The Devolving Union

“Power does not corrupt. Fear corrupts… perhaps the fear of a loss of power.”  – John Steinbeck

Theresa May, in one of her last acts of power before abdicating as PM and turning over to either Boris Johnson or (perhaps) Jeremy Hunt has made a surprise announcement of a trip to Scotland to launch a “review of devolution” in the UK by Lord Dunlop – who was Head of Research within the Conservative Party during the Thatcher era and worked with David Cameron to formulate the UK Government’s strategy against the 2014 independence campaign.

Details of the review will be published on Friday but the early press release doing the rounds today has said that it will not “review” powers already devolved to the Scottish parliament and other administrations but will instead look at reserved areas to determine if they are still functioning optimally in the face of the changing politics of the UK and the last few rounds of devolution since the 2014 independence referendum.

This story comes in the same week that the Scottish Conservatives and Scottish Lib Dems are having an almighty temper tantrum at the thought of the Scottish Government running a round of Citizens’ Assemblies on various issues including the topic of independence. Elected MSPs have even been encouraging a boycott of these Assemblies by Unionist supporters, seemingly not quite understanding that those who abstain from democracy lose the right to complain about the results of it when it happens without their input.

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Source: Unsplash

I won’t “empty chair” democracy. I won’t be disengaging from this devolution review but will instead offer some thoughts on it and speculate about what it might discover if it chooses to look.

The Balance of Power

One of the biggest barrier to the UK’s equitable and optimal distribution of power within (and outwith) it is the UK’s own self-limiting view of power and sovereignty. I’ve written about this before with respect to the EU debate but it’s worth covering again as it will almost certainly frame the results of this devolution review.

Constitutionally, the UK views itself as a kind of benevolent dictatorship. All power is invested in the Crown by divine right and it is only by the whim of the Crown that power it ceded elsewhere. By convention, all power is ceded to the parliament and we mere subjects are permitted to choose who sits in that parliament but, as per Enoch Powell’s famous maxim that “power devolved is power retained” there is always the divine right to pull back that power at any time.

This attitude feeds into the UK Parliament as well. Power may be devolved to Scotland, Wales or Northern Ireland but “sovereignty” is retained at Westminster. That power, too, can be pulled back or overridden should whim dictate thus. The same goes for power devolved to local councils or to arms-length bodies.

Crucially, the same goes for supra-national organisations like the EU. By sharing power between countries, the UK view is that this power is lost from the UK and must be “taken back”. This perception of a “loss” of sovereignty is at the heart of the Brexit debate as much as it is at the heart of the devolution and independence debates. It is why I do not believe that this review will recommend any further devolution to Scotland no matter how compelling the case is.

I take a very different view of sovereignty. For me, the people of a country are sovereign, not in any one institution or in a family whose blood is better than yours.

I believe firmly in a principle which I regard to be one of the best ever laid down by the EU (even if they don’t shout about or even strictly practice it enough). The principle of subsidiarity.

Under this principle, all policies should be controlled and implemented at the most local possible level. Instead of governments deciding which powers should be devolved down to local level, they should instead have to make the case about which powers should be devolved UP to a less local level. It may well be that a local authority can fund a hospital which can provide more effective care than local clinics and thus this aspect of healthcare should be devolved up to regional level. It may well be that a national government can provide a more effective system of defence than local militias and therefore matters military should be devolved up to national level.  And it may be that international trade can be co-ordinated at a multi-national level more effectively than it can be done from a local level and therefore trade should be devolved up to an international level.

None of this subtracts from the sovereignty of a people or a nation. It is the recognition that power is sometimes better shared – truly shared, rather than hoarded and doled out by people to whom we are told to be grateful for the largesse.

Unless the UK can get to grips with this idea then this devolution review is as doomed as the Union itself ultimately will be.

That said, let’s look at some of the reserved areas that I believe that the review will consider.

Income Tax

The relationship between income tax and devolution goes back to the very start of it. The 1997 devolution referendum included a question not only on Scotland regaining a parliament but on that parliament having tax powers (of which, income tax was the one most prominently understood to have been meant). But the powers that came were delivered slowly and clunkily and with many caveats. Even now, while Scotland has the power to adjust rates and bands within income tax, it has no power over the zero-rated Personal Allowance and it has no ability to co-ordinate income tax between other taxes such as capital gains and it has no power over the definition of income. This has led to attempts to diverge Scotland’s income tax system away from the UK’s to be made only very tentatively.

As this area is already largely devolved now, I doubt the review will have too much to say with regard to Scotland but nor do I expect it to recommend the devolution of things like the Personal Allowance or other income-related taxes like capital gains. It rather suits the UK for Scotland to be tentative about this policy area and for the most minor changes to be screamed about as the most abhorrent of things possible. It may suggest a form of parity between the income tax powers given to Scotland and those granted to Northern Ireland and Wales and I would welcome that but I would be surprised if it did.

VAT

Another area of tax which has been talked about in terms of devolution is VAT. The 2014 Smith Commission recommended the partial devolution of VAT after the agreement to do so by the representatives at that meeting but the actual implementation of that devolution has proved to be very complicated.

Under EU law, VAT is one of the very few domestic taxes that the EU has anything to say about. Member states are expressly prohibited from setting different VAT rules in different parts of their state and the rules around products which qualify for lower or zero rates of VAT are complicated and often depend on the “grandfathering in” of rates set before the current regulations were established. This has lead to pro-Union campaigners leveraging messages such as “Scotland would be forced to pay VAT on children’s clothes”.

Rather than devolve rates of VAT to Scotland, the Smith Commission instead opted to create a system whereby half of VAT raised within Scotland would be transfered to the Scottish Government and the Scottish Government’s Block Grant would be reduced by the equivalent of half of the VAT raised in Scotland.

This change to the assignment of VAT has been postponed (and will likely be dropped entirely) by the Scottish Government due to the complexity of the proposal. Scotland doesn’t collect anywhere near the level of data required to calculate this assignment (figures in GERS for VAT are based consumer surveys which are fine for an annual estimate but not nearly robust enough for any actual money transfers).

Whilst Conservatives have been blaming the Scottish Government for this “failure to deliver” the truth is that under the current UK-wide collection and calculation of VAT it was never going to be delivered. I’ve spoken directly to senior statisticians at length at both Scottish and UK level about this devolution policy. Not one has ever been remotely positive about it being deliverable in its proposed form and all said that it was the result of politicians coming to a fudged solution at the Smith Commission before passing it off to civil servants to “fix it”. This is not the way to make policy.

So I don’t believe that the devolution review will recommend trying again to do this. If it does have something to say about VAT then it might well look at the possibility of devolving VAT since Brexit removes the UK from the EU’s regulations. If it does, then Scotland should seriously consider adopting the EU’s proposed reform of their own VAT rules.

Because the EU has started to recognise that the current regulations are too restrictive and has led to asymmetries where long-standing members have been able to grandfather in discounted rates whereas new members have not. The system now being proposed is one where members would have the ability to set a standard rate of VAT at not less than 15%, a discounted rate of more than 5%, a second discounted rate of between 0% and 5% and a 0% rate. Countries could then apply these four rates to any goods and services they like (with some exceptions like weapons and tobacco which must charge standard rate) so long as the weighted average VAT across all goods and services is at least 12% (so members can’t just zero-rate everything).

This would allow Scotland to avoid those “baby clothes” arguments and would allow Scotland to keep its VAT system broadly in line with EU regulations so that it could make re-joining the EU easily when the time comes. It would also neutralise problems such as recently where changes to VAT have penalised the Scottish solar power sector.

Welfare

The UK’s welfare policies aren’t working for Scotland. They aren’t working for anywhere. They are a working example of deliberate cruelty being inflicted on a vulnerable population and have been called out as such by the United Nations.

As an example of the wielding of power by a government that cares only about the wielding of power, it is harder to to find a better one than welfare. Always judge a government by how they treat their most vulnerable citizens. It’s how they’d treat you if they thought they could get away with it.

Some aspects of this have been devolved and Scotland is leading the way with a far more humane philosophy towards social security that outweighs the comparatively minor powers granted to it.

As with tax, I’d be surprised if the devolution review recommends further devolution in this area. I expect it to make a justification along the lines of saying that UK benefits are a unifying policy and help foster a greater sense of Union in recipients. After all, a population that sees its social security needs and safety nets being delivered by the Scottish Government might start thinking that they, rather than the UK Government, have their interests at heart. I expect to see re-heated arguments about the “sustainability” of “pooling and sharing” welfare across the UK rather than looking more deeply at the regional inequalities which have exacerbated much of the UK’s economic and social problems.

Foreign Affairs

Brexit has caused a great deal of stress to the fabric of the Union in the last few years. It almost seems like the UK Government has gone out of its way to not just cut the devolved governments out of discussions but to actively undermine them at every turn. May’s cry of finding a deal which “works for the whole of the UK” is one that she has tried to imposed ON the whole of the UK, regardless of fit.

Jeremy Hunt has recently doubled down on this approach by announcing that a review of the Brexit Deal will involved the DUP and Tories from Scotland, Wales and Northern Ireland but NOT those country’s respective governments.

He has also sparked outrage by withdrawing diplomatic support from the First Minister in a recent trip abroad on the grounds that he didn’t like her talking about independence.

The devolution review should actively condemn this approach to foreign affairs and relations and should state forcefully that devolution means that sometimes devolved governments will do something other than what the central government would do in their place. If this principle isn’t embedded within the understanding of devolution then there is no point in having devolution at all and we’re right back at the the Divine Right of the Crown to unilaterally dictate what must be done.

This chapter, probably more than any other, will be the test for the devolution review. If the UK cannot sustain a Foreign Office which supports Scotland and its own choices abroad even when the UK Government disagrees with those choices then the UK itself cannot be sustained.

The Scotland Office

This department will be another major test for the devolution review. The Scotland Office used to be the centre of power when it came to dispensing policy in Scotland but since devolution has found itself with increasingly little to do with its time.

Except in recent years, it has seen its budget ramped up and activities including overt pro-Union propaganda becoming a major feature of their social media output. The Scotland Office website openly promotes itself as a department whose mission is to promote “the best interests of Scotland within a stronger United Kingdom“. It has increased its staff and is moving to a new office in Edinburgh. There are long standing suspicions that post-Brexit, EU powers which should be devolved to the Scottish Parliament will instead be delivered to the Scotland Office instead.

If the purpose of the Scotland Office is merely to disseminate reserved policy in Scotland then it is perhaps even more distracted by constitutional questions than they accuse the Scottish Government of being. But as a tool for the Union for preventing Scottish independence then they are probably fulfilling that job as designed. I’m not sure what the devolution review will say about this office. If the former job is considered more important then perhaps they will join calls for the Office to be abolished as no longer required but if they take the latter as being more important then I expect a congratulations for a job well done and a recommendation for another budget boost.

A Watchful Eye

I’ll be keeping an eye on the formal announcement of the devolution review tomorrow and will be very interested to see the intended scope of it. Theresa May won’t be around to see its conclusion (or even its commencement) but her successor will almost certainly want to boost their pro-Union credentials by embracing it.

I also will wonder if this will be a purely internal departmental review or if they intend to find out how the various government departments are perceived by the citizens of the UK.

If the latter, I wonder how they’ll try to do it. I really hope they suggest a Citizens’ Assembly.

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4 thoughts on “The Devolving Union

  1. Or the Dunlop review of devolution may be no more than a device to facilitate the process of implementing those ‘UK-wide common frameworks’ that David Mundell is so looking forward to administering on behalf of the British state.

    Liked by 3 people

  2. Great article Craig. I guess you could have said a lot more about income tax, dividend tax etc, not forgetting the Block Grant Adjustments saga – probably best in a separate article, which you may already have written. Have you?

    BTW, Spice recently publishes a good summary of the BGA-effect at https://spice-spotlight.scot/2019/06/26/taxing-times-the-perils-of-fiscal-devolution/
    Though it’s annoying they characterise this as “fiscal devolution”!

    Like

  3. That she also celebrated American Independence day whilst denying us the chance to have our own also sticks in the craw. Old King George who lost the American colonies would probably be rather grumpy about that you know Theresa. Off with her head!

    We only notice July 4th because the Yanks are the superpower and like that sort of thing. Just like not recognising Taiwan makes the emerging Chinese superpower Not put you in diplomatic and trade coldstore.

    Though forced to choose between superpowers I would be inclined to the Chinese. They have made no moves towards territories not hitherto claimed by China. They don’t have bases all over the world in other people’s countries. Their Belt and Trunk or whatever scheme seems entirely bent on a combination of extracting resources more efficiently AND fostering international trade.

    In the Pacific they have replaced crumbling wooden wharves with concrete and grass airstrips with asphalt. The workers were Chinese and left when finished but the Pacific nations noticed. When a Tropical Cyclone swept through Tonga last year they expressly told New Zealand and Australia their help would not be required and their new friends the Chinese would provide.

    China may also want their votes in international fora but then so do NZ and Oz so former colonial overlords or disinterested China? China is actually racially and culturally closer to traditional Pacific peoples so they get on rather well. Note that China wasn’t apparently remotely bothered by Tonga being a constitutional monarchy with a king.

    China also understands that conflict hurts trade and thus should be avoided at all costs. I very much doubt Uncle Sam does.

    The confected furore over a memorandum of understanding with a Chinese company by the Yoons scuppered needed incoming investment and sent the message that Scotland is too politically turbulent for Chinese investment. iScotland will have to do much better.

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