Is Devo-Max Compatible With The UK? And What Is Devo-Bare Minimum?

Many of us remain convinced that the best, and most democratic, way for Scotland to be governed is as an independent state. But constitutional options like devo max (generally understood to mean Holyrood having power over everything except defence, foreign affairs, immigration, and a few macroeconomic essentials like the currency), which were dangled in front of voters so extensively during the final weeks of the recent referendum campaign, would be a welcome advance on Scotland’s path to self-government.

Now that the referendum is over though, the mode du jour amongst the unionist commentariat and political elite has been to claim that devo max is a “complete non-starter” (Ruth Davidson MSP) and “incompatible with remaining part even of a largely federal system” (Alan Trench). But is it really true that devo max is incompatible with membership of the United Kingdom? Or is it simply a working backwards from a (legitimate, if not majority-held) view that Scotland should remain as similar to the rest of the UK as possible?

If we look to the rest of the world (something which I fear hasn’t happened nearly enough in the current debate), we find some potential answers to that question. And, while we’re at it, we observe some possible ‘design patterns’ for the constitutional arrangements of post-referendum Scotland, and the UK as a whole, in places that have been doing this stuff for decades.

On a fundamental level, the claim by some that devo max is, more or less by definition,
incompatible with being part of a larger state is patently false. Hong Kong is an integral part of the People’s Republic of China, yet has more autonomy than even devo max would provide (Hong Kong having both its own currency, and a separate immigration area from mainland China).

Hong Kong – along with Macau – is of course governed under the maxim of “one country, two systems”, and some may object to the comparison on the basis that no-one in Scotland expected a No vote in the referendum to mean the “state within a state” form of government that Hong Kong enjoys. That proposition remains to be tested – perhaps this would be a more popular option than many unionists would like to believe – but it is not necessary to pursue this particular comparison here. It serves merely to illustrate that on a technical level claims about devo max being inherently incompatible with membership of the larger state that is the United Kingdom are simply not true.

If we look then to federal (or federal-like) countries which no-one would suggest are anything other than single states, we find several where some or all of the constituent parts have significantly more control over the fundamental issues of taxation and welfare than Scotland currently does as part of the UK.

The most obvious example – and one not so far from home – is Spain, and in particular the
autonomous communities of the Basque Country and Navarra. These two autonomous communities – through their economic agreements with the Spanish central government – are responsible for setting most, and collecting virtually all, taxes in their respective territories, while remitting a certain amount of money to the Spanish state for centrally provided services such as defence, according to a bilaterally agreed formula.

Are the Basque Country and Navarra part of the Kingdom of Spain? Quite clearly they are. (Many may wish them not to be, but that is besides the point here.) These two autonomous communities have had almost exclusive competence over tax collection for more than three decades (and also previously, before the Franco era), but they remain part of Spain, and, indeed, are highly integrated in the Spanish single market.

Crossing the Atlantic to Canada, we find provinces which are responsible for a significant number of their own taxes, and virtually all of their own working-age benefits – there is no Canada-wide equivalent to Jobseekers’ Allowance or Universal Credit, for example. In the area of contributory state pensions, where there is admittedly more uniformity across most of Canada, Québec has its own separate Québec Pension Plan. Yet Québec, like the other provinces, is still an integral part of Canada, and an integrated part of the Canadian macroeconomic zone and single market.

Careful observers won’t have failed to spot my specific highlighting of the Basque Country and Québec, two of the most independently minded parts of their respective larger states – and, in fact, the most autonomous sub-state entities in the whole of the OECD. That is with good reason. Contemporary Scotland is the most independently minded and autonomy-seeking part of the United Kingdom, and so we should devise a constitutional settlement which reflects and accommodates that (even if ultimately I would prefer such a settlement to be extended to, or at least be on offer to, all four UK nations). We shouldn’t force Scotland into a UK straitjacket that doesn’t meet the aspirations of most Scots simply for the sake of some abstract notion of British unity.

Looking again at Spain and Canada, and examining the situation of even the most ‘Spanish’ of autonomous communities – Castile-La Mancha amongst others – or of an ‘ordinary’ Canadian province such as Ontario, we find aspects of the constitutional order which go significantly beyond the Scotland Act 2012 and which would be worth taking serious note of. For example:

  • Castille-La Mancha, in common with all Spanish autonomous communities, has a statute of autonomy – an entrenched written constitution subordinate only to the written constitution of Spain.
  • Ontario levies a large number of its own taxes, including beer and wine tax, corporation tax, fuel/gasoline tax and personal income tax – and, particularly relevant to the current debate in Scotland, the employer health tax, a payroll tax completely separate from income tax and unique to Ontario.

Some may posit, “Well, that is all very well and good, but our contention was never that such systems of government would not be technically possible in the United Kingdom, simply that in the specific case of the UK, the essential nature of what the UK as a country is about – as opposed to what, say, Canada and Spain are about – makes the level of autonomy that devo max would involve impossible to contemplate.”

That seems quite a contorted argument, but if it is some people’s view, let’s at least hear it – along with a decent defence of this position. What is it that makes the UK so different from Canada, Spain and elsewhere that makes significant, if not complete, autonomy for a part of the state over taxation and welfare a non-starter, uniquely, here? I’m not sure anyone has a convincing answer to that question.

That all said, let’s for a moment set aside the first choice (for now) of devo max, and focus
only on two humbler aspirations:

  1. That the Scottish parliament should be responsible for raising tax revenue to fund substantially all of its own expenditure – a basic principle of responsible and accountable government anywhere.
  2. In having responsibility for a particular tax, this responsibility should be comprehensive – ensuring that the Scottish parliament isn’t prevented from making reasonable changes to the structure of a particular tax to the extent that the usefulness of it having any control over that tax at all is severely hampered.

One benefit of devo max-like systems is their clarity, and thus their clear trace-through to the ballot box. In the Basque Country, for example, it is clear to everyone who is responsible for every last rate, band and relief of income tax – and this would also be the case in Scotland under devo max.

By contrast, in all of the unionist parties’ rather tepid proposals on income tax, numerous
important components of the income tax system would remain under the control of Westminster – including the personal allowance (which is simply a 0% band), meaning that Westminster, bizarrely, would be deciding how much of Scottish taxpayers’ earned income could be taxed, while not actually receiving any of the tax on this income itself.

At the recent UK Conservative Party conference, the UK prime minister David Cameron said:

So here’s our commitment to the British people: No income tax if you are on Minimum Wage. A 12 and a half thousand pound tax-free personal allowance for millions of hardworking people. And you only pay 40p tax when you earn £50,000.

If the Conservatives’ current plans for further Scottish devolution were put into effect, the
part of Mr Cameron’s promise relating to the 40p income tax band wouldn’t apply in Scotland, while the part relating to the proposed £12 500 personal allowance would (meaning the UK parliament would be telling the Scottish parliament at what point it can start taxing Scottish taxpayers’ earned income). I challenge anyone to convince me that this would not be an utterly confusing proposition at the ballot box in Scotland – not to mention the unfairness of English voters being able to vote for a holistic vision of the entire income tax system while Scottish voters cannot.

Returning then to where we started: Devo max is quite clearly not incompatible with Scotland’s staying in the United Kingdom and to suggest otherwise is to wrap a political preference in the guise of objective fact. Furthermore, devo max would make Scotland’s governance arrangements much simpler to understand (compared to either the status quo, or any of the other currently mooted schemes for further devolution), and it would thus provide the greatest level of political transparency and democratic accountability possible while Scotland remains in the UK.

If devo max is not deemed to be politically achievable this time around, then let’s give Scots a system of fiscal autonomy where they are able to express a holistic view at election time on at least some of the most significant taxes and welfare benefits. (And, in deciding on the extent of such a system, let’s keep in mind that many countries manage to operate, and indeed thrive, with much less fiscal uniformity than currently exists in the UK.)

While such a ‘devo max lite’ proposition would likely not satisfy the appetite for more powers of most Scots – not least of all the 45% who voted Yes on 18 September – it would be another step forward on the journey to true self-government – a journey where the direction of travel is clear and unambiguous.

The Edinburgh Agreement commits the Scottish and UK governments to work together constructively in the best interests of the people of Scotland and of the rest of the United Kingdom. It benefits neither Scotland nor rUK for a discontent Scotland to be denied the power over its own affairs which it legitimately seeks.

Let’s make a step change in the governance of Scotland and all of the United Kingdom.

Let’s get to it.

Kenneth MacArthur
National Collective