Scottish Labour’s Devolution Commission’s Interim Report

There were few surprises arising from the publication of Scottish Labour’s Devolution Commission’s interim report.

The starting point for these commissions is always the same.  They look around for reasons why a particular power should not be devolved.  They do not look at what could be achieved by control of that power being passed to the Scottish Parliament.

The main problem that I have with this report is that we have heard all this before and in fact quite recently.  The Calman Commission taught all of us with an interest in seeing the creation of a Scottish tax system how its opponents behave.   I like to call this the Calman doctrine.

“Make a huge fuss about having someone look at the issue, take your time, offer as little as possible, exaggerate any problems, minimise or ignore any advantages and ensure HMRC and HM Treasury remain in control.”

Calman also taught us that even if a report is produced and its recommendations are accepted not all of those recommendations actually make it to a Scotland Act.  That is why the Scotland Act 2012 is called “Calman minus”.

The absence of common sense is also a problem.  Why not look at which powers are already devolved and then devolve the areas of taxation most closely connected to these already devolved powers.  For example inheritance tax and succession law, tobacco and alcohol duties and health and vehicle excise duty and transport.  This would greatly help the development of policy and at the same time provide the Scottish Parliament with a serious number of economic levers.

Simplification for both the UK tax system and the new Scottish tax system is not even considered.

So what does report say?

The main taxes other than income tax are quickly dealt with and also the largest area of law not yet devolved, welfare.  The report rules out devolving National Insurance and with it any control of the welfare state, corporation tax and North Sea revenue.  That immediately restricts what can be done.    As VAT can only be devolved if Scotland becomes independent, of the 5 major sources of revenue, that only leaves income tax.

The report is quite clear and does not recommend devolving complete control of income tax.  At most it recommends devolving control of the rates, thresholds and allowances.  Almost all of the underlying law that governs how income tax is charged, or the type of reliefs, or the collection rules or who pays and when would not be devolved.   That means that income tax would have two masters.  As with the Scotland Act income tax proposal this is a recipe for disaster.

The report then looks at a number of minor taxes and uses a number of the “usual suspect” reasons as to why they should not be devolved.  They generally do not say that a particular minor tax should not be devolved but rather there is an “issue”.   The main issues are “concerns about avoidance” and “subject to EU law”.  This covers fuel duties, tobacco duties, alcohol duties, stamp duties other than SDLT which is already being devolved, insurance premium tax, betting and gaming duties, most of capital gains tax and a number of other minor taxes on income and wealth.  It is not clear what is proposed regarding climate change levy. Revenue from our TV licences and the National Lottery are simply described as “not relevant”.

So, along with slightly more control of income tax, what is left?  Possibly air passenger duty and aggregates levy as recommended by Calman but not included in the Scotland Act, possibly vehicle excise duty, possibly part of capital gains tax, possibly inheritance tax and possibly control of the Crown Estate.  The recommendations are not that dissimilar to the Liberal Democrat Home Rule Commission proposal.  Please see my earlier blog on this which can be found here.

The conclusion is simple.  The vast majority of tax revenue and taxes will remain controlled by the UK Government.   In any case, the response from a number of Labour MPs to the interim report tells us all we need to know as to the likelihood of these relatively minor proposals being enacted.

Tags: , , ,

Comments are closed.