It’s been a busy week. After giving evidence in Cardiff on Monday, I travelled to Edinburgh to give evidence to the reconstituted Scotland Bill Committee at Holyrood. This of course was my second stab at this, following my appearance in January. After May’s election and the SNP majority, this committee was reconstituted to look again at the Scotland bill and advise the Parliament about whether to give legislative consent to it or not. As the UK Government has sought to indicate that the Parliament gave legislative consent before the May elections, this itself is something of a point of debate between the UK Government and the Parliament. This came out in the evidence of the Advocate General, Lord Wallace of Tankerness QC, who appeared immediately before me, mainly to discuss the clauses regarding the powers of the UK Supreme Court in criminal cases raising human rights issues, but also straying a bit more widely, as he’s the UK minister responsible for the bill in the House of Lords.
My evidence was mainly concerned with financial matters – with the sorts of steps that would be necessary to put a devolved Scotland onto a similar financial footing to regional-level governments in other federal or decentralised systems. I’m still developing my thoughts on this, but it’s increasingly clear to me that a solution will involve devolution of pretty much all personal income tax as presently charged. I’m also increasingly inclined to think that assignment of VAT proceeds (considered and rejected by both the Calman and Holtham Commissions) is likely to play a part, largely because of problems with how the block grant works that are now becoming clear and which will have increasingly serious effects in the next few years. At the same time, I’m sceptical about the merits of devolving corporation tax, and how that might be done, though that’s favoured by both the Scottish Government and other groups including Reform Scotland. I’m also dubious about devolving excise duties on alcohol, because of how excise duties work, as they’re a tax levied at the point of production or importation, not the point of sale or consumption – and in a fiscally decentralised context, it’s the latter that’s appropriate.
I emphasised how significant the shift even to a modest degree of fiscal devolution would be for UK-level institutions, particularly HM Revenue & Customs. I also explained my grave concern about the UK Government’s failure to explain how the reduction in the block grant to allow for the newly devolved tax powers would be calculated or adjusted in subsequent years. In my view, this is a fundamental issue, and far from being ‘technical’. Without much greater clarity about it, I do not see how the Scottish Parliament can properly give its legislative consent to the bill.