Critics confounded by radical reform plans

SIR Kenneth Calman confounded his critics yesterday by unveiling a far more radical package of changes than had been expected on the future of devolution for Scotland.

When it was announced that Dynamic Earth in Edinburgh would be the location for the report's launch, the joke was that the content would struggle to live up to the name of the launch venue.

But instead the commission proposed sweeping new powers in finance and other areas which will hand far greater control of Scotland's affairs to MSPs.

So great were the changes being proposed that it split opinion on whether it puts Scotland on "the road to independence" – as the SNP were privately crowing – or "strengthens its place in the Union" as Sir Kenneth claimed.

Sir Kenneth made it clear that the proposals to hand over much of Scotland's income tax to Holyrood was the key recommendation that would improve Holyrood's accountability.

"No longer when you vote will you just have to consider how it is proposed to spend your money, instead the political leaders will have tell you how much they want to raise from you, and what that means for services you receive," he said.

Scottish Secretary Jim Murphy said that he hoped some of the proposals would end the "rancour" and "grudge and grievance" that has defined Scottish politics in recent years.

And the areas targeted in the report – such as devolving powers on airguns, drink-drive limits, speed limits and electoral administration – appeared to be direct attempts at tackling topics where the SNP has made political capital in the past two years.

Along with this came a plea for "mutual respect" to be formally embedded in the relationship between Westminster and Holyrood, which by implication the commission acknowledged was missing from the current relationship.

The broadest grin in the room was sported by CBI Scotland director Iain McMillan, a member of the commission. He said that the proposals were a great deal for business in Scotland and underpinned the economic stability they required in the context of providing more accountability to the Scottish Parliament.

And he was quick to point out that some of the more significant changes, such as borrowing powers or new devolved taxes, would need to be agreed by the Treasury.

Most importantly he had won the battle to keep Holyrood's hands off major taxes such as corporation tax, National Insurance contributions and VAT.

The right of centre think tank Reform Scotland welcomed the changes, particularly on greater flexibility on income tax and handing over smaller taxes such as stamp duty and air passenger duty.

However, Reform Scotland chairman Ben Thomson said: "These proposals are a move in the right direction but in our view they do not go far enough.

"In our view is that the Scottish Parliament needs to have much greater power to raise its own revenue in order to enhance its financial autonomy and accountability."

One of Scotland's leading experts on tax law, Isobel d'Inverno of Edinburgh law firm Brodies, who gave evidence to the commission, said that the proposals on different PAYE tax codes represented "a new departure for Scottish and UK employers".

But she welcomed the move and the proposals for increased co-operation between the Scottish and UK parliaments and governments, "which should allow the tax system to work more effectively across the UK".

However, Mr McMillan's colleague at CBI Scotland, David Lonsdale, gave the report a guarded welcome.

"The commission's report is undoubtedly a very good and thorough piece of work," he said. "But on tax, the recommendations go further than the CBI will be able to support."

Mr Lonsdale was unsure on the cost to business of different rates north and south of the Border and uncertain over recommendations which may open the door to a local income tax replacing the council tax, which CBI Scotland opposed.

There was also speculation yesterday on how the Calman proposals will affect the rest of the UK. In particular, Wales has trying to get a similar settlement to the one Scotland has.

The proposals, which look to have been accepted by the main parties, could also raise interest in Northern Ireland's assembly.

However, pro-devolutionists did not get their own way on every aspect of Scotland's powers. The commission said that registration of health professionals and charities, as well as laws on food content and labelling and insolvency, should all be reserved again.

Eileen Maclean, of business recovery experts R3, who gave evidence to the Calman Commission asking for insolvency to be "re-reserved", said: "I am delighted.

"Its recommendations will, if put in practice, clarify a situation that causes confusion for our members and sees increasing divergence between liquidation in Scotland and England."

Rachel Grant of Brodie's who also appealed to the commission to "re-reserve" insolvency arrangements, added: "Given the commission's reference to clarity, consistency and speed, it is hoped that the UK and Scottish governments will now act quickly to implement this recommendation."

The SNP has tried to remain apart from the Calman Commission which it believes was set up by the unionist parties as a rival to its Scottish Government National Conversation.

And in the spirit of its self- imposed separation, Scotland's minister for constitutional affairs, Mike Russell, held interviews outside Dynamic Earth. He welcomed any proposals for additional responsibilities for the Scottish Parliament and government – as part of the overall powers that Scotland needs as an independent nation.

He added: "We support a number of the Calman Commission's specific recommendations – such as devolving responsibility for air weapons, drink-drive limits, and indeed the running of Scottish Parliament elections –while rejecting any suggestion of transferring any powers back to Westminster." But he attacked the refusal to assign Scotland's share of oil and tax revenues and said the report fell far short of the ideal solution of independence.