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23 December 2010

The Scotland Bill

The long awaited Scotland Bill was finally published by the UK Government's Scottish Secretary Michael Moore. The Bill heralds the most significant change to the way that Scotland is governed since the formation of the devolved Scottish Parliament in 1999, and hailed by the UK Government as the "biggest transfer of fiscal power to Scotland since the creation of the United Kingdom".  As expected, the Bill is based on the findings of the Calman Commission review of devolution which was published 18 months ago in June 2009. Due to its cross-party support, albeit unionist, the Bill's content would have been pretty much the same irrespective of which party or coalition was in government.

Currently, through the devolved taxation powers of local council tax and business rates, revenue generation by the Scottish Government amounts to around 13% of devolved spending. The measures in the Scotland Bill would increase the proportion of the Scottish budget raised in Scotland to around one third of Scottish Government spending. It would do this through a new Scottish income tax from 2015applying equally to the basic, higher and additional rates. The rate of income tax going to the UK Government would be reduced by 10p in the pound allowing the Scottish Government to set rates for the rest with a new Scottish income tax. Consequently there would be a reduction of around 35% in the block treasury grant currently worth about £30bn a year. The Bill would also give the Scottish Government borrowing powers for capital and revenue spending (£2.2bn earmarked for construction projects such as the new Forth Bridge), control over stamp duty and landfill tax and a clause within the Bill to make it possible to devolve other taxes to the Scottish Parliament in the future.  Other measures in the Bill include a transfer of powers over air weapons, drink-driving, speed limits for cars and the management and running of elections in Scotland.

The Scottish National Party, although agreeing to the general principles of the Bill, unpredictably suggested that it was far too limited and did not give Scotland the fiscal tools it needed to support "long-term, sustainable growth".

The overall vision of the Bill is to strengthen devolution, responding to a growing desire for Scotland to have more autonomy over the way that it raises its own finances. The Bill acknowledges the weaknesses inherent in the current financial arrangements whereby the Scottish Government has control over 60% of the expenditure of the state in Scotland through a block grant from Westminster but has little responsibility for how this revenue is raised. It is hoped that future Scottish Governments will be more accountable to the Scottish public for the financial decisions that they make and will "bring decision-making closer to the Scottish people, and make the political system more responsive to the needs of Scottish business and Scottish society".

The Bill should be acknowledged for its desire to provide increased financial accountability and responsibility, but these principles have been limited by the UK Government which is keen also to maintain the integrity of the Union. This is a difficult path to tread and could leave the public unclear as to which level of government is responsible for what. Increased, but in many ways limited, financial responsibility by the Scottish Parliament will make governing north of the border more complicated and require a strengthened relationship between the two governments.   

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