A draft submission to the Smith Commission on the devolution of powers to Scotland

The Smith Commission is reviewing the devolution of powers to Scotland, and it has been asked to work at breakneck speed;  the deadline for submissions is 31st October, and the Commission will be reporting by 30th November.  Normally what I do with drafts is that I write a basic response, put them to one side, let them simmer, polish them a little, rewrite,  and send them off when they seem properly baked.  I don’t really have the time to do that, so I’ve decided to post something half-baked instead.  The draft submission I’ve posted here is – as it says – a draft; I’m hoping that some of you will read it and suggest how I can make it better, clearer or more sensible.   You can comment on the blog, or email me with ideas.

Further note, 14th October:  I’ve updated the draft, and the link now goes to the second version.  There has been a salvo of publications about this issue.  I’m not going to try to delay the submission to the bitter end, because  if I do, it’s probably going to have less impact; I’ll try to finalise it by the end of next week, but I’ll try to respond to other people’s arguments on the blog as they come out.

Further note, 21st October:  Here is the third, and I think the final version – unless someone points out a disastrous mistake!  As before, I’ve changed the link on the draft so that it now goes to this one.

 

Nick Clegg tells Northern Irish Assembly that ‘money doesn’t grow on trees’

We have just been given an illustration of how a devolved social security system might work.  Northern Ireland has had the competence to alter social security benefits, on and off, for much of the last century.  The Northern Ireland Assembly’s current offence is that it’s failed to pass a Welfare Reform Bill, intended to implement a series of measures imposed by the coalition government in London.  The measures include

  • introduction of Universal Credit
  • introduction of Personal Independence Payment
  • changes to Housing Benefit
  • introduction of a Benefit Cap
  • end of the current Social Fund scheme which will be replaced by a new service called Discretionary Support
  • changes to Employment and Support Allowance
  • introduction of new Fraud and Error powers
  • introduction of further sanctions and hardship measures.

There’s actually rather more in the Bill, including a clause restricting the access to Jobcentres of the sex industry and a reduced fee for the dog licences which the rest of the UK doesn’t have, but leave that aside. Most of the bullet list has been implemented in Great Britain, but three have had very little main effect on finances to date.  Universal Credit hasn’t really happened, and will cost money when it does; PIP is grinding out exceedingly slowly, and in any case the new rules do very little directly to affect the roots of increasing costs; and the benefit cap is a token measure which affects very few people nationally, and fewer still outside London.   Of the others, the Social Fund is capped anyway, the bedroom tax has all but collapsed because of the need for exceptions, and new measures for fraud can’t be expected to do anything that thirty years of crackdowns haven’t done, so the bulk of the prospective savings come down to two measures – reassessment of ESA entitlement and sanctions.

At present the Northern Ireland government is accused of overspending on its total budget by over £100m.   Given a budget of roughly £10bn, Northern Ireland’s deficit is hardly profligate – and it’s important to recognise that the province took a hammering in the financial crisis, and is still in the grip of a major slump.  Nearly as much money again, however, will be added to to the deficit as the result of £90m fines being imposed on Northern Ireland for failing to comply with Westminster’s diktat.   I’m not going to suggest that Nick Clegg’s comments are patronising, because patronising is such a long word and it will only confuse people.   But when he explains that the Assembly has to accept “financial realities”, it seems that financial reality consists of the lesser orders doing what they’re told to do.

 

 

Limited prospects for devolution

Despite the solemn ‘vow’ to devolve further powers, David Cameron has argued that the issue of greater powers for Scotland has to be taken together with the devolution of power in the rest of the UK.  That might sound plausible initially, but the problems aren’t capable of being resolved in those terms.  By any test, devolution in the UK is going to be imbalanced, or ‘assymetric’.  The crux of the problem is that Scotland has an entirely distinct system of law, Northern Ireland has legislative authority, and Wales does not.  If England is legislated for as a unit, there will be a permanent imbalance of power, status and responsibility.  If power is devolved to the English regions, they will still not have the same range of powers that Scotland does.

This is not about federalism.  Federalism reserves power to the states.  Devolution distributes power from the centre.  What we’re talking about currently is devolution, and that in limited terms.   The current discussion seems to be focusing on the devolution of powers relating to income tax (not to tax overall), ‘welfare’ (by which the government seems to mean Housing Benefit, but not JSA or ESA) and some economic development.  It doesn’t seem to include other vitally important issues, such as public spending, issuing bonds and job creation.  It doesn’t seem even to extend to transport: the Scottish Government can’t change the air passenger  duty or  stop people parking on pavements.  London really must relax its grip.

The argument on powers

The nation-state is dead, Scotland on Sunday argues in today’s editorial; the real issue now is about powers.   The choice lies, as they see it, between a position where an independent Scotland  cedes powers in a negotiation with other authorities, and one where a devolved Scotland gradually gains greater powers through devolution from the United Kingdom.

The powers currently on offer fall short, however, of the devo-max that  many people in Scotland want to see.  They fall short even of the powers that a local authority would have had a century ago.  Local authorities have lost, in the last 70-80 years, powers over social assistance, police, fire, hospitals, water, energy, public transport, and much besides – they may have some residual powers over housing, for example, but nothing like what they used to have.  One of the key powers they’ve lost, though we hardly noticed it going, is the power to borrow on the markets by issuing bonds; another is the power to create jobs.    Scotland, and much of England, need powers to regenerate local economies, to make jobs, to develop infrastructure and to build.  It’s not on offer.

I don’t see this changing with a ‘no’ vote.  The problem lies, like many problems in the UK, with the Treasury, which would have to let go, and with the neo-liberal dogma that holds to the idea, despite decades of evidence to the contrary, that government can’t create jobs and that public borrowing is always bad.  It’s not going to happen.

Thinking about Devo-Max

In the rush to consider alternatives to independence, the parties at Westminster are flirting with different ideas about further devolution: further powers over taxation (probably income tax), welfare (housing benefit and attendance allowance) and borrowing.   These are being referred to as options for  “Devo-Max”; they’re not.  The clue about “Devo-Max” lies in the second part of the expression: it is supposed to be devolution to the maximum possible extent.  The powers that Scotland does not have, and which it would gain with independence, are

  • The constitution
  • Economic policy
  • Public expenditure
  • Benefits
  • International relations
  • Defence
  • Immigration and nationality
  • Access to information
  • Business law
  • Labour market law
  • Consumer protection
  • Energy
  • Transport
  • Broadcasting

Northern Ireland has (in principle) powers over transport and benefits; neither of these is likely to be devolved in full to Scotland.  Devo Max would cover pretty much everything that could be devolved, which leaves only the constitution, monetary policy, international relations and defence, and nationality.  That’s not dissimilar to the situation of the Crown Dependencies (the Channel Islands and the Isle of Man), which have their own economic policy, taxation and social provision, but (with the exception of the EU) share the UK approach to foreign policy, defence and money. That level of devolution isn’t on offer.

There’s a strong case for moving towards federalism in the UK, but federalism starts from a different place.  One of the key problems with the devolution settlement has been that powers have offered reluctantly, with restrictions, often requiring subsequent correction or special legislation.   The presumption in federalism is the opposite: power flows from the lower areas or member states, not from the top.

Parking: another fine mess about devolution

In a federal system of government, residual powers are generally defined as belonging to authorities that are smaller than the federal government – such as the States in the USA or the Länder in Germany.  The UK has the opposite arrangement – all powers are assumed to reside in Parliament unless there has been a specific delegation to the contrary.

The Scotsman has twice this weekend reported on problems facing a proposal  to stop cars parking on pavements.  The Responsible Parking Bill has taken more than two years to wend its way through the Scottish Parliament, but despite widespread support  it seems to have stalled.  There were initial objections raised about whether the Scottish Parliament had the power to act about parking, but it has passed other legislation on disabled person’s badges, and on that basis it could reasonably be argued that there isn’t really a problem about legislative competence.  The subsequent discussions have focused on other issues – the cost of enforcement, the dissolution of Scotland’s traffic warden service by Police Scotland, and the burden on local authorities.

Except, it seems, that there is a problem.  The Scotland Act 1998 reserves a range of powers, and among the powers it reserves is the scope of the 1988 Road Traffic Act.  When that Act was originally passed, it made parking on pavements illegal.  The provision (section 19A) lasted three years, before the government of the day gave it up: too difficult, too expensive.  So what are the powers that are reserved to Westminster?  The common-sense view ought to be that the powers that were reserved were the powers in force at the time of the Scotland Act, not powers that were previously defined and repealed  – in which case there is really no problem of legislative competence. If the reports are correct, however, that does not seem to be how the Scottish Parliament’s lawyers see it.  They have apparently argued that as the Scottish Parliament doesn’t have delegated powers related to parking, but local authorities do, the bill could only proceed by instructing local authorities to use the powers they have, which are derived from Westminster legislation.

English local authorities have a general power to promote welfare.  Scottish local authorities don’t, because their power derives from the Scottish Parliament, which is subject to reserved powers.  We seem to be again in the situation where the Scottish Parliament has been accorded fewer powers than an English local authority.

Devolving Housing Benefit would change Universal Credit

According to today’s Scotland on Sunday, the Conservatives are considering devolving responsibility for Housing Benefit, partly as a means of defusing the ‘toxic’ issue of the bedroom tax.  There are some good arguments.  The first is that Housing Benefit depends on local housing markets.   The second is that local authorities have a long track record of operating Housing Benefit; they have the people and the organisation to do it.  Third, rent policies are different in Scotland from England.  The underoccupancy penalty in Scotland is not removing a ‘spare room subsidy’ – it’s a penalty, taking somewhat more from Housing Benefit than the cost of the rooms in dispute.  Fourth, the flexibility of devolution could make it possible to get around some of the problems that have emerged in the pilots through not paying social landlords direct.

If Housing Benefit was to be devolved,  however, part of the plan for Universal Credit would unravel.  Universal Credit was supposed to produce a unified taper, or ‘marginal rate of deduction’ – the speed at which benefit is withdrawn as income increases.  It is going to be set at 65%.  The figures never quite come out looking like that, because UC will be calculated on net income, after tax, national insurance and some other benefits which are not being integrated in the system.  If a person is paying tax and National Insurance at 32% – there are several variations and possible permutations – UC will take away 65% of the remainder; that comes to 76.2% in total.

At current rates, Housing Benefit is withdrawn at 65% and Council Tax Reduction is withdrawn at 20%.  If tax, NI and UC take away 76% of additional net income and CTR and HB together take away 85% of what’s left,  the combined deduction  would be over 96%.   Even without tax, it’s 95%.  (I’m assuming here that HB and CTR would be calculated after UC, and that income from HB and CTR would be disregarded for UC purposes.  If they weren’t, and  if there were different time frames, the calculations could be bewildering.)    To avoid these problems, either the tapers would have to change, or UC  would have to be calculated differently,  with different rules where Housing Benefit is not part of the scheme.

If Universal Credit was to go forward without Housing Benefit, it would be a move toward a  different model – tying Tax Credits to something that looks a lot like Supplementary Benefit.  I’m not sure that this combination makes any more sense than the rest, but the smaller the pretensions of the scheme, the less scope there is for catastrophe.

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.”

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.

Devo-max

I’m not a constitutional specialist, but I think I can see how enhanced devolution, or “devo-max”, might work for Scotland. Currently there are about 240,000 people who are not governed from Westminster or the devolved governments; they live in the Channel Islands and Isle of Man. The governments of these islands are responsible for its own economic, social and domestic policies; treaties are made by the UK in its behalf, but it is not part of the European Union. I served as a consultant for the States of Guernsey for four years; my work was based on corporate planning for health, housing, education, social work, social security and policing. Effectively, each government has its own negotiated status. In some cases, the policies are very similar to those of the UK (I am not sure why Guernsey residents should want to pay a TV Licence to support the BBC, but that’s up to them), in others they are distinctively different. Devo-max is neither unfeasible nor untried.

There is however a potential problem with the two-question referendum. People would vote yes or no for independence, and yes or no for devo-max. Imagine that 22% vote “yes-yes”, 22% vote “yes-no”, 22% vote “no-yes” and 33% vote “no-no”. The result would be that both questions would be defeated, 55-44 – despite 66% of voters voting for increased powers. It’s critically important what the questions are and how they’re put.