AS BEFITS a medical man, Sir Ken Calman has compared writing his report into the future of devolution to treating an illness.
"It's like dealing with a complex clinical problem. You don't have all the answers, there's some uncertainty, you'd like to do a few more tests and you need to come to a decision," he said recently. Tomorrow, the diagnosis will be given.
The Commi
ssion's 300-page review of Scottish devolution is eagerly awaited in political circles. Set up by the three unionist parties – the Liberals, Labour and the Tories – to review the Scottish Parliament's powers, the report is unlikely to offer grist to the mill of Nationalists who would like full independence. What it will do, however, is trigger fresh debate about the current balance of power between Holyrood and Westminster. The report could be the blueprint for Devolution Mark 2, acting as the catalyst for profound change in Scotland. Or it could be destined for the long grass, marked "damp squib". So which is it?
With Calman understood to have largely rejected moves to transfer major powers to the Scottish Parliament (for example over immigration, gun control and drug laws), the headlines are already being grabbed by Calman's plans for a reform of Scotland's tax system. With only the clumsy and un-used "tartan tax" at its disposal, pressure has been mounting for Holyrood to get more tax powers so that the Edinburgh government is more accountable to the people it serves. The theory is that only if Scottish ministers know their income depends on tax receipts raised in Scotland will they have the incentive to focus on growing the economy. The Calman Commission appears to have partially bought the argument. Radical plans to devolve VAT and Corporation tax have been dismissed but Calman is set to back the transfer of two new major new tax raising powers nonetheless; income tax revenue and – as we reveal today – Stamp Duty.
The plans for income tax envisaged by Calman are complex. Holyrood would not get complete control over all rates. Rather, it would be given the power to decide over 10p of the tax rate in each tax band.
For example, Scottish ministers could decide that basic income tax payers – who pay 20p – needed a cut. They could then reduce their 10p share to 5p.
Crucially, the Scottish Government's own income would then rise or fall depending on this decision. Scottish ministers would therefore have to weigh up whether they could afford a cut or not. Good governance, say advocates, is the natural consequence.
As we reveal today, a similar plan is envisaged with Stamp Duty. Rather than Stamp Duty from house sales being sent to HM Revenue and Customs, the cash would go to Edinburgh instead. As with income tax, Scottish ministers would have the power to vary rates and bands. The theory is that Holyrood would therefore be able to move to the demands of the more stable Scottish property market – rather than follow the whim of the UK scene.
If adopted, it is estimated that as much as £9 billion of Scotland's £33bn budget would come from the new tax powers. UK ministers would, under Calman's plan, then reduce the block grant they currently send up north. The new system would then closely reflect systems in Canada, where provinces rely on a mix of national grant and local taxes.
The plans sound radical. Backers say it would make Holyrood more accountable. The trouble is that most tax experts think that, in order to keep current spending levels going, the new taxes would be going in one direction only – up.
Professor John Kay, an economist who sits on Alex Salmond's advisory group, says: "We know that public expenditure is higher in Scotland than the rest of the UK and unless Scotland receives a disproportionate share of UK revenue – whether that is through Barnett or some other device – the public services cannot be financed at their current level. That's just the facts."
Rhona Irving, the head of tax at PWC Scotland said: "You can say 'let's have lower tax rates' – that's great, but can you actually afford it? Public spending is high here, because we have a large public sector and that would all have to be paid for."
Consequently, analysts say, even if the powers were offered, Holyrood ministers would pass the buck.
Jenny Stewart, the head of government at KPMG, adds: "In the current climate, the tax take would be less and my instinct is that it is difficult to see how the government would want to use the powers with the current economic situation."
"Tartan tax has never been used in the ten years since devolution," says Prof Richard Kerley, an expert in public finance at Queen Margaret University. "What is there to make us believe that a Scottish Government would use the tax-varying powers in the next ten years?"
Practical problems loom as well. The proposals envisaged by Calman could take a minimum of eight years to enact, as officials at the HMRC attempt to unpick the UK's unified tax system – supposing they agree to undertake the task in the first place. "It's all very well talking about more powers but unless you keep the present system or just move to independence, it all becomes very complicated," says a senior Labour MSP. There is thus considerable scepticism about whether the reforms will ever see the light of day.
The same charge of otherworldliness is being made about the other big section in Calman's report – on smoothing relations between London and Edinburgh.
That tetchy relationship has been a running sore in devolution's journey over the past ten years.
One anecdote from last Christmas sums up the relationship well. A civil servant in Whitehall tried to send an e-card to a few friends working at the Scottish Government. A few minutes later, the e-mail bounced back, having failed to get through the Edinburgh firewall. All that the civil servant's friends in Scotland could read was the message: "An undecipherable e-mail has been intercepted."
From the Holyrood perspective, Whitehall and Westminster MPs stand accused of haughty arrogance. Former cabinet ministers of Jack McConnell's long complained about being ignored by their London counterparts. SNP ministers say there are few concrete ways of getting plugged into the Whitehall system.
One former Scottish Government minister declared: "Some of the UK ministers we would speak to would basically say – 'look, I don't have to respond to you, I answer to the Palace of Westminster'".
Calman tomorrow will call for much greater co-operation between the two centres of power, so that – for example – Holyrood will be able to scrutinise legislation in Westminster more closely. He will suggest that Holyrood and Westminster committees hold joint inquiries and hearings on matters of mutual interest. An example might be over the recent collapse of the banking sector, or over broadcasting. The report is also likely to support moves for UK ministers to be more accountable to Holyrood – by, for example, reporting to the Edinburgh parliament on the impact of the Queen's speech. Meanwhile, he will also suggest that the First Minister be accountable occasionally to Westminster. One member of the Commission said that healing relations – rather than increasing power – was the main focus of its attention. "We had one civil servant at St Andrew's House saying to us, focus on improving the way we work with London."
But many politicians on the frontline are more than a little cynical about Calman's ability to apply a healing balm. A former Labour minister declares: "You can set up as many committees and protocols as you like but you can't legislate for trust." The hard political facts, say politicians on all sides of the divide, are that when there are two centres of power, often with different political parties at their helm, discord is the inevitable outcome.
Members of the Commission themselves admit that their earnest proposals will only be paid lip service in the real world. One said: "There has to be political will in both parliaments to make this happen. There will be a question mark about whether that is realistic because if you have a Nationalist government in Holyrood are they going to want to have good relations? No, and why should they?"
SNP MPs and MSPs may well ask why they should pay heed to a report that seeks to bolster the Union when the Scottish people elected them in the full knowledge they want to end it. However, in the Conservative camp the plans are being met with outright support. David Cameron will meet Scots Tory leader Annabel Goldie on Tuesday to discuss their response to the report. One senior source said: "Conservatives take the view that if the relationship (between Holyrood and Westminster] is not right then the whole thing will flounder. Much of what we expect in this report chimes with what Cameron has been suggesting." Thus, Cameron's opponents say, Calman will simply be used by the Tories as part of their attempt to "decontaminate" their brand north of the border.
So the question remains as to whether Calman's Commission will be lost amid the noise of rival parties seeking political advantage, and by the practical problems that his tax reforms may encounter.
On the one hand, even cynics concede that, at the very least, the Commission has laid down an unrivalled evidence base for future reforms. If tax reforms are backed by the main unionist parties, then it is likely that they will take the form that Calman will propose. Meanwhile, the report tomorrow is likely to see – at least on the surface – greater integration between the work at Holyrood and Westminster.
On the other hand, many political figures expect the plans to quietly wither on the vine. Or as one source close to the Commission puts it: "The potential for long grass is considerable."
