Economics of Independence Scotland's Economy ScotRef Westminster Mismanagement

Smith Commission falls short of devolution vow

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Lord Smith outlines his recommendations

The Smith Commission report out today contains some positive measures that can be used by the Scottish Government to the betterment of Scotland.  It is also true to say that it is the largest movement of power from Westminster to Scotland since the formation of the parliament, but it falls well short of the vow made by the leaders of three of the four main Westminster Unionist parties.  It falls even further behind the promise of the No campaign’s official spokesperson Gordon Brown that Scotland would be as close as possible to a federal state within one or two years, or Danny Alexander who told us to expect  “effective Home Rule”.

Federalism and effective home rule it isn’t, but that hasn’t stopped The Times from screaming from its front page “Fears of a federal UK as Scots get new powers”.  Now I obviously could never write for the Times as the headline I would have used is “Hope for creation of a federal UK as Scots get new powers”.

The Times today states Under the agreement, Scottish MPs will still be able to vote on income tax rates in the rest of Britain but English MPs will have no say north of the border. However, No 10 said yesterday that it would still press ahead with plans to force English-only votes for English laws after the election.”

The backlash and co-ordinated campaign to stop the Smith Commission recommendations from being implemented will now move into full swing. We shall have to watch closely as Westminster MPs seek to further water down Smith’s recommendations.  Today in Westminster Conservative MP John Redwood asked the Scottish Secretary (Carmichael) if he agrees that “once Scotland is determining its own income tax rates in the Scottish parliament, it would be “quite wrong for Scottish members of this parliament to fix the bands and rates for the English”.

It will be interesting to see what UKiP (now outpolling the Lib Dems in England) has to say about the report given its last Scottish manifesto effectively suggested shutting the Scottish Parliament.

It strikes me that the unionist parties have a track record in attempting to placate the Scottish people with promises to match the growing support for constitutional change and then letting them down in the final delivery of recommendations.  The Calman Commission being a case in point, where the powers that were delivered were underwhelming and seen to be such by the people of Scotland.  The failure of Calman to wow the people of Scotland, combined with the generational shift away from Unionist parties that continues today, set us up for the referendum.  The Failure of Smith to impress or the failure of Westminster to support its implementation without catches and unworkable caveats will reopen the independence debate within a few short years, and Yes will very much be in the ascendancy.

The Smith Commission – what’s good and what’s missing

Any step towards the goal of giving the Scottish Parliament the ability to govern Scotland more effectively for the benefit of the people of Scotland should be welcomed.

From a business point of view, control over Air Passenger duty is a good move and will help boost Scotland’s international connectivity which is vital for business and tourism. It should be noted at this point that the Calman Commission recommended devolving APD and it still has not happened, yet we remain optimistic this wont be the case again. However, the lack of powers to vary VAT rates, for example to lower VAT rates on tourism related activity in the same way as Ireland and 23 other EU nations, means that the Scottish Parliament will not have the ability to create a joined up connectivity and tourism strategy that would boost overnight stays and rural economies and create jobs.

Cameron favours devolving corporation tax to Northern ireland but not Scotland.

Cameron favours devolving corporation tax to Northern ireland but not Scotland.

The lack of devolution of tax incentives for research and development will slow Scotland’s ability to catch up with the rest of Europe on growth optimised levels of research and development. No corporation tax varying powers is a bit of a shocker when you consider that Northern Ireland is expecting corporation tax to be devolved. In fact Prime Minister David Cameron has said “the argument made for the devolving of corporation tax powers to Northern Ireland is strong.

Corporation tax powers would allow the Scottish Government to create incentives for companies to invest in key areas that underpin the Scottish economy and, in particular, in projects that create jobs and boost vital sectors such as tourism, food and drink, innovation and manufacturing.

It’s good that Scotland will see progress in control of personal taxation, but no control of employer national insurance contributions or the personal allowance which could allow the working poor to earn more before being taxed, child and working tax credits, and full control over the welfare system – all of which stay with Westminster – leaves the Scottish government with only half the tool set required to boost jobs and the attractiveness of work through welfare powers.

Failures to progress in key areas

According a Panel Base poll published in October, the most popular areas that people would like to see devolved to Scotland are the very ones where the proposals fall short.

71% supported control of all taxation raised in Scotland, 75% wanted control of the welfare and benefits system and 72% sought guaranteed consultation by the UK Government with the Scottish Government when deciding the UK’s stance in European Union negotiations.  Disappointment on key powers then?

Key organisations will be disappointed

During the commission’s deliberations I represented Business for Scotland at a commission round table discussion and the input of several key organisations in Scottish life was sought.  The Scottish Council for Voluntary Organisations (SCVO) were very keen to see major welfare powers and I suspect they will see this as a missed opportunity to devolve the key welfare powers.

Screen Shot 2014-11-27 at 11.26.09Even key Labour party supporting organisations such as the STUC will likely be disappointed that the minimum wage will still be set in Westminster under the beady eye of the CBI, rather than in Scotland with an eye on the opportunity to address and eventually end in work poverty.

Grahame Smith, general secretary of the Scottish Trades Union Congress (STUC) said he was “underwhelmed” by the package of recommendations which “does not meet our aspirations”.

He added: “STUC continues to believe that control over employment law, equalities and minimum wages is a necessity if inequality is to be effectively challenged. We will continue to press for this.”


Some of the unionist parties have had to compromise hard on their weak position on devolving more powers, and it is good to see the Labour Party bring its position up to the same level as the Conservatives and Liberals.  How Labour ever fell into a trap of being the party of less devolution when compared to the Conservatives is  mind boggling – perhaps they should have listened to their branch office more.  The Yes supporting parties have also compromised, the No vote made that a requirement, however we do see some progress in the Smith Commission’s recommendations. But what we have is, essentially, what the Calman Commission should have been allowed to be and not what we were promised in the vow.

The devil is in the detail and over the next few weeks and months we will see how Westminster reacts. If the proposals are blocked, watered down or tied to stopping Scottish MPs voting on devolved issues (Cameron’s Labour killer plan) or if cuts made by the Scottish Government, say in APD, result in withering cuts in our block grant then the vow has failed and the union will fall.

What’s your view? Leave a comment and tell us if you think the Smith Commission recommendations go far enough and if you think Westminster will agree to implement them.

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About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland Gordon ran a business strategy and social media, sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and Believe in Scotland.


  • I agree that Smith has laboured hard to produce something so insignificant. I don’t blame Smith – he did what he said he would do, which was to produce an agreement in a timescale from very disparate groups.

    I DO blame Labour in particular, and likewise the Lib Dems, whose 1913 Bill was streets ahead of this stitch-up, for the resulting “wet fart”. I don’t blame the Tories – they only care about their own money and freedom of action.

    We have been given control over oil and gas licences onshore. NE England had hints of the same PLUS the right to set up its own “fracking fund”. It is this next level power that is missing. We need the power to tax and control the onshore production of not only oil and gas, but whisky and other spirits, and other items currently seen, like N Sea oil as a UK benefit. All excise duty raised should have been allocated, even if, like VAT, the rate was set by the UK. We also need the right to set up and keep a long-term asset fund, with various revenue streams, rather than just oil. It should also be able to hold assets in trust, eg land given in lieu of tax or rates on big estates, shares in enterprises set up with grants and loans from the Scottish Government. This fund could be used to stimulate the economy, even out “bumps”, reduce the borrowing requirement.

    The alterations to income tax and VAT, taken with the concomitant rebalancing of Barnett mean Scotland is no better off, has no real freedom to raise or lower taxes, and is still regarded as a subsidy junkie dependent on an ever-generous England for its pocket money. No mention of the £148 billion subsidy we’ve given them over the last 30 years.

    Smith said his commission would not seek to devolve a random selection of meaningless powers – so I take it that someone was taking the piss by devolving the right to alter road signs. This hardly counter-balances the significant failure to match Scotland’s revenue raised to Scotland’s spending needs.

    I want independence – failing that, while the UK can keep a “common trade area” by setting most tax rates, I want Scotland to keep what it raises to cover its own needs, rather than be handed pocket money. It should send a share to Westminster for UK spending.

    That is “devo-max”.

    • 100% agree with the above. Whilst I support independence, if we are to remain within the UK (for now anyway) Scotland’s relationship with the rest of the UK needs to change to a position where we control,our own resources and contribute to the cost of common services or costs.

  • Would be good to see a chart showing three columns of what powers were already coming, what additional powers the Smith Commission has actually added and what Gordon Brown alauded to in the Vow. This would help to fully understand what the Vow has achieved as Murghy and the Unionists only talk of the total substantial powers delivers by them in honouring the Vow.

  • No wonder Smith said that after his job was done putting this report together that he will not be taking any further part but will be looking in from the sidelines to keep an eye on how it is progressing,all we asked was to have our independence from Westminster,they gave us some crumbs,not good enough,it was all just a sham.bring on the G E.

  • The only people who are happy with these proposals are the Pro-unionist parties. That says it all really. Scotland will not be soothed by this outcome in fact Scotland ( both yes and no) will be seriously insulted by the meager offerings from the unionist table. Independence is coming ever closer. Saor Alba

  • No surprises there then. This commission was a stitch up from the appointment of Lord Smith David Cameron’s Fraking pal he has been told what to offer by David Cameron and in return he got all the Fracking licences he wanted. This stinks to thd heavens and I would not accept it we need to dump every unionist out of Scotland at the GE and just declare UDI it’s the only answer as if we have an other referendum they would just fix it with there cheating and corrupt ways.

  • We always knew they were never going to offer enough powers and any that are suggested I’m sure WILL BE BLOCKED BY WESTMINSTER. Referendum number 2 coming up.

  • I think this is a very measured and realistic appraisal. Apart from the lack of transfer of significant tax powers, there are so many missing powers that would really have made a difference to the Scottish Government’s capacity to grow the economy.

    A great deal of the proposals add to the complexity of government instead of grasping the opportunity to offer the Scottish Government the real powers to integrate policy objectives. Nowhere is this more obvious than in the timid transfer of small elements of welfare. A complete and holistic package of all welfare could have enabled simplification and streamlining of a system that has become bogged down in punishing the disadvantaged. The introduction of Universal Credit has been badly handled and there is a missed opportunity to permit the Scottish Government to achieve a better resolution.
    I wrote a piece late last night prior to Smith reporting. This is more about consequences and opportunity and can be found on my blog at

  • I think this is a workable step forward with a lot of positives. We have more powers in Scotland than we think – what we have lacked until sturgeon is a political will to use them – enhanced childcare being a good example.

    Your article above seems to miss a vital point in that a lot of the exonomic powers not devolved would have been used to create arbitrage with the English economy, eg corporation tax rates. Given the ease with which businesses can shift production in our tiny island this would have caused a race to the bottom with no net benefit. Northern Ireland is an entirely different kettle of fish in this regard and needs a more level playing field with EIRE. The fundamental Smith principle of no net gain/loss to either Scotland or rest of UK relative to the other has to be sacrosanct and is in line with the wishes of the 55% majority who wish to remain in a strong lUK.

  • Oh dear, how long do sour grapes last?
    Like it or not, the SNP with Ms Sturgeon in charge are taking the sensible step of accepting that the majority of people living in Scotland do not want independence. Therefore, let’s work to make the country operate to the best of it’s abilities.
    If the SNP want to be more socially just, then let them face the consequences of having to pay for it.
    For all the criticism that Smith is not enough, just think what a stooshie we’d have had if we believed all the promises made about North Sea Oil being able to subsidise Scotland for the rest of time. Time to accept Salmond was in such an enviable position of promising everything to everyone and that he would sort it out, manana.
    This is about as good as the SNP want it, if they had all tax raising and spending powers devolved, they would be found out very, very soon.

  • We have been let down again by empty promises. Of course Westminster won’t implement them.

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