While Holyrood continues to consider the Scotland bill, it has started its serious progress at Westminster. It had its second reading – and the first substantive debate – on Thursday 27 January. BBC News’s rather sketchy report is here, and the full transcript from Hansard is here. Labour MPs (and Conservative and Lib Dem ones) lined up firmly behind the bill’s proposals. None of those who spoke in support suggested it was the first step along a further path of further devolution; they left that issue untouched. Quite a few speakers did suggest that significantly more detailed scrutiny of the bill was needed, and looked forward to that taking place in Committee. Only Malcolm Bruce raised the issue of the impact of the increased personal allowance for income tax and its effect on the devolved rates of tax – a key question, and one that no-one has sought to answer to date. It’s intriguing that it took a Scottish Lib Dem member to raise an important issue arising from his own party’s UK policy, and that neither he nor the ministers who spoke had an answer for it beyond referring to the ‘no detriment’ principle set out in the Command paper accompanying the bill. That is, with all respect, not a good enough answer. The SNP unsurprisingly opposed the bill, and moved an amendment to the effect that many provisions of the bill were insufficient and inadequate (rejected on a division, unsurprisingly).
In the interests of completeness, it’s worth noting that an English Conservative MP (Andrew Selous) gave criticisms of the Barnett formula a run-out in a Westminster Hall debate on 18 January. The Hansard record is here, and there’s news coverage from the Western Mail here and BBC News’s Wales site here.
Also interesting is the evidence session that took place a couple of weeks ago before the Commons Northern Ireland Select Committee. That committee is carrying out an inquiry into the Coalition UK Government’s plans to devolve corporation tax in Northern Ireland (for which the call for evidence is here). On 12 January, it took evidence from two key witnesses. One was Professor Rosa Greaves from the School of Law at Glasgow University, who is the leading expert in the UK on the legal issues that surround devolved corporation tax and its relationship to the EU’s state aids regime. The other was Phillip Kermode, an official from the European Commission’s Directorate General for Taxation and Customs Union. The transcript of their evidence is here. The outcome appears to have baffled members of the Committee, and raised the ire of the more Eurosceptic ones – though one might expect working out what is legally possible and not to be the first item of business for such a committee, rather than coming at quite a late stage in its evidence-taking.
Devolving corporation tax in some form is clearly of increasing interest at UK level, if this story from the Herald a few days ago is to be believed. It is, though, a highly problematic area, and its ramifications clearly aren’t being thought through. The reasoning of much of the fiscal federalism literature is that it’s a bad idea, as it triggers damaging tax competition. Its interaction with EU law is problematic; so, as a result, is its impact on ensuring UK-wide equity in public spending or public services. It certainly needs very careful consideration by all parties if it is to be considered at all seriously as part of the next steps in reforming devolution finance.