4 Scotland under "devolution max"
- This chapter explores the possibilities of greater powers for Scotland beyond those recommended by the Commission on Scottish Devolution, within an overall UK framework.
- A range of policy areas are explored and two case studies demonstrate why Scotland's unique and individual circumstances warrant increased powers.
- This chapter also details a number of innovative policy initiatives which could be explored if Scotland had increased powers.
4.1. The previous chapters set out the limitations of the current devolved settlement and the options for reform as suggested by the Commission on Scottish Devolution. This chapter looks at options for enhanced devolution or "devolution max". As set out in "Fiscal Autonomy in Scotland: The case for change and options for reform" 8, "devolution max" is shorthand for the devolution of all significant domestic policy responsibilities and full fiscal autonomy - a highly decentralised model, still within the UK, but with increasing rights and responsibilities falling to the Scottish Parliament and Scottish Ministers.
Animal health and welfare
4.2. One of the lessons learnt from the Scudamore Report into Scotland's response to the foot and mouth disease outbreak in 2007 was that the separation of policy responsibility from financial responsibility is unsustainable.
4.3. The structure of the Scottish industry is different from the rest of the UK and needs appropriate delivery mechanisms. Scottish Ministers are currently working to achieve a fair settlement for Scotland in the devolution of the GB animal health budget.
4.4. Devolution of the animal health budget will bring responsibility for how that budget is spent in line with responsibility for animal health and welfare policy in Scotland. By being able to focus on our specific animal health priorities, devolved budgets can be used to support improvements in animal health and welfare in Scotland, to reduce animal disease and support increased sustainable economic growth of the livestock farming sector. The following case study demonstrates the importance of this.
Box 6: Case Study - Foot and Mouth Disease
During the 2007 foot and mouth disease outbreak, normal seasonal livestock movements were severely disrupted by movement restrictions imposed by the Scottish Government in line with European regulations. These restrictions were put in place to prevent the spread of foot and mouth disease. The restrictions were in place during the peak period for moving store lambs and older ewes to low ground farms and the subsequent sale of store lambs: in total, it was estimated that some 1.5 million animals were affected by the restrictions.
Whilst some adverse effects were immediate (additional feed, delay to sales), some were more medium term (loss in productivity of breeding ewes, fall in prices because of over supply in the domestic market). The income losses facing the livestock sector were estimated to be around £30 million 9. In the face of the negative impacts from movement restrictions necessitated by the outbreak in England, the Scottish Government decided, alone amongst UK Administrations, to use the European provisions regarding state aids to small and medium sized businesses to introduce a Sheep Welfare Scheme to compensate farmers and crofters for income losses caused by movement and export restrictions.
Policy responsibility for Animal Health and Welfare is devolved to Scotland, however animal health budgets were retained by the UK Government at the time of devolution to be spent on a GB-wide basis.
Consequently, the Scottish Government approached Defra to meet the costs of the compensation scheme given the terms of the concordats that define its relationship with Defra, however the funds were not forthcoming.
Therefore the Scottish Government announced and funded a Sheep Welfare Scheme as part of a £25 million aid package. This aid package was aimed at providing immediate relief for farmers and crofters, particularly in the sheep sector, and also helped support more long-term objectives, notably around strengthening livestock industry resilience.
4.5. Achieving solutions tailored to Scotland's needs in the field of fisheries management is made more difficult by the failure of the current devolution settlement to put beyond doubt the respective roles and responsibilities of UK Ministers on the one hand and Scottish Ministers on the other.
4.6. Where internationally negotiated agreements provide for an allocation of fishing opportunities - including fishing effort - to the United Kingdom, the role of the UK Government, under Westminster scrutiny, should be confined to the division of those opportunities between the four nations of the UK.
4.7. Under "devolution max", arrangements for the exchange of fishing opportunities between fishermen in different parts of the UK would need to be agreed between the relevant fisheries administrations; and vessels joining or leaving the Scottish fleet would have no automatic right to transfer their fishing privileges.
4.8. Greater management flexibility under "devolution max" would allow Scottish Ministers to better adapt fisheries management measures to meet the specific needs of the Scottish industry. Such an arrangement would help in the future to avoid the recent disagreements between the Scottish and UK Governments, for example on quota management and support for the Scottish fishing fleet during last year's fuel crisis.
Box 7: Case Study - Scottish Fishing Industry
The fishing industry makes a significant contribution to our coastal communities and economy. By agreement, quota management and vessel licensing arrangements have been overseen by the four UK Fisheries Administrations acting jointly.
As policy objectives and fleet structures across the UK have diverged, the current joint management arrangements have constrained the Scottish Government's ability to put in place arrangements tailored to Scottish circumstances. The current "one size fits all" joint management approach is simply not working, and more flexible arrangements are required.
There are genuine differences between fleets in the UK, which broadly tend to break down along national lines. In Scotland, for example, where 70% of UK quotas are held and managed, foreign ownership is much less common than in the rest of the UK. Vessel ownership tends to be based on family partnerships, and the fleet is more dependent on a few key quota species, compared to the fishing industry elsewhere in the UK.
During the fuel crisis of 2008, Scottish Ministers made repeated attempts to encourage the UK Government to intervene to help alleviate the difficulties which high fuel costs caused many of Scotland's traditional industries, such as the fishing industry. The UK Government chose not to intervene or provide any additional support.
4.9. With responsibility for imports and exports, Scottish Ministers could encourage the growth of domestic re-use and recycling facilities, and more stringent checks on waste exported for recycling, all securing long term benefits for the natural environment in Scotland and elsewhere.
4.10. Progress on renewable heat will be critical to achieving the statutory targets in the Climate Change (Scotland) Act 2009. The Scottish Government has recently called on the UK Government to: legislate for a pro-rata level of energy efficiency supplier obligation activity in Scotland; give the Scottish Government the ability to enable it to direct and coordinate this activity through a coordinating body of its choice; recognise the variation in Scotland's climate and housing types; and provide a greater level of incentive for loft top-up insulation.
4.11. With "devolution max", the Scottish Government would be responsible for raising, collecting and administering all (or the vast majority of) revenues in Scotland and the vast majority of spending for Scotland. By collecting all tax revenues in Scotland, a payment from Edinburgh to London would be required to cover common UK public goods and services (i.e. shared services).
4.12. The range of services included in this basket of "shared services", how they would be paid for and the authority the Scottish Parliament would have over such policies would be subject to negotiation at the time of any revised settlement. It is envisaged that in the context of rural and environmental issues, there would be very few "shared services" under this fiscal framework. However, interaction with the EU would remain the responsibility of the UK Government.
4.13. Short of independence, the Scottish Government believes that "devolution max" would represent a significant step forward in the devolution settlement and allow maximum policy discretion for the Scottish Government and Scottish Parliament to rebalance tax regimes in the medium term for greatest public benefit.
4.14. It could help to deliver a low carbon economy, for example by creating and using a Scottish oil fund for developing world-leading clean technologies. The viability of rural areas and Government's ability to assist economic recovery in them, and funding of environmental measure could benefit from fiscal autonomy.
4.15. For example, the majority of transport functions are already devolved to the Scottish Parliament. Fiscal autonomy would also allow Scotland to tailor fuel and vehicle excise duties to take better account of Scottish circumstances, balancing the need to reduce emissions against the desire to support rural and remote communities. However, short of full independence, restrictions are likely to remain on the Scottish Government's ability to tailor the tax environment. For example, rules or guidelines might be implemented to ensure that a degree of synchronisation remained between the fiscal frameworks in Scotland and the rest of the UK. This could potentially limit the ability of the Scottish Government to adopt fiscal measures which differed from those elsewhere in the UK.
4.16. Rebalancing aid for agricultural land and property could allow consideration of specific tax incentives for landowners who made direct provision for the letting of whole farms to genuine new entrants to farming. It could also be possible to offer relief from Stamp Duty Land Tax for new entrants taking up leases. Such measures could encourage new blood and enterprise to agriculture, food production and land management in Scotland.
4.17. With full fiscal autonomy, Scotland would be able to decide on how best the taxation structure addressed the needs and challenges that we face. A number of countries, including the UK10, are exploring opportunities to rebalance the tax and benefit system with a greater emphasis on exploring whether the balance might be further shifted from taxing "good" behaviours (e.g. working, saving, running successful businesses) to taxing "bad" behaviours (activities which cause environmental harm). Under "devolution max" and full independence Scotland would be able to engage in this debate and put forward a taxation and benefit structure that best suited the circumstances of Scotland and the opportunities and challenges that we face.