2 The devolution of greater powers
and the referendum
6. We ended this Parliament as we began it, with
the consideration of proposals to devolve further powers to Scotland.
We spent much of early 2011 scrutinising the Scotland Bill which,
enacted in 2012, delivered greater responsibilities to the Scottish
Parliament over taxation. The Act made provision for the devolution
of responsibility for two additional taxes, Landfill Tax and Stamp
Duty Land Tax, and control over a proportion of Income Tax. We
were disappointed that the devolution of the Aggregates Levy and
Air Passenger Duty was omitted from the Bill.
7. In our 2015 Report The Implementation of the
Smith Agreement we noted:
The fiscal framework needs not only to deal with
the question of no detriment and adjustments to the block grant
but also with the broader issues of increased Scottish borrowing
powers to insulate against volatility in the Scottish public finances
and the health of its economy in general.[4]
The fiscal framework must include rules that are
fair, robust and transparent, and allow the Scottish Government
to bear the consequences of its decisions. We considered that
if the Governments of the UK and Scotland get this most crucial
of issues right then the Smith Agreement has the potential to
be an enduring settlement, but we warned that if they get them
wrong then the potential for grievance, from either side, will
be huge. The Smith Agreement offered an indication of how the
fiscal framework might work without providing much detail.[5]
Equally the UK Government's Command Paper, which was published
alongside the draft clauses, stopped short of providing a definitive
answer to this question. We expect the implementation of the Smith
Agreement to be a major part of the work of our successor Committee,
and suggest that the fiscal framework, in particular, will merit
careful scrutiny.
The referendum
8. Our inquiries into the referendum on separation
for Scotland involved an extensive programme of oral evidence,
as we aimed to provide as much information as possible to the
Scottish electorate to assist them in making an informed decision
at the ballot box. We therefore scrutinised in detail the UK Government's
series of Scotland Analysis papers, which were coordinated
by the Scotland Office,[6]
and the Scottish Government's White Paper Scotland's Future:
Your guide to an independent Scotland.[7]
We held 44 evidence sessions, many of them in Scotland, and heard
from a wide range of Whitehall Departments, including ten Ministers
and three Cabinet Ministers, as well as senior lawyers, economists,
academics and union officials.[8]
We aimed to establish key facts on the potential impact of separation
on the people of Scotland. For example, our evidence sessions
with the Chancellor of the Exchequer, Rt Hon George Osborne MP,
Rt Hon Ed Balls MP, and Rt Hon Danny Alexander MP provided important,
clear information on the position of the three main UK political
parties on the key issue of a potential currency union between
Scotland and the continuing United Kingdom in the event of a Yes
vote on 18 September 2014.
9. We published fourteen reports covering the potential
impact of separation on areas such as the provision of pensions
in Scotland, defence contracts, higher education and Scotland's
membership of the European Union. It was clear from our inquiry
that the Scottish Government were consistently underplaying the
potential risks of separation.
Full fiscal autonomy or full fiscal
austerity?
10. Having failed to achieve its desired outcome
in the referendum, the Scottish Government is now pushing for
full fiscal autonomy.[9]
Under full fiscal autonomy, the Scottish Government would receive
all revenues raised in Scotland and be responsible for almost
all public expenditure. Only certain UK services such as defence,
intelligence and foreign affairs would remain delivered at a UK
level-the Scottish Government would pay the UK for these services.
11. As part of our inquiry into the implementation
of the Smith Agreement we scrutinised the alternative option of
full fiscal autonomy. We found that under full fiscal autonomy,
as with separation, Scotland would lose the benefit of being able
to pool risk and share resources with the United Kingdom and would
therefore be more exposed to shocks in its revenues or spending.
Furthermore, Scotland would be replacing the stable stream of
funding that comes via the block grant and Barnett formula, worth
an additional £8 billion a year in public funding compared
with the UK average, with volatile oil revenues over which the
Scottish Government has little control.
12. The recent collapse in the oil price provided
a stark reminder of the risks that face economies which depend
on volatile streams of revenue to fund large areas of public spending.
We noted that:
The conclusion of the Smith Commission not to
devolve such a volatile source of revenue, nor to recommend full
fiscal autonomy, but instead to retain the system of shared benefit
and pooled risk across the United Kingdom has already proved to
be a wise decision, and one that is of obvious and immediate benefit
to the people of Scotland.[10]
The people of Scotland deserve a constitutional settlement
that serves their best interests. The Smith Agreement represents
the best of both worlds for Scotland and its people, giving much
greater fiscal autonomy and accountability, but maintaining a
good degree of protection within the wider UK economy from fiscal
risks and shocks, and continuing to provide financial support
to Scotland via the Barnett formula. It is not clear to us what
the Scottish Government want to achieve that they will not be
able to with the further powers that will be devolved under the
Smith Agreement. The people of Scotland need to hear what the
Scottish Government will do with these new powers, particularly
the opportunity to increase, by any amount, each and every benefit
and to change all tax rates and bands, rather than demands for
more powers for the sake of it. Alongside its scrutiny of the
implementation of the Smith Agreement, should the Scottish Government
continue to press the case for full fiscal autonomy in the new
Parliament, we believe that our successors should also scrutinise
the consequences of these proposals in careful detail.
Devolution within Scotland
13. As well as scrutinising proposals for the devolution
of further powers to Scotland, during the course of this Parliament
we have also considered whether power should be devolved within
Scotland. It is our view that the evolution of the constitution
is a process which requires powers to move in whichever direction
is in both the interest of the people and of better governance.
In our inquiry into the Scotland Bill we concluded that the process
of devolution "should lead to further decentralisation within
Scotland, to local authorities and communities, and not simply
to a gathering in of authority in Edinburgh".[11]
We have pursued this theme in several of our inquiries.
THE CROWN ESTATE
14. During our inquiry into the Scotland Bill we
received a significant amount of evidence identifying concerns
with the administration of the Crown Estate in Scotland. This
led us to hold a separate inquiry into the work of the Crown Estate
Commissioners (CEC's) in Scotland. We identified a number of issues
in relation to the CEC's management of Crown rights in Scotland,
particularly in administering its responsibilities for the seabed
and the foreshore. We concluded that the only way in which these
problems could be addressed was for the CEC's responsibilities,
including the administration and management of the Crown rights
to the foreshore and seabed, to be devolved to the Scottish Parliament.
However, we further concluded, that, in order to deliver the maximum
benefit to the residents of Scotland, decentralisation should
not stop at Edinburgh. We recommended that these responsibilities
should be further devolved to the most appropriate level, including
local authority and local community level, to the maximum extent
possible. We were pleased to note that the Smith Commission endorsed
this view.[12]
15. As the Smith Agreement is implemented, we look
forward to the management of the CEC's economic assets in Scotland
transferring first to the Scottish Parliament and Government,
and from there being further devolved to a local level. Securing
commitments to the reform of the Crown Estate and the further
devolution of the CEC's responsibilities have both been amongst
our key achievements during the course of this Parliament. We
believe that our successor Committee should closely scrutinize
the implementation of the proposed reforms to the Crown Estate
to ensure that the spirit of both our recommendations, and the
Smith Commission's proposals, are translated into reality and
that local communities really do benefit from this important change.
OUR ISLANDS-OUR FUTURE
16. 'Our Islands-Our Future' is a joint vision drawn
up and shared by Orkney Islands Council, Shetland Islands Council
and Comhairle nan Eilean Siar. 'Our Islands-Our Future' was formally
launched on 17 June 2013,[13]
its intention was that, whatever the outcome of the referendum,
the UK and Scottish Governments should recognise the special position
and needs of the UK's three largest island groups, and that these
should be fully taken into account in any new constitutional arrangements
for Scotland.[14] We
have held a number of informal meetings with the island council
leaders during the course of this Parliament, and held a one off
oral evidence session with them on 8 April 2014. We recognise
the strategy and vision of 'Our Islands-Our Future' as being exactly
the type of initiative which both serves to promote decentralisation
within Scotland, and to strengthen structures of local government
as a means to counterbalance the Scottish Government's centralising
tendency, while recognising the unique characteristics and challenges
of the different regions of Scotland. Indeed, part of the rationale
for our inquiry 'Our Borderlands-Our Future', was to explore whether
a similar campaign could be established in the borders area of
Scotland, with strategic collaboration between local authorities
there, in order to achieve the same benefits for local people
as has been the case in the highland councils.[15]
We also regard it as important that the needs of those islands
which are part of mainland authorities should be examined.
Our Borderlands-Our future
17. Decentralisation of powers within Scotland was
also a key theme during our inquiry Our Borderlands-Our Future.
Our Report highlighted the key concerns facing the region, including:
the need for greater cross-border working; economic development
and enterprise; unemployment and the low-wage economy; and, EU
regional and structural funds. We concluded that these challenges
were further complicated by two countervailing tendencies. The
first was the instinct of the Scottish Government to centralise
power and functions in Edinburgh. The negative consequences of
this were particularly evident for the south of Scotland in the
scrapping of Local Enterprise bodies in favour of the creation
of a centralised Scottish Enterprise. At the same time, the UK
Government's capacity to deliver its responsibilities in Scotland
has reduced. It has been too easy for Whitehall Departments to
assume that their major functions are devolved, and to not give
adequate attention and priority to administering their reserved
functions north of the border. Both of these trends have had a
tangible, negative impact on the daily lives of people in the
south of Scotland. We subsequently recommended further decentralisation
and the strengthening of local bodies within Scotland, in order
to adequately address the challenges faced in the south of Scotland.
TELECOMMUNICATIONS
18. On 18 March 2015, we held an oral evidence session
on telecommunications in rural Scotland. If jobs are to be maintained
in rural Scotland then it must have access to the same telecommunications
infrastructure as the rest of the country. At the evidence session
we heard of work in progress that has the potential to deliver
an ambitious telecommunications infrastructure to all of Scotland.
While we recognise that there are challenges involved in delivering
and maintaining a telecommunications infrastructure across the
whole of Scotland, we are concerned from the evidence we heard
that telecommunications companies are not performing as well as
their customers are entitled to expect. We urge our successor
Committee take this work forward in the new Parliament.
4 Scottish Affairs Committee, Fourth Report of Session
2014-15, The implementation of the Smith Agreement, HC 835 Back
5
The Smith Agreement, 27 November 2014 Back
6
The Scotland Analysis papers are available at https://www.gov.uk/government/collections/scotland-analysis
Back
7
Scottish Government White Paper, Scotland's Future: Your guide
to an independent Scotland, Back
8
Full details of the Committee's inquiry into the referendum are
available on our website www.parliament.uk/scotaffcom Back
9
Andrew Marr Show, BBC One, 25 January 2015, transcript of interview
with the First Minister Back
10
Scottish Affairs Committee, Fourth Report of Session 2014-15,
The implementation of the Smith Agreement, HC 835, para 52 Back
11
Scottish Affairs Committee, Fourth Report of Session 2010-12,
The Scotland Bill, HC 775-I, para 7 Back
12
Scottish Affairs Committee, Seventh Report of Session 2010-12,
The Crown Estate in Scotland, HC 1117 Back
13
Orkney Islands Council, "Strong voice" from the islands
in referendum debate, 17 June 2013 Back
14
Our Islands-Our Future joint position statement, June 2013 Back
15
Scottish Affairs Committee, Second Report of Session 2014-15,
Our Borderlands-Our Future, HC 556, 9 July 2014, para 6 Back
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