Hume Occasional Paper No. 57
ISBN 1-870482-48-5
Hector MacQueen and Brian G M Main
The range of topics covered in this collection of seminar papers is wide. That range serves to emphasise that the powers devolved to the Scottish Parliament are, indeed, significant and capable of exerting substantial change on the social and economic conditions of the Scottish population. We provide a brief thumbnail sketch of each speaker's paper before offering some overall conclusions of our own. As explained in the preface, the papers themselves have, for the most part, been published elsewhere as earlier Hume Occasional Papers, or are reprinted below.
The Economy.
Given at a time when many commentators on the economy were forecasting that the world economy was heading into a severe recession, this talk starts by asking how such an out-turn would impact on a recently devolved Scottish Parliament. Key points regarding the Scottish economy and its economic position regarding the rest of the UK are highlighted. From this perspective, any slow down in the world economy is predicted to have severe effects on foreign direct investment, so important to the Scottish economy, and also to put severe strains on the budget settlement as defined in the Barnett Formula.
Jamieson sees other regions in the UK becoming jealous of the relatively generous settlement in terms of fiscal transfers, implied by the Barnett Formula (at least as it currently impacts on public spending in Scotland). The Scottish Parliament will bring out into the open the extent of the fiscal transfer through the block grant to Scotland from the rest of the UK. While, in the long run, the Barnett Formula is designed to bring about an equalisation in per capita public spending in Scotland, the very public scrutiny that the Parliament is designed to achieve will make it very clear to those in certain areas of England, such as the North East, that their own provision is less generous.
While the threat of a global downturn as discussed by Jamieson seems, for the moment, to have receded, the points he makes remain valid. In any such downturn there would undoubtedly be a marked reduction in the level of foreign direct investment in Scotland with a consequent depressing effect on the Scottish economy. This would leave the policy makers in the Scottish Parliament looking for ways to increase spending to stimulate recovery, and, hence, in a position of being under pressure to deploy the tax raising powers available to them under the Scottish Variable Rate.
Jamieson encourages the Scottish Parliament not only to forego such upward movements in tax rates, but recommends that tax rates be cut in an attempt to secure Laffer-curve type effects where lower tax rates can so stimulate economic activity that tax revenues may actually be higher at these lower rates than they are at the high rates. Here he echoes arguments elaborated in detail in his recently published CPS booklet, The Bogus State of Brigadoon, where he calls on Scotland 'to pull herself out of a nosedive towards political and economic implosion' by setting out on a 'new agenda'. Prominent on this new agenda are cuts in the marginal rate of income tax ( at the 40% rate rather than the basic rate which is actually open to the Scottish Parliament), and cuts in capital gains tax and cuts in inheritance tax. All of these are seen as providing Scotland with the tools to meet the challenge of globalisation.
Further supply-side improvements include attention to education and training. Topics returned to below. The general thrust of the Jamieson argument is that devolved powers to Scotland need not mean more of the same. The potential of home rule is seen as lying in the ability to strike out in fresh new directions which free up market forces and allow the Scottish economy to thrive rather than falter in the global economy.
The start of a new song.
In this paper, published separately as Hume Occasional Paper No. 55, Vernon Bogdanor argues that the constitutional settlement represented by the Scotland Act 1998 is bound to introduce difficulties for the traditional doctrine of the supremacy of Westminster. This doctrine, while enshrined in the Scotland Act 1998, something with which David Hume would surely agree, will become difficult to maintain, according to Bogdanor, owing to the very fact that power has been devolved to the Scottish Parliament. In this he takes a contrary view to the conventional wisdom of constitutional theory where the old saw, 'power devolved is power retained', holds sway. Bogdanor argues that the political reality is that power devolved is, in fact, power transferred. This renders the notion of the continuation of the United kingdom as a unitary state a sham, because in practice the state of affairs will be to all intents and purposes quasi-federal. It is then only a matter of time before other regions demand parity in treatment with Scotland and the process continues inexorably towards federalism. The one inhibition that may slow up this process is the extremely weak sense of regional identity in England itself. With the exception of areas in the North and Southwest most residents in England would struggle to identify ‘their’ region.
One on-going and much discussed perception of difficulty with the Scotland Act is the eponymous West Lothian Question. This Bogdanor finds to be a non-question owing to the way in which the block grant to Scotland is to be calculated using the Barnett formula. Under this formula, Scotland retains a vital interest in the debate regarding how much should be spent on health, education, law and order, and so on, as it is these very levels of expenditure for England that will drive the level of spending available to the Scottish Parliament. While it is true that the Scottish Parliament retains the discretion to vary the ways in which this block grant is spent (with more, say, on health and less, say, on education), the total spending available varies from year to year to reflect the variation agreed for England. To be precise, the Barnet Formula guarantees that if and extra £100 per head is spent in England on devolved areas, then exactly £100 per head extra will be available in Scotland. The ongoing participation (and, of course, voting) of Scottish Westminster MPs in these matters is, therefore, seen as entirely appropriate from this perspective.
In terms of the ‘slippery slope’ argument regarding the political consequences of devolution leading inexorably to Scottish independence, Bogdanor opines that it is far more likely that the exposure of the Scottish National Party to debate and scrutiny regarding its policies across a wide area is more likely to bring about splits and factions in that party, and so inhibit rather than encourage any move to separatism.
Continue on to the Commercial Law and the Scottish Parliament or return to the contents page