Devo Plus is the answer to the constitutional question

Political Blogger

Thursday 8 December 2011

There has been a great deal of speculation about whether the proposed independence referendum will contain a second question, offering the Scottish people a choice of something somewhere between outright independence and the status quo.

Reform Scotland hopes that a third option will be put to the people and we have set out Devo Plus as our preferred model for Scotland’s future.

We believe that the current balance of powers between Westminster and Holyrood is in need of radical overhaul. In 2009/10 the Scottish Parliament was responsible for 59.2% of expenditure in Scotland (including money spent by local authorities) while Westminster was responsible for 40.8% (including non-identifiable spending). However, despite being responsible for the majority of expenditure, Holyrood was responsible for raising only 6.4% of total revenue in Scotland.

As a starting point Reform Scotland has consistently argued that each layer of government in Scotland should be responsible for raising the majority of the money it spends – this is essential for good governance, transparency and accountability. Obviously one way to remedy this imbalance would be outright independence, which would see the Scottish Government responsible for all expenditure and revenue. However, Reform Scotland has considered how the problem could be solved with Scotland remaining part of the UK. We do not consider Devo Max to be a viable option as this does not meet our principles of each layer of government being responsible for raising the money it spends. Devo Max is generally considered to describe a scenario whereby all taxes are raised and collected in Scotland with money then transferred to Westminster to pay for reserved functions. This scenario simply creates the current problem but in reverse. Instead Reform Scotland has devised Devo Plus which passes the majority of tax-raising powers to Holyrood to cover its expenditure, but leaves Westminster with a number of taxes, primarily including VAT and National Insurance, to cover its expenditure in Scotland. Included in these recommendations is the passing of Scotland’s geographical share of oil revenues to Holyrood. While a substantial figure, recent years have shown it to be volatile and it should not be relied upon as some sort of silver bullet. For example in 2009/10 £5.9bn was raised, down from £11.8bn in 2008/9. Some who argue against Holyrood receiving any additional financial powers point to the fact that based upon the revenue raised in Scotland in recent years, including oil revenues, Scotland has faced a deficit. However, this is hardly surprising given the UK as a whole is facing a huge deficit and it is also important to remember that Scottish taxpayers contribute toward the cost of financing the deficit interest and this figure was £2.6bn in 2009/10. It is also worth pointing out that in 2009/10 the total Scottish deficit as a percentage of GDP was 8.42% compared with 8.97% for the UK as a whole. I mention these facts not to dismiss the issue of the deficit, but simply to put it in the right context as it should not be used as an obstacle to reform. Under the Devo Plus model Scotland would receive its share of deficit borrowing relevant to the rest of the UK’s as Scottish taxpayers would continue to pay towards interest payments. Devo Plus also calls for £7.2bn of the £15bn currently being spent by Westminster to be transferred to Holyrood. While Westminster would be left with state pensions and maternity/sickness pay amongst others, the transfer would enable the Scottish Parliament to more coherently address its current responsibilities for alleviating poverty. Devo Plus represents an option which would enable the Scottish Parliament to become more fiscally responsible as well as providing some meaningful tools to address the social problems facing Scotland. As a result, it offers a good model for consideration as the middle option in Scotland’s referendum.

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Devo Plus is the answer to the constitutional question

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