In fact if you take anything more than a passing interest in the constitutional affairs of Scotland, it is difficult not to be up to date.
The Bill, its benefits and/or shortcomings, and the 100 amendments proposed by the Secretary of State himself as well as by his political opponents, have already been extensively debated and discussed inside and outside the parliaments of the UK and Scotland. And there is much more to come. The Bill goes back to the House of Commons on Monday (November 9), then to the Lords. We can expect long debates and detailed argument in both places.
Early in the New Year the discussion will come north of the border when the Scottish Parliament decides whether to give the legislative consent necessary before the Bill can become law. If all goes well, the Bill should get the final Royal Assent by March, just before the start of the election campaign for the Scottish Parliament.
A few months ago we might have thought it was a foregone conclusion that the Scotland Act would be in place by next year: all parties signed up to the Smith agreement and so might have been expected to welcome more powers for themselves.
But in September Deputy First Minister John Swinney raised the prospect that the Bill and the ability it would give to Scotland to set its own rates of tax and create its own welfare system might actually be rejected. A few opposition MSPs have talked about the same possibility.
What irreconcilable points of disagreement might make this come about? I can’t tell you. Very few other people can – and those few who are in the know are not saying. “We will not provide a running commentary,” is the official line.
Fiscal framework
The reason is that in parallel to the Bill, another set of negotiations have been in progress between a small team of ministers and officials from Scotland and London (the Joint Exchequer Committee), conducted in private without parliamentary or public scrutiny. We know when they meet (three meetings so far, one more planned), but not what they discuss. No agenda is published, no minutes are made public.
It was to those discussions that Mr Swinney was referring when he speculated that agreement might not be possible.
They are the attempt to produce a fiscal framework which will underpin the provisions of the new Scotland Act and make it workable. It will include such seemingly arcane items as who should forecast Scotland’s future tax revenues and on what basis, how should the block grant which Scotland will continue to receive be adjusted and how much and in what circumstances should the Scottish Government be able to borrow.
Yet they go to the heart of devolution and will determine, for example, whether Scotland will be able to opt out of austerity and follow a radically different economic and fiscal policy to the UK as a whole. Mr Swinney and the SNP say that it should – and the new powers over tax and welfare spending are meaningless unless it is able to do so.
The UK Government, on the other hand, is concerned not to allow a situation where spending in Scotland undermines Chancellor George Osborne’s overall strategy – to eliminate the budget deficit by 2019-20 and bring the national debt down from over 80% of GDP – a position he believes exposes the UK to excessive risk – to nearer 70%.
From next year (as a consequence of the 2012 Scotland Act, not the one currently under discussion) Scotland will be required to set a rate of income tax and collect the resulting revenue. The block grant we receive under the Barnett formula will be reduced by the same amount.
The figures are relatively easy to work out for the first year and if Scotland sets a rate equivalent to the rest of the UK (ie so that tax rates are the same on both sides of the border) there will be no difference in the amount that the Scottish Government has to spend.
It gets more complicated in future years if the Scottish economy and the UK economy grow at different rates, even more complicated when the more extensive tax powers in the 2015 Act come into force and even more complicated still if the Scottish Government sets radically different tax rates to the rest of the UK. How will taxpayers react if the tax burden is more onerous in Scotland than south of the border, or vice-versa?
Economic and tax forecasts for the UK Government, which it will use to calculate the amount by which it will reduce the block grant, will be made by the Office of Budget Responsibility. For the Scottish Government the forecasting will be done by its civil servants and checked by the revamped Scottish Fiscal Commission (which might produce its own forecasts, although this is not yet decided).
Paradoxically, the UK Government could hope that the forecasts are optimistic, so that it needs to pay less in the block grant, while the Scottish Government will want to be pessimistic to get as much from London as it can. But what will happen if the forecasters in London and Edinburgh cannot agree?
It has been suggested that there should be an arbiter, a person or a body which can decide which forecast is correct or apply a judgement of Solomon between them. But who should that be? An academic body like the Institute for Fiscal Studies (which both sides have fallen out with at one time or another), an international body like the OECD or IMF or a completely new institution?
What democratic accountability will that referee have? And what guarantee that both sides will accept the decision?
It is not difficult to foresee a situation where the Joint Exchequer Committee fails to agree a framework in time for the Scotland Bill’s final reading. But in the meantime we do not know how near ministers and officials are to agreement or how far, or even what they are asking us to sign up to. Are we as well informed as we think?
This first appeared on David Hume Institute blog and is republished here with permission
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