The Queen’s Speech today is a remarkable moment in British politics: the first British coalition government in 65 years, the spectacle of the Cameron-Clegg double act, and the possible emergence of new political force, ‘liberal conservatism’.
It is also a significant time in Scottish politics, with the announcement of a new Scotland Act, drawing from the ideas of the Calman Commission, but considering delaying or even ditching the most important part: the tax powers.
Calman proposes that Scottish income tax rates would be cut by 10p with the Block Grant cut by an equivalent amount. The Scottish Government would then be able to set its own rate. If it did this at 10p it would return revenues initially to their previous level.
These proposals are meant to widen fiscal accountability, aid Scottish economic competitiveness and growth, and break the pork barrel nature of Scottish politics. Sadly they do none of these, and are dangerously ill-thought out policies which would damage Scotland and its finances.
Despite calls from Jim Wallace, Advocate General, that ‘Calman is not a cherry picking exercise’, but ‘a package’, it would be welcome if the UK Government treated it as such and put the tax powers on the back burner.
Calman’s tax powers would have damaging consequences. If the Scottish Government reduced income tax to stimulate the economy its own finances would suffer while the UK Chancellor of the Exchequer’s revenues would benefit. If the Scottish Government raised the rate of income tax to increase its revenues this would deflate the Scottish economy and reduce revenues going to the UK Government.
The proposals suffer from what economists call ‘fiscal drag’, in which generally an increasing proportion of tax is taken from higher rate taxpayers, while Calman’s proposals take a higher proportion from basic rate taxpayers. As more people are pushed into higher rate tax bands as governments do not increase thresholds in real terms, Scottish finances would be squeezed and become more regressive. The standard, intermediate and higher basic rates of tax from which the Scots could vary, would remain with Westminster, as would tax bands.
The economists Jim and Margaret Cuthbert have written a series of detailed studies itemising these failings, calling Calman’s tax proposals ‘seriously flawed’ and ‘a major danger to the Scottish economy’. Andrew Hughes Hallett and Drew Scott have looked at the potential for the Calman plans to encourage conflict between the Scottish and UK Government in particular over how the overall Scots tax take is assessed.
Scotland needs much more fundamental powers than Calman: control over more tax revenues and rates, more powers to borrow, control over off-shore revenues, regulation of utilities, and power over competitions and mergers policy.
Calman assumes that Westminster and Holyrood will be committed in the future to the same broad direction of public spending and the balance between charges for public spending and taxation.
What Calman misses is the potential of a divergence between the Scottish and UK Governments on public services with a UK Government embracing a privatising, pro-choice, pro-charging for public services agenda, which would have huge consequences for Scotland, cutting its spending via the Barnett consequentials.
Calman is motivated by strengthening the union, yet assumes that the political direction of Scotland and the UK will always be in the same direction, without considering the implications if this is not the case. Michael Keating has explored this, stating that Calman ‘treated the matter of taxation as a largely technical matter’, ignoring wider political dynamics.
Another weakness of Calman is that this is another attempt at a Scottish-only solution – reprising our ‘greatest hit’ of the Scotland Act 1998. This is a mistake, for devolution to Scotland and Wales, has to be seen in a UK context.
The English dimension matters in this, and England’s widening democratic deficit, the last part of the UK still run directly by Whitehall and a panoply of unelected boards and quangos. England is the only nation in the UK which has never had a constitutional vote on its future – whereas Scotland, Wales and Northern Ireland have each had two.
Calman is a technocratic, elite based fix and interpretation of Scottish politics. When it was launched Wendy Alexander said that ‘Kilbrandon, Scottish Constitutional Convention, Calman, this is how we do our constitutional change’.
This is a partial view, for Calman has had little to no public engagement and involvement, and one which carries little resonance with the public. Calman does not offer us the prospect of a popular story or narrative for our nation, but instead flawed administrative tinkering.
Calman is not the answer for Scotland’s economy, democracy or future, but what is if independence as it has been conventionally understood is not on offer in the foreseeable future either?
Maybe the solution lies in shifting from the politics of post-modern independence, and the pretence of statehood and valuing of symbols which currently characterises much of modern Scotland.
Instead we could embrace a politics of post-nationalist independence and inter-independence, which would entail Scotland developing new arrangements with the other nations of the UK, sharing sovereignty, and recognising the importance of the English dimension.
Many conservatives, pessimists and naysayers will say that such a politics is not practicable, and that instead we should focus on the deliverable plans of Calman. This is profoundly wrong. The old notions of sovereignty and power which define Westminster and Britain have brought about the multiple crises: economic, democratic and geo-political, which shape our modern society.
Viable alternatives exist around the world which offer possible models for Scotland and the UK. The most thoroughgoing form of devolution is full fiscal autonomy along the lines of the Basque Country in Spain which allow them to raise all their main taxes including personal income tax, corporation tax, VAT and excise duties. The devolved administration then negotiates with the central government an agreed share for paying for common services such as defence.
Scotland needs a new story as a nation, society and democracy and Calman is not the answer nor for the immediate period is independence. We need a radical, far-reaching set of proposals for Scotland, which engage the public imagination and involve unlike Calman or ‘the national conversation’, genuine public engagement, and aid the emergence of a new set of arrangements for the whole UK.
The UK has not worked for many years, for the majority of people living in it have been dominated by the interests of the South East and the City, to the detriment of Scotland and most people elsewhere.
The existing British political system needs to be completely recast, and the most centralised state in Western Europe supplanted by arrangements more suited to a modern state and democracy. Scotland can play a major part in this democratic revolution, but only if we ditch the main elements of Calman and aim higher.