The Calman Commission Report on Scottish Devolution

Commission on Scottish Devolution (2009) Serving Scotland Better: Scotland and the United Kingdom in the 21st Century

Summary Discussion
Given its limited remit (to a discussion of improving devolution within the Union) and the tone of its interim report, the final report of the Calman Commission remit is surprisingly ambitious. Its recommendations on finance, the further devolution of powers, intergovernmental relations and the role of the Scottish Parliament are substantive, providing the potential for further changes in the future. Most interesting for me is how compatible these recommendations are with SNP Government policy. While most attention may focus on the proposal to make the Scottish Parliament more accountable for income taxation (in a form unlikely to be welcomed by the SNP), it is striking just how much of the report is consistent with SNP aims. This includes the call for more formal intergovernmental relations (in part through the enhanced role of the Joint Ministerial Committees), the call to devolve responsibility for Scottish Parliament elections, airgun and drink-driving regulations; and the recommendation that the UK Government becomes more supportive of Scottish Government aims by accommodating devolved policies with knock-on effects for housing and council tax benefits (such as the local income tax?) and allowing the Scottish Government to use Prudential borrowing (i.e. on the basis of their ability to repay debt) for capital projects (which may make it easier to fund the Forth Road bridge in a way that is more acceptable to the SNP than PFI).

Detailed Discussion
The Calman Commission’s final report was published on June 15th. While most headlines will be reserved for its substantial recommendations on fiscal autonomy and the further devolution of powers, there are also some interesting recommendations to improve intergovernmental relations (IGR) and the legislative process of the Scottish Parliament. The main thrust of the report is that the constitutional side of devolution has been a success but that change can improve the settlement. Of course, the proposed level of change falls short of any prospect for independence because the report was established by the SNP’s opposition parties – Labour, Conservative, Liberal Democrat – and the UK Government to provide competition for the National Conversation.

Fiscal Autonomy
The most significant change can be found in its recommendations regarding the funding settlement. It argues that it would be difficult to maintain the Union if the UK Government granted full fiscal autonomy to Scotland. Therefore, macro-economic policy must remain reserved. While this is a defendable unionist position, it presents considerable problems when formulating further fiscal powers. The report also notes the limitations that it faces when making recommendations on the Barnett formula. Overall, we have a half-way house between fiscal dependence and autonomy (there should also be a common sense of social citizenship and minimum welfare rights, but only when the UK and Scottish Parliaments agree their scope). Barnett has the advantage of providing stability during devolution’s first decade and should be maintained, but only until the UK Government commissions a needs assessment to determine a more equitable system of funding. There should also be more accountability for money spent in Scotland. Therefore, there should be a devolution of economic powers when differences would not undermine overall macroeconomic policy (in part because they largely affect local populations, with relatively little prospect of exit) – the Stamp Duty on property transactions, the Aggregates Levy, Landfill Tax and Air Passenger Duty. More importantly, the Scottish Parliament should be obliged to make a positive and more visible decision about its level of taxation in relation to the UK rather than benefiting from the relatively hidden status quo position in which it accepts the same levels by not using the tartan tax. Calman therefore recommends reducing UK income tax in Scotland by 10p in the pound (for the lower and higher income tax thresholds, with no ability to tax on one but not the other) and reducing Scotland’s grant accordingly, meaning that Scottish Parliament would have to set the Scottish rate at 10p to stay the same as the UK. However, the Scottish Government will not be able to make the bigger decisions about the mix of tax bands or the overall structure of taxes set at the UK level. Therefore, this is effectively the introduction of a greater appearance of accountability but primarily for assigned revenues (this is to be extended to a notional share of income tax on savings, to remove the administrative burden of identifying Scottish savers). There is also not a full link between accountability and economic policy in part because there is still a limited incentive for the Scottish Government to increase its own tax revenue by using economic levers to foster growth. There is also a limited ability to compete to attract businesses or individuals through the modification of taxes. Overall, the measures may open up the old north/ south debate on UK macro-economic policy. While Scotland’s GDP per capita is higher than most English regions, it is significantly lower than the south-east of England which brings overall English GDP per capita to a level higher than in Scotland. Therefore, the 10p tax rate in Scotland is likely to produce a slightly smaller overall level of revenue, perhaps prompting the SNP to wonder why it should be accountable for the tax when it can not influence its determinants fully.

On the other hand, the recommendations may mark the beginnings of a substantive shift in fiscal arrangements since the 10p would be based on identified rather than notional Scottish incomes and, for the first time, the HMRC would be obliged to work on behalf of Scottish ministers in collecting devolved taxes (Scottish Ministers should also be consulted on appointments of HMRC Commissioners). This comes on top of three further recommendations:

1. To keep benefits such as housing/ council tax reserved but give much more scope for Scottish Ministers to amend their use when developing their own policies. This may be seen as an argument that UK government should not only not interfere in issues such as the local income tax, but also that the UK Government and HMRC should do all they can to minimise the unintended consequences by cooperating on effects on benefits (although note its very clear recommendation to keep Attendance Allowance reserved as a gateway to other reserved entitlements),
2. To allow the Scottish Government, like local authorities, to borrow on a Prudential basis (i.e. based on its capacity to repay debt) through the National Loans Fund or Public Works Loans Board. This system would perhaps allow the Scottish Government to fund the Forth Road Bridge in a more straightforward way.
3. To consider further tax devolution – on VAT and a share of fuel duty – when these recommendations have ‘bedded in’. This suggests that, again, the recommendations do not mark the end of the Scottish ‘settlement’.

Devolved and Reserved Powers
Perhaps the most interesting aspect of the report’s recommendations on devolved powers is that it has not avoided issues that could be embarrassing to its UK Government sponsor and advantageous to the SNP Government’s agenda. This includes a recommendation to devolve responsibility of the Scottish Parliament elections to the Scottish Parliament (following SNP criticism of the role of the Secretary of State in the ballot paper fiasco), allow Scottish ministers to appoint the Scottish member of BBC Trust (although this falls far short of SNP calls for Scottish-specific broadcasting), devolve airgun regulation (an SNP demand which it partly inherited from the previous Scottish Executive) and drink-driving limits (in the context of SNP criticism of UK limits when promoting its overall, divergent, alcohol strategy). It also recommends devolving responsibility for the national speed limits, animal health funding, marine nature conservation (note that the issue of marine control has divided the UK and Scottish governments for some time), the Deprived Areas fund, discretionary elements of the reformed Social Fund and the prescribing of controlled drugs (e.g. heroin) to treat addiction (perhaps signalling, incidentally, a position on the balance between the medical and criminal treatment of illegal drug use).

The report recommends that many issues – such as charity law and regulation, food labelling and regulation, the regulation of all health professions and the UK Insolvency service - should remain reserved to preserve sensible administrative arrangements and levels of policy uniformity. In other cases, it merely calls for better working arrangements to solve problems associated with devolved and reserved policy interaction or problems associated with the implementation of reserved issues in Scotland, including: the operation of the Health and Safety Executive; the scope for local variations in immigration law implementation; the issue of the wellbeing of children of asylum seekers; Welfare to work; and, the operation of Crown Estate. It strongly recommends that the UK Government maintains the principle of UK-wide Research Councils (which allow Scottish Universities to ‘punch above their weight’ and remain part of a wider pool of scientific funding) but also establish comparable ‘government-funded’ status for particular Scottish research institutions. Perhaps of most note is the absence of a recommendation to change the constitutional settlement regarding nuclear power. This may in part follow the UK Government’s acceptance of a Scottish veto on new nuclear power stations. It also follows a broader recommendation to accept that there will always be issues regarding devolved/ reserved boundaries and that there should be resolved through better intergovernmental relations.

Intergovernmental Relations
The report is critical of the informality of intergovernmental relations (IGR) between the Scottish and UK Governments and it makes recommendations for ministers, civil servants and the Parliaments. First, it argues that the joint Ministerial Committee should become a body to foster close working and cooperation relationships (perhaps like the JMC Europe) rather than just dispute resolution. The JMC (Domestic) should meet at least annually, as should a new JMC Finance (to discuss macro-economic policy as well as taxation); and a JMCO (for senior officials). The JMC agendas should be published in advance to parliaments (and there should be an annual report). The JMC Europe should foster earlier and more engagement between Scotland and UK, with Scottish Ministers to be automatically part of UK delegation and to speak more on agreed UK line. There should also be a greater expectation that Scottish MEPs attend Scottish Parliament committees. Second, it argues that there should be more training for UK civil servants to improve their knowledge of devolution and that the civil service code should be amended to ensure cooperation and mutual respect.

Third, although it suggests that the Sewel convention, in which Westminster will not normally legislate on devolved matter unless given permission by the Scottish Parliament, has been respected and works well, it must be used better to foster meaningful links between Parliaments (Sewel, or legislative consent, motions are primarily addressed through executives). The report makes a wide range of recommendations in this regard: the Sewel convention should be entrenched in standing orders of each house; there should be more parliamentary cooperation and discussion – perhaps by each passing motions for the other’s attention; Westminster should debate devolved implications and establish a regular “state of Scotland” debate; a ‘standing joint liaison committee of the UK Parliament and Scottish Parliament should be established to oversee relations’; barriers to sharing information and inviting each other to committee meetings should be removed; the Secretary of State for Scotland should appear annually to a convenors’ (committee chairs’) group of the Scottish Parliament and in plenary to report on the devolved implications of the Queen’s speech; the First Minister should appear at Scottish Affairs Committee once per year generally and once per year to discuss how its legislation interacts with reserved matters; there should be Scottish MPs on any UK legislation that uses a substantive Sewel motion, followed by the potential for Scottish Parliament committees to invite the MPs to discuss their implications; and Scottish Parliament and Westminster committees should be given an answer on legislation as they would to their own committees. Further, Calman suggests that there should be a Westminster equivalent to the Sewel motion: ‘A new legislative procedure should be established to allow the Scottish Parliament to seek the consent of the UK Parliament to legislate in reserved areas where there is an interaction with the exercise of devolved powers’.

Scottish Parliament recommendations
Finally, Calman makes some recommendations to improve the scrutiny role of the Scottish Parliament. To deal with the lack of a second chamber and the relative finality of its stage 3 legislative process, it recommends giving the power to the Presiding Officer to refer novel, substantive amendments at stage 3 back to committee before bill is passed (to give MSPs and stakeholders chance to look at implications). Or, an amendment to proceed to stage 4 can be proposed by MSPs. It also recommends that committees seek to minimise their MSP turnover (although this is still largely the decision of the parties themselves) and that committees should be able to decide themselves when to create sub-committees to deal with scrutiny overload.