The Implementation of the Smith Agreement - Scottish Affairs Contents

Conclusions and recommendations

Conclusions are in plain text, recommendations are italicised.

Draft clauses

1.  We are surprised that the Scottish Government did not raise its concerns when it was initially consulted over the draft text of the clauses but instead waited until after publication to air them. Lord Smith called for both Governments "to work together to create a more productive, robust, visible and transparent relationship". Of course the timetable was tight but on this occasion the working relationship between the UK and Scottish Governments fell markedly short of Lord Smith's aspiration. (Paragraph 14)

2.  The idea that the draft clauses contain "twelve vetoes" is a ludicrous one and it is disappointing that the UK Government failed adequately to rebut such claims. We hope that a good working relationship between the two Governments will mean that consultation will be routine, agreement a formality, and that dispute will not arise. On such a basis some might question why requirements to consult are included in the draft clauses at all; in the interests of good governance and good legislation it is right that they are there, but we remain of the view that the UK Government should have been better able to explain the clauses and to have avoided the unnecessary conflict and confusion which was used to detract from the real substance of this legislative package. (Paragraph 18)

3.  The recommendations on welfare confer broad powers that would allow the Scottish Government to increase any benefit and create new benefits in devolved areas. In effect, the only powers the Scottish Government will not have over welfare are the powers to cut or completely redesign benefits in reserved areas; this presents the Scottish Government with substantial powers to shape the welfare system in Scotland. (Paragraph 21)

4.  The Smith Agreement clearly states that the Scottish Government will have the power to make discretionary payments in any area of welfare so long as it is able to fund them. If the discretionary payments are to come out of the Scottish Government's budget then it should be for the Scottish Government, not the UK Government, to set the terms and conditions under which those payments can be made. We recommend that draft clause 18 be amended to give the Scottish Government broader powers over the application of discretionary payments. Such a change will make it clear to the people of Scotland that they have the benefit of the security of the UK welfare state while, at the same time, the Scottish Government has the capacity to provide more generous welfare support should it wish to do so. (Paragraph 24)

A revised fiscal framework

5.  The updated fiscal framework should account for circumstances where there might be a direct link between a particular tax and specific public spending. It would not be fair for Scotland to benefit from public spending in reserved areas that was directly based on revenues raised in the rest of the UK. We note, however, the recommendation of the Smith Commission that the UK Government has the power to levy a UK-wide tax if it is in the national interest to do so. (Paragraph 32)

6.  The potential for grievance over the operation of the no detriment principle is enormous. If the Smith Agreement is to be an enduring settlement both Governments must work together in good faith and agree a mechanism to administer a policy of no detriment that is proportionate, fair and based on independently verified data. (Paragraph 35)

7.  Whatever the mechanism decided upon, the new fiscal framework must have the support of both Governments and deliver a robust set of fiscal rules that are fair, transparent and which allow the Scottish Government the power to exercise its new responsibilities while bearing the consequences of its actions. (Paragraph 39)

Full fiscal autonomy

8.  The collapse in the oil price is a stark reminder of the risks that face economies which rely on a volatile revenue stream to fund a large proportion of their public spending. 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. (Paragraph 52)

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Prepared 10 March 2015