A d v ic e Pa p er (09-02)

Februa ry 2 0 0 9

THE FUTURE OF SCOTTISH DEVOLUTION WITHIN THE UNION:

a response to the Commission on Scottish Devolution

Summary
The work of the Commission will undoubtedly focus on the relationship and powers ofWestminster and Holyrood, but the RSE would encourage the Commission to consider also the local government and European dimensions where these are relevant to its work. If the idea of a unifying and defined social citizenship is to be pursued, it would need to recognise that responsibilities for aspects of social citizenship reside at different levels of government, and could only be developed as a result of agreement with each. If such a social citizenship sought to limit the ability of devolved governments to provide enhanced levels of social provision then it could prove to be inimical to the Commissions aims. Inter-governmental and inter-parliamentary structures need to be overhauled and made to work more effectively. Consideration should be given to entrenching the powers of the Scottish Parliament and developing the relationship between the governments of the UK towards one of a partnership of equals. There is a strong case that the Scottish Parliament should be given increased responsibility for devolved and assigned sources of taxation. Ideally it should be responsible for raising the majority of its revenue. This would improve financial accountability.The RSE recommends that the Commission should seek further detailed advice from the Independent Expert Group (IEG) on the most appropriate range of taxation powers to facilitate the delivery of this level of revenue raising responsibility. If the revenue raising powers of the Scottish Parliament were to be substantially increased, then a revised needs-based equalisation system should be developed to continue to pool the economic risks between the nations and regions of the UK. There is a strong case for the devolution of borrowing powers, within agreed limits. The RSE strongly supports the view of the Commission that the UK Research Councils serve the UK research community well, and should be retained.

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CONTEXT
1 The Commission on Scottish Devolution published The Future of Scottish Devolution within the Union:A First Report in December 2008. In addition to the submissions made by a wide range of organisations and individuals this report also considered a report published by the Independent Expert Group (IEG) that the Commission had asked to advise it on the financial accountability of the Scottish Parliament. Following the launch of the First Report the Commission issued a call for further evidence to be submitted in a consultation open until the 27th February 2009. Having contributed a submission to the first phase, the Royal Society of Edinburgh, Scotlands National Academy, brought together a working group of Fellows with relevant expertise in order to prepare a submission in response to the new call for evidence. The paper was subsequently considered and approved by members of the Council of the RSE. On the future relationship of Scotland and the United Kingdom there exist a range of views within the Fellowship.This submission represents a broad consensus of the contributions made, but cannot encompass the opinions of all Fellows of the Society. In its earlier submission the RSE made comments on a range of issues.These still stand. In this paper the Society is responding to particular overarching issues raised in the report of the Commission and subsequent consultation.

Union, in which Scotland has MEPs elected to the European Parliament. Many of the issues over which the European Union has responsibility ultimately impact upon policy areas which are devolved to the Scottish Parliament. Consequently the structures between the devolved Government,Westminster and Brussels should ensure that the devolved accountability to Holyrood is adequately respected in these policy areas. With regard to local government the power to set the system of local taxation resides at Holyrood, whilst Council Tax Benefit remains a Westminster responsibility. To enable policy innovation and avoid conflict there would seem to be a case for both of these policy areas to be within the responsibility on one parliament, and in this case the Scottish Parliament would seem to be most appropriate. Consideration could also be given to the relationship between housing policy and housing benefit. Whilst the work of the Commission will undoubtedly focus on the relationship and powers of Westminster and Holyrood, the RSE would encourage the Commission to consider the local government and European dimensions where these are relevant to its work.

SOCIAL CITIZENSHIP
8 The concept of citizenship as envisaged by the Commission would appear to require considerable development to become a fully-fledged proposal. Citizenship is usually understood to have three dimensions: political; civil; and social. Civil rights in Scotland are at present protected through the European Human Rights Convention (ECHR). Other rights result from membership of the European Union. Political citizenship has been enhanced by devolution, which gives people in Scotland an additional channel for participation without sacrificing their rights as British citizens. Social citizenship refers to the welfare state and public services, as a result of the post-war welfare state settlement. In this context it is difficult to see how the current devolution settlement undermines this citizenship.The ECHR is enshrined in the Scotland Act; freedom of movement and employment flows from membership of the EU; and, with respect to devolved public services, the movement has been in the direction of enhancing entitlement to universal provision rather than the reverse.

DEMOCRATIC STRUCTURES AND ACCOUNTABILITY

4 Post-devolution there are a number of democratic structures which people in Scotland have access to that influence the shape of public policy as it affects them. Domestic policy and services are largely influenced by decisions of the Scottish Parliament, although Westminster continues to have a significant role in setting the level of the block grant, as well as continuing to have responsibility for social security, pensions and macro-economic policy. Local Government is a key partner of the Scottish Government in delivering many of the key public services and, to a certain extent, deciding upon local priorities. International affairs are within the remit of Westminster, with perhaps the most important of these being the relationship with the European

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In the case of the ECHR, the provisions of the Scotland Act allow the courts to strike down a measure passed by the Scottish Parliament that is deemed to be incompatible, whilst the Human Rights Act, which incorporated the ECHR into UK law, does not confer the same powers with regards to the actions of the House of Commons. Strengthening the Human Rights Act in a manner similar to the requirements of the Scotland Act would ensure that both legislatures had equal obligations in law to comply with the ECHR.

The university sector is another area where co-operation is important given that there is a mix of devolved and reserved powers, that the flow of students and academics in both directions is desirable, and that the research achievements of the UK university sector is a strength that we would wish to see continue. 13 In order to improve the way in which the Governments and Parliaments interact it is important to re-examine the relationships and structures of devolution.The Joint Ministerial Committees (JMCs) envisaged in the original settlement have been held infrequently, and have in the main had limited impact. There has also been little interaction between the Parliaments, and on the whole there has been little engagement of UK Ministers with Committees of the Scottish Parliament. Overall the current settlement operates on the assumption of the sovereignty of Westminster, with the Scottish Parliament being seen as subordinate. Devolution is an evolving process and will greatly benefit from the establishment of a compact or partnership of parliaments which is incorporated in the UKs system of governance and democracy. 14 To achieve this it would be important that the position of the Scottish Parliament within the UK could not be changed unilaterally.This could be by legislating for a statutory need for agreement between both Parliaments before their powers can be changed. In areas of overlapping responsibility the JMCs could take the lead in joint policy making and bilateral agreements between the Governments.The JMCs could also play a role in dispute resolution between the Governments. Here a new mechanism might be introduced to deal with the resolution of unresolved disputes, through some form of Devolution Council. This could be drawn from senior members of the Privy Council who are not actively party to the dispute in question. 15 Developing relationships between the Parliaments would also help to develop understanding of the procedures of each institution and contribute to the exchange of ideas. In certain areas of policy it may also be desirable to establish joint committees, for example where there is a degree of shared or overlapping competence. Formal participation of Ministers from both parliaments would greatly increase the value of parliamentary committee work.

10 If the idea of a unifying and defined social citizenship is to be pursued, it would need to take account of the responsibilities of each level of Government, and be by agreement of each. If such a concept of social citizenship sought to limit the ability of devolved governments to enhance the level of social provision then it could prove to be inimical to the Commissions aims in that it could lessen the value that citizens saw in the retention of the Union.

PARTNERSHIP, INTER-GOVERNMENTAL AND PARLIAMENTARY STRUCTURES

11 There are a number of areas of policy where it is in the interests of both the Scottish and UK Governments to work together, due to shared interests or overlapping competences. Relations with the European Union are a case in point, as the UK is the member state with responsibility for engaging with the structures of the EU, whilst there are a number of areas of devolved policy where Scotland has a distinctive case to make.Agriculture and fisheries are perfect examples where it is important for the Scottish Government to have a significant role in shaping and representing the UK position. 12 The shared infrastructure of the UK is another area where it is essential that there is engagement and co-operation between the devolved and UK administrations.Arterial transport links, such as motorways and railways, require co-ordination in respect of the north-south links. Energy policy requires co-ordination both to ensure that the grid is connected to all of the potential sources of energy, but is also capable of transmitting electricity to the parts of the UK that require it. Investment in the grid infrastructure is an essential part of the aim of maximising the renewables potential of Scotland, both to harness that potential, and also to allow electricity to be transmitted from other sources when the renewables are not operating at sufficient capacity.

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FINANCIAL ACCOUNTABILITY
16 In financial accountability terms, the current arrangements are unsatisfactory from the perspective of both Scotland and England.The block grant system, supported by the Barnett formula, means that the Scottish Government and Parliament have responsibility for a large expenditure budget, but currently with fairly limited responsibility for taking decisions on how these resources should be raised. Where the Scottish Parliament has used its resources to enhance services or entitlement, the block grant system has been used increasingly as a basis to criticise the settlement between Scotland and other parts of the UK. 17 The Independent Expert Group (IEG) produced some useful analysis of systems of financing devolved levels of government in a number of different countries.The RSE is of the view that the financial accountability of the Scottish Parliament would be enhanced by a greater proportion of its resources coming from a mix of devolved and assigned taxation revenues. If this approach is taken, then consideration needs to be given to the extent of the Scottish Parliaments obligation, with a sensible eventual level of between half and two thirds of revenue to be raised by the Scottish Parliament. The remaining resources of the Parliament would then come from a revised grant-based equalisation measure, initially matched to current expenditure levels, but over time taking account of changing levels of need in the nations and regions of the UK and to pool economic risks. 18 By consequence of devolving wider powers to the Scottish Parliament to raise its own revenue, the Scottish Government would inevitably need to have borrowing powers.The overall levels of borrowing would have to be set in discussion between the Governments. Some sense of macro-economic management is of course required, but the borrowing powers would be necessary to smooth out the ups and downs of variable taxation revenues, without impacting unduly on the consistency of public spending profiles. Such borrowing powers could also be deployed towards major infrastructure projects of national importance. 19 The precise mix of devolved and assigned taxes is an area in which the RSE would encourage the Commission to secure detailed advice and evidence from the IEG, and other groups expert in taxation and public finance.As well as assessing which taxes would be suitable for devolution, it would also be prudent to model the alternatives for times of economic downturn, as well as economic growth, as it would be important to design a system with the capacity to cope flexibly with both. In considering the range of appropriate revenue raising powers the IEG should also be mindful that the recent experience of year on year growth in real terms in the block grant is unlikely to be repeated in the coming decade. 20 It should also be noted that all spend on reserved functions in Scotland (c 40% of total public spending in Scotland) is pooled across the UK and would be unaffected by any rebalancing of devolved spend.

RESEARCH
21 The RSE would strongly support the Commission in the view that the current UK arrangements for the Research Councils should continue. The Society recognises that there is considerable evidence that these arrangements work well both for the UK and for Scotland in fostering a strong UK wide research base.A significant proportion of the earlier submission by the Society makes this case in greater detail, and further evidence can be provided if required.

Additional Information and References

In responding to this consultation the Society would like to draw attention to the following Royal Society of Edinburgh response which is of relevance to this subject: The Royal Society of Edinburghs submission to the Commission of Scottish Devolution, Review of the Experience of Devolution in Scotland (September 2008)

Any enquiries about this submission and others should be addressed to the RSEs Consultations Officer, Mr William Hardie (Email: evidenceadvice@royalsoced.org.uk) Responses are published on the RSE website (www.royalsoced.org.uk).
Advice paper (Royal Society of Edinburgh) ISSN 2040-2694

The Royal Society of Edinburgh (RSE) is Scotlands National Academy. It is an independent body with a multidisciplinary fellowship of men and women of international standing which makes it uniquely placed to offer informed, independent comment on matters of national interest. The Royal Society of Edinburgh, Scotland's National Academy, is Scottish Charity No. SC000470
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