Tag: Scotland

The case for transaction taxes

James Mirrlees, the chair of the IFS review on taxation, is reporting as criticising the Scottish Government’s proposal for a property transaction tax. His review in 2010 described property transactions taxes as ‘highly inefficient’ and argued that there should be an annual tax on housing services, based on up to date valuation of property. That’s all very well, but no such valuations exist; the current information is more than twenty years out of date. The problem faced by the current Scottish Government, then, is that there is no mechanism in place to do what Mirrlees recommends, and it will take years to create it.

The Scottish Government is inheriting a complex, rather obscure system. For example, there are some twenty-five different reliefs; three or four do all the heavy lifting, and about 15 are hardly claimed at all by anyone, but by the same token those reliefs don’t actually cost anything, and the Government can be sure that if they abolish them, there will eventually be protests. The system makes little sense, but it more or less works (largely because all property transfers are registered and solicitors enforce it). That’s an argument for incremental change at best.

Tuition fees

Joan McAlpine writes in today’s Daily Record that the Scottish Government’s actions to remove fees from Scottish students has been “well and truly vindicated” by improved recruitment. However, the story is not yet complete. Undergraduate fees have not been abolished; they are charged and reimbursed by the Students Awards Agency to Scotland, which makes a payment direct to the university. The fees which are being charged and reimbursed to Scottish students by this process are different from, and signficantly lower than, the fees charged to students from the rest of the UK. Expect the court cases to blossom. There is probably a very simple solution, which is to charge all students the same nominal fee and then reimburse it to Scottish-based students. It’s been done in Further Education for years.

The consultation on same sex marriage

I read the report on the consultation on same-sex marriage with a certain professional interest: my team processed the previous consultation on civil partnerships in 2004. Nicola Sturgeon was subject to some hostile questioning on Newsnight Scotland about the treatment of the consultation, on the basis that a majority of respondents were clearly opposed in principle. But a consultation is not a sort of referendum; the purpose is not to count heads, but to make sure that a full range of views is taken into account.

Part of the problem is that consultations are presented as if the proportion of respondents mattered. We wrote in our report:

The consultation was not in any sense numerically representative, and caution should be exercised in interpreting the pattern of responses on the basis of majorities or minorities. The validity of a consultation depends, not on numerical representation, but on the extent to which it succeeds in representing and giving voice to diverse groups and shades of opinion. … A quantitative analysis does not really do justice to the range and diversity of responses. Many responses did not follow the pro-forma. Some responses respond to one question with the answer to another; others try to shoehorn issues under ill-fitting headings. … Where issues are raised by several respondents, this has the effect of cross-validation and reinforcement. This is the primary basis of analysis. However, it is also true that isolated responses may raise issues of importance: … where there are complex legal issues to unravel, particular responses also pose specific problems, cite examples and identify conflicts. In these circumstances we have recorded these concerns and sought to report on issues which require resolution.

This was reported in the press as saying that “Most Scots back plans to recognise gay marriages as legal, according to a study by the Robert Gordon University.” (Aberdeen Press and Journal 6.2.04) The Daily Mail headline (17.2.04) complained that “Same-sex marriage survey was hijacked by gay rights lobby” and that the consultation was “flawed” because several similar responses had come in from Stonewall.

From which I take it that either the press don’t understand what a consultation is about; or that they don’t bother reading the reports; or that the whole issue is so emotive that they will only read what they want to read. Possibly all three.

Renaming the Scottish Government

The Scottish Government has just been renamed … to become the Scottish Government. It seems that its official name was still the “Scottish Executive”, and that the legislation has just caught up with the practice.

The term “Scottish Government” is currently used without distinction to refer to the Scottish Government, the group of ministers in Parliament, and the Scottish Government, the executive civil service. These are different bodies, with different personnel, locations, roles and mandates; when I tell people that I have been in contact with the “Scottish Government”, I usually have to add several words of explanation to clarify what I am talking about. (I have just used the term “Scottish Government” here seven times. It begins to remind me of the Monty Python sketch where all the members of the Faculty of Philosophy are called Bruce, to avoid confusion.) As we now have a free label available, the “Scottish Executive”, is there any prospect that we could use it instead when we refer to the executive civil service?

Report of the Welfare Reform Committee

The Scottish Parliament’s Welfare Reform Committee has issued its stage 1 report. They express “grave concern” about the current progress of welfare reform, making these points:

• changes to the benefits system will remove lifeline benefits from large numbers of vulnerable people;
• the means of applying for new benefits is complex …
• 330.000 people are caught within an appeals system that overturns two thirds of these assessment results …
• there will be major impacts on the independence of disabled people, and on child poverty and homelessness levels;
• the likelihood of individuals and families getting into serious debt … is increased;
• the Department of Work and Pensions … has done limited work to assess the impacts on different groups …

There is also a short section on the issue I have been raising:

“Social Fund
103. In its early consideration of the Bill the Committee harboured some concerns about the absence from it of powers in relation to the discretionary elements of the Social Fund, which have been devolved.
104. The Committee also received written evidence from Professor Paul Spicker, Grampian Chair of Public Policy at the Robert Gordon University. In his evidence Professor Spicker contends that there are legal competence issues for the Scottish Government in undertaking some aspects of welfare reform, including the discretionary elements of the social fund that have been devolved:
Professor Paul Spicker – There needs in particular to be a residual power to promote welfare and to give financial assistance to any person – the same power currently possessed by English local authorities. As things stand, the promotion of welfare, and payments of financial assistance to individuals by way of benefits, are ultra vires.
105. In her evidence to the Committee on 1 May, the Cabinet Secretary explained that the Scottish Government will put in place interim arrangements using the general power of wellbeing that local authorities possess, along with a section 30 order to facilitate that 107 . In the longer term the proposal is to introduce a social fund bill in 2013-4, coming into force in 2015. The Committee welcomes the clarification from the Cabinet Secretary on interim arrangements for council tax discounts and the social fund and looks forward to assessing these arrangements and contributing to their development in due course.”

Scotland's powers and the Social Fund

This is from a discussion from the Scottish Parliament’s Welfare Reform Committee, 1st May 2012:

“Jackie Baillie: Evidence from Professor Paul Spicker suggested that the Scottish Government does not have the power and competence to deliver benefits and the replacement social fund, and you appear to have opted to use local government powers, through a section 30 order. Is that why you said that you are considering introducing a social fund bill in 2013-14?
Nicola Sturgeon: We would need the section 30 order to legislate, as well. We have chosen the approach that I described partly for reasons of speed, so that we can get the interim arrangements in place, and because we are confident that we can do it in such a way. Our preferred approach of legislating later is just that—a preferred approach—and is not being taken because we consider that we require primary legislation. However, because of the interaction with social security we need a section 30 order, combined with the general power to advance wellbeing that local authorities have, to put the arrangements in place.
Jackie Baillie: Was he correct to say that there are issues of competence, which you have managed to overcome?
Nicola Sturgeon: To whom are you referring?
Jackie Baillie: Professor Paul Spicker.
Nicola Sturgeon: Before I could say whether he was correct I would need to look at the evidence. I would be happy to do so and to tell the committee what we think of it, if that would be helpful.
Jackie Baillie: It would be helpful to our consideration to understand what powers the Scottish Government has and for what purpose you would seek a section 30 order.”

So – am I right? The straight answer is, I don’t know. The issues are complex; the powers conveyed by the devolution settlement relating to local government can be read in different ways; in the event of a dispute, it is often difficult to know what an authoritative interpretation would look like. My main concern in raising the matter publicly now is to ensure that any resolution will not involve delay, confusion or denial of service to people in need. The resolution seems to hang on what the proposed section 30(2) order actually says. I am reasonably confident that the problems can be ironed out, but any practical solution is going to need to clear the ground so that Scottish and local government can operate effectively.

A further note, June 2012. A note from Nicola Sturgeon says this:

“The Scottish Government’s position on Professor Spicker’s submission is that his analysis of the power to promote well-being, specifically as enabled by section 20(2)(b) of the Local Government (Scotland) Act 2003 is generally consistent with our own analysis … we do intend to work with the UK Government to bring forward an order under section 30 of the Scotland Act, to ensure that the desired policy can be delivered using to power to promote well-being.”

Welfare Reform in the Scottish Parliament

My submission to the consultation on the Welfare Reform (Further Provisions) Scotland Bill is here. The main point is technical, but in a nutshell the issue is that the Scottish Parliament, and Scottish local authorities, do not have the power to do things in relation to benefits that English local authorities can do. At present that means that when the Social Fund is abolished, the Scottish authorities will not be able legally to do what they need to do to protect people who are vulnerable.

Developing a benefits system for Scotland

I did threaten, when I set up this blog, that I would use it to float half-baked ideas. This is a first stab – I’m likely to make changes and extend the argument as time goes by.

The Scottish Government has been keen to consider how to expand its role in taxation and economic management, but social security has hardly been mentioned. One of the main uses of tax is for “transfer payments” – moving money from one set of people to another. Pensions, tax credits and benefits have to be paid for. An independent Scotland, or a much more devolved administration – “devo-max” – would need to have its own benefit system. This has not largely featured in any of the discussions. That might be because it is a hot brick, and no-one wants to handle it; but it might also reflect a sense of despair, a feeling that not much can be done about it.

There is a general problem in all administrative reform called “path dependency”: changing things that work can be difficult to justify. Are we going to say, for example, that benefits should not be acting as a form of social insurance (the rationale for Widowed Parent’s Allowance)? That people should not be compensated for disability if they do not have financial needs (Industrial Injury Benefits)? That people should not have their rent paid (Housing Benefit)? It’s doubtful, if we were designing the system from the outset, that we would do things the same way; but once they have started, it’s hard to stop.

A benefits system cannot be designed from scratch. There are people now who are elderly, disabled, unemployed or otherwise in need of support, and they have benefits delivered on the same terms as the rest of Britain. The first thing that they will learn about a new system is whether they are better or worse off than they were before. If a Scottish system cost the same as benefits do now, it would either have to pay the same benefits, or it would have to justify paying less to some people so that others could get more. And people would always compare what was happening to what happens over the border. When the Republic of Ireland became independent from the UK, it mirrored the benefit system blow by blow for most of the next sixty years. Even today, it still has a clutch of benefits that look like benefits in the UK – Jobseekers Allowance (yes, the name is the same), State Pension and Child Benefit – and others that look a lot like the way that the UK system used to look (Invalidity Pension, Maternity Benefit, Supplementary Welfare Allowance). Scotland would most likely end up doing the same sort of thing.

The only practical way to make more fundamental reforms is to pay substantially more in benefits, so that people do not lose out. The strongest contender for a reformed system would be something like a Citizen’s Income – extending the universal principle of Child Benefit to a range of adults. The coalition government is talking about something similar in relation to pensions – a Citizen’s Pension, instead of the combination of insurance and means-testing we have now. The same principle could help people at the margins of the job market without work – the labour market in Scotland has a sector of people who are “sub employed”, shifting between benefits and causal, peripheral and temporary work, and a more secure income would make a big difference. To make it even possible, however, the Scottish Government needs to start thinking about the issues now.

The power of well-being and the Social Fund

With the coming abolition of the Social Fund, local authorities might be expected to do something to fill the gap. Local authorities used to offer loans before the introduction of the Social Fund in 1988. Local government in Scotland now has a general power to promote well-being, and I have to confess that I had blithely assumed this power would make it possible to develop alternative systems for delivering financial assistance. The recent debate about the powers of the Scottish Parliament has prompted me to rethink.

Under the 1998 Scotland Act a range of powers were devolved to the Scottish Parliament, with a large number of explicit exclusions. In 2000 the UK Parliament devolved additional powers to English and Welsh local government, including a general power to promote well-being (Local Government Act 2000, s 2). The promotion of well-being includes a power to “give financial assistance to any person” (s 2 (4)). In 2003 the Scottish Parliament followed suit, creating a general power to promote well being. The 2003 Local Government in Scotland Act grants Scottish local authorities the same powers (s.20), using the same wording as the Act for England and Wales.

However, the Scottish Parliament does not itself have these powers. It is expressly denied that role by the definition of reserved powers in the Scotland Act. So, it cannot make provision for “Schemes supported from central or local funds which provide assistance for social security purposes to or in respect of individuals by way of benefits.” (Scotland Act 1998, schedule 5 F1) If the Scottish Parliament did not itself have a power to give people financial assistance, it could not have granted that power to local authorities – the only authority could have come from the UK Parliament. If that is right, it is possible that English and Welsh local authorities now have a power that the Scottish Parliament and Scottish local authorities do not.

Further note, 15th February 2011. The Scotland Office has written to say that they will be addressing the issue of competence in the legislation to ensure that the necessary powers will be in place. That should resolve the specific issue with the Social Fund, but it may recur in other fields if the general issue of competence is not addressed.

Scotland refuses consent

The Scottish Parliament has refused legislative consent to the Welfare Reform Bill. There is considerable concern about the direction of welfare reform, especially relating to the treatment of disability, but it would be misleading to say that the concerns have gelled into a solid body of opposition. If people’s concerns have been diffuse and difficult to focus, it is because the Bill itself is so vague. It outlines principles for action, but it is still desperately thin on detail. The Coalition Government has taken the view that the Bill is only about broad outlines; the details will go into secondary legislation. More than a year after the White Paper, it is still far from clear how Universal Credit will work, what will be included, and what its implications will be.

The Legislative Consent Motion effectively asked the Scottish Parliament, then, to agree to the Bill without knowing what they were signing up to. The Health and Sport Committee (the Scottish Parliamentary committee that reviewed the motion) expressed concern that the effect of passing the motion would be to commit Scottish Ministers to come forward later with secondary legislation that would not be subject to scrutiny. Equally, the vagueness of the proposals makes it difficult for the Parliament to be sure what will happen after refusing legislative consent. The Parliament’s consent is needed mainly to ensure that UK legislation is compatible with Scots law, and refusing consent will not prevent the UK legislation from being passed. The most positive interpretation is that the UK government will have to bring forward primary legislation for the system to work in Scotland; but witnesses to the Committee raised concerns that the effect may be the suspension of benefits to Scottish recipients.

The Parliament’s action is more than a gesture. Benefits are a reserved matter – that is, they are governed exclusively from Westminster – but training for employment is a shared responsibility. When the Department for Work and Pensions has taken action in Scotland in the past, it has been done with the active cooperation of the Scottish government. The view of the government was that “they rely on our support”. Scotland will have to take responsibility, under the reformed system, for Council Tax Benefit, and it is likely that other responsibilities, including Housing Benefit and work formerly done by the Social Fund, will gravitate to the Scottish Government. It is difficult to see how Westminster’s programme can be implemented in Scotland without the Scottish Government’s co-operation.