

Securing the Union will be an act of statecraft. It will not be easy. If we are to succeed we will need to employ and harness all the many facets of the state. Politics and constitutional design, of course. And law, too. But at the core of the project will lie the economic, social and cultural powers of the state. If the nationalists were in our shoes, they would have been doing this for years already. Let’s get to it.

A fixed-term hung Parliament?

British Government and the Constitution

With three days to go the general election the polls haven’t moved in weeks. The major parties are neck and neck on about 33% of the vote each, with the other 33% being shared between the Lib Dems, Ukip, the SNP and the other smaller parties. It’s going to be close and it could go either the Tories’ or Labour’s way. I have no idea who’s going to win, and I make no prediction. But, for the sake of argument, let us suppose that the result is something like this: Conservatives 290 seats; Labour 270; SNP 45; Lib Dem 25; Others 20.

If this were the result, the Conservatives and LDs could between them command 315 seats. Still a handful shy of a working majority. Add the DUP to the mix and you get to about 324: just enough once you discount the Speaker and the Sinn Fein MPs (who…

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