Scottish Variable Rate: the battle in Holyrood

The row about the Scottish variable rate (previously discussed HERE), and what the Scottish finance secretary knew and when, has turned into a fine Scottish rammie.  Wednesday’s debate at Holyrood (see BBC News report here and coverage from the Scotsman here) saw opposition politicians seeking to knock blocks off the minister and the minister seeking to defend himself while acting in a contrite fashion.

It’s understandable that Scottish politicians want to be seen standing up to each other, especially with an election looming.  It’s also easy to see why a minister in a minority government might prefer not to tell Parliament about something rather embarrassing.  But treating this as a row solely bred in Scotland overlooks broader issues.  One concerns the way Treasury, in particular, operates.  The easiest way to show this is to quote Andrew Davies AM, the former Labour finance minister in Wales (in the National Assembly’s debate on the Holtham Commission report, available here):

as a former Minister for finance who dealt with the Treasury for the best part of three years in negotiations, what struck me was that the Barnett formula was anachronistic and did not reflect the reality of devolution today, whether for Wales, Scotland or Northern Ireland. The Treasury treated the Assembly Government as another Whitehall Government department, as opposed to a Government in its own right, with its own mandate, jurisdiction and policy. …  As a Minister for finance, I certainly felt that not only were we almost playing a game of football with the other side, but that the other side was also the referee and was not above moving the goalposts on occasion, when that suited its purposes. Therefore, there is a real issue of accountability and transparency. For example, neither the First Minister nor the Minister for finance is a signatory to the statement of funding policy, which governs the so-called ‘agreement’ between the devolved administrations and the UK Government. It was, in effect, an internal UK Government agreement signed by, in our case, the Secretary of State for Wales and by Treasury Ministers. Similarly, there is no effective solution or mechanism for conflict resolution, other than the appeal by the Assembly Government, or the Scottish Government or the Northern Ireland Executive, to the joint ministerial committee. That is, in effect, the nuclear option and, if you do that, you will almost certainly fail in your request, which is why it has never been done.

The Treasury doesn’t like acknowledging the impact that their constitutional or political status makes, and still less the fact it isn’t simply funding services provided by a devolved government but providing the resources that underpin constitutionally autonomous institutions.  But understanding niceties like the difference between a legislature and an executive seems beyond them.  Thus, the full title of the Statement of Funding Policy (available here) is Funding the Scottish Parliament, National Assembly of Wales and Northern Ireland Assembly: Statement of Funding Policy, but its text then only discusses the devolved administrations.  Such constitutional illiteracy might have been manageable when Labour dominated all three British governments, but it hasn’t been since 2007.

Those from the unionist parties who have sought to make political capital out of Swinney’s discomfiture might want to bear in mind the Coalition UK Government now, and Labour governments before, have made full use of this practice.  It’s their party counterparts in London who created the situation that made this was possible.  It has been made much worse by the general secrecy that has surrounded the conduct of intergovernmental relations, which is why we have known so little about the administrative arrangements for operation of the SVR which have been more intricate than pretty much anyone understood.  The desire of both UK and devolved governments to limit the extent of inter-parliamentary liaison, even on matters like legislative consent (Sewel) motions that directly concern them, aggravates it further.  The current situation arises at least as much because of the way intergovernmental relations have been conducted as because of executive-legislative relations in Scotland, and it’s a pity if the way the battle happens means we lose sight of that.

It’s also worth emphasising that what underlies this mess is an assumption at UK level that all the costs of running devolution should come from the devolved side, not the UK side.  That applies to the set-up costs of the database to enable the SVR to operate in 1999; to the ongoing costs of running the Scotland and Wales Offices; and to the attempt by the UK Government to get the Scottish Government to contribute to the cost of the new HMRC database.  That assumption may have been fair enough in 1998-9 – who else could bear the costs of setting up computer systems for the SVR?  But it’s become increasingly debatable ever since. With publication of the bill implementing Calman due very soon, at least part of the SNP’s motivation is probably to raise issues about how the costs of administering the ‘Calman’ system will be borne.  Simply passing the costs of administering the devolved UK onto devolved governments and not accept that UK has to bear a ‘devolution overhead’ is intellectually lazy, and presents increasing problems.  It badly needs rethinking.



Filed under Conservatives, Devolution finance, Labour, Lib Dems, Scotland, SNP, Whitehall

5 responses to “Scottish Variable Rate: the battle in Holyrood

  1. Hendre

    “The Treasury treated the Assembly Government as another Whitehall Government department, as opposed to a Government in its own right…”

    As does David Cameron. He’s been reported in the Welsh press this week as stating that the Welsh Assembly has done better in terms of cuts than other ‘departments’.

  2. RandomScot

    It is worth pointing out that the SVR lapse occurred under the Labour Liberal Coalition in Holyrood, not that you would know that if you read the papers or watched the Beeb

  3. russell mellett

    Hello Alan:

    Another good post and I will comment on 2 items.

    First,the fundamental difference between devolved administration, and devolved government. I’m not sure I understand the purpose of devolution if it serves only to implement or administer decisions of the central government. Sadly this seems to have a polarizing effect: on the one hand you have the fact of devolved administration, on the other a call for outright independence. Surely there are a number of options for regional governance that would be workable in the UK context. Unfortunately the current UK government seems to be giving sensible solutions short shrift.

    Second, economic efficiency would suggest that common tax definitions be used across the UK, and effective administration would indicate that a single tax collection agency be employed. The sensible solution is that income and VAT taxes continue to be collected by HMRC, using common definitions of what is taxable, with or without regional variation in tax. The point here is that the UK government has an incentive to pay all collection costs, so that common tax base definitions and collection can be maintained. This contributes to UK wide economic efficiency (no distortion due to definitional variation or alternate collection methods). So rather than moaning about the costs of collection, some thought should be given to the benefits of maintaining an effective system on a UK wide basis.

  4. Pingback: The Scottish Government lifts the veil on intergovernmental relations « Devolution Matters

  5. Pingback: The Scottish Government lifts the veil on intergovernmental relations « constitutionunitdotcom

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