Debate: Scotland's fiscal options—a response to Midwinter

Scotland has choices As John Curtice (2006, p. 95) succinctly put it: [unionist] advocates of devolution ‘hoped it would strengthen public support for the maintenance of the United Kingdom, whereas its critics feared it would have the opposite effect’. Fifteen years on from the initial devolution debate, Curtice’s question has crystallized with the prospect of a referendum on Scottish independence in 2014. Critical to the early skirmishes is the question of whether a ‘middle option’, popularly known as ‘Devolution-Max’, should be offered to the Scottish public in the referendum. Although yet to be fully defined, ‘Devo-Max’ essentially combines the transfer of those ‘domestic’ policy competences, such as broadcasting, trading standards, drugs and firearms, currently held at Westminster to the Scottish Parliament, with the wholesale transfer of economic powers to Holyrood so that Scotland attains fiscal autonomy, that is that the Scottish Parliament be responsible for generating all (or substantially all) of its revenues in addition to determining its spending priorities. In his article on fiscal autonomy in Scotland in the January 2012 issue of Public Money & Management, Arthur Midwinter argues that fiscal autonomy for Scotland is impossible, the country facing a stark binary choice between independence and the status quo in the forthcoming constitutional debate. To us at least, Midwinter’s position is an entirely normative one, reflecting a particular position on how the future of the United Kingdom as a nation state might be best preserved given the current tactical situation, rather than arising from the evidence available. Karl Mannheim’s view that the British display ‘a peculiar genius for working out in practice the correlation of principles which seem to be logically opposed to each other’ is perhaps over-quoted but, as Vernon Bogdanor (2005) has noted, it is nonetheless highly applicable to devolution as it has been enacted in the UK. This is because the form of devolution introduced since 1999 is fundamentally ‘asymmetrical’, with each of the devolved administrations in Scotland, Wales and Northern Ireland being afforded a different set of powers and competencies. The ‘genius’ of this arrangement, as seen by the pro-Union parties, is that it provided flexibility by means of devolving more powers to Scotland and Northern Ireland where the constitutional issue was more problematic, whilst at the same time avoiding a quasifederal reform of the UK that might ultimately undermine the sovereignty of the Westminster Parliament (Jeffery and Wincott, 2006; Trench, 2007; Mitchell, 2009). Given the logic of asymmetric devolution as seen from the UK perspective, our immediate response in reading Midwinter’s argument was to wonder why governmental asymmetry is suddenly impossible when it comes to the issue of affording Scotland substantial fiscal powers. After all, the idea that devolved administrations might attain fiscal autonomy has been debated since at least the Kilbrandon Commission on the constitution in the early 1970s, and a system of ‘assigned’ taxes was seriously considered running up to the Scotland Act 1998 (Bell and Dow, 1995). Our reading of Midwinter’s position is therefore that, just as the introduction of a explicitly federal system of government would contradict some of the core assumptions of British constitutional practice—such as the sovereignty of parliament rather than pre-eminence of a written constitution—fiscal autonomy for the devolved administrations is difficult or even dangerous for the UK precisely because it would cast an uncompromising light on some of the contradictions of Britain’s political economy. Leaving aside arguments over the allocation of North Sea oil and gas revenues, it is likely that it is the scale of the fiscal transfers required to make a system of fiscal autonomy work across the UK that underlies opposition to the idea. This is, in large part, because it would emphasise the increasingly stark regional inequalities that have been downplayed to sustain the neo-liberal ‘competitiveness’ narrative of UK economy with its over-reliance on London and the south east of England. Perhaps this is what Midwinter actually means in his phrase about full fiscal autonomy being ‘incompatible with the UK fiscal framework’.