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Politics as football

Brian Taylor | 10:45 UK time, Friday, 5 September 2008

He's said it before, I know: this stuff about Scottish fiscal powers, not least in an back in February.

I recall that interview, in Kirkcaldy, for a couple of other reasons. Mr Brown, understandably keen to bolster his colleague, forecast then that Wendy Alexander would be a "great" leader of Scottish Labour.

And, immediately after talking to me, the PM headed for Starks Park hoping to join the football fans singing and dancing in the streets of Raith. The mighty Rovers, GB's boyhood delight, were thumped.

So nothing is fixed in politics or football. Nonetheless, the Prime Minister is pursuing an intriguing theme when he talks about the Scottish Parliament gaining responsibility for raising money as well as spending it.

When Donald Dewar took Labour into the Constitutional Convention, he said that his party was going to have to "live dangerously" for a while.

Mr Dewar, like Mr Brown, was intuitively averse to risk.

Yet it would appear that Mr Brown now, like Mr Dewar then, is .

Popular mood

Is he "caving in" to the SNP? To some degree, yes. His comments reflect the political reality that people in Scotland seem to like the concept of decisions honed in Scotland, reflecting Scottish wishes and driven, solely, by a Scottish mandate.

In response to the SNP pressure for independence, he is still firmly saying no.

Now, however, it is "no, but . . . " This resembles the instigation of devolution itself.

Labour is responding, directly, to the popular mood which is, to some extent, represented by the SNP.

However, the origin of this initiative should not concern us exclusively. Personally, I am much more interested in the details of the project and its next phase. If you like, let's look at Leviticus and Exodus, taking Genesis for read.

What is Gordon Brown proposing? Strictly, nothing precise at this stage, given that he anticipates the will guide on this matter.

Since he and others directed Calman's remit, that is a reasonable presumption.

What, then, might we expect?vI believe that Gordon Brown is talking about assigned or devolved revenues.

Declining economy

Assignation means that the product of a tax raised in Scotland, say income tax, stays in Scotland. Devolution means the Scottish Parliament would have full or partial control over varying that tax.

Which taxes might be assigned or devolved? Holyrood already has the power to vary the standard rate of income tax. But the tax isn't assigned - in that Scotland simply gets a block grant.

Under assignation or devolution of tax, the Scottish Government and parliament would have a direct incentive to grow the economy: because they would get the extra tax cash that thus accrues.

Equally, they would have to live with the consequences of a declining economy.

VAT? Could be assigned, difficulty perhaps with devolution because of EU consistency rules.

Corporation tax? Could be assigned - but probably not devolved in order to avoid the problem of companies shifting their HQ plates within the UK to skip tax.

That's one reason why such a move has been resisted for Northern Ireland.

Other taxes like stamp duty seem clear candidates for assignation or devolution. Oil? That will be the SNP's greatest demand - but assignation/devolution would be strongly resisted by the Treasury.

Borrowing power

There are other issues. The Treasury would dislike any substantial assignation or devolution if it weakened their control over the UK's overall finances.

That might suggest there would be a requirement for rules governing such matters.

Further, the Scottish Government - both ministers and officials - are exceptionally keen on gaining borrowing powers. They point out that local authorities can borrow - but they can't.

Assignation of tax might well be accompanied by borrowing powers.

Bear in mind that, for the PM, this is not solely about Scotland.

In his speech last night, the line about Scottish economic flexibility was followed immediately by a statement stressing that this was all about "preserving the unity of the United Kingdom".

Under assigned taxation, there would still be an equalisation system to top up for Scotland the revenue that isn't transferred, such as oil, and to deal with differential need, however assessed.

There would, in my view, be a full-sacle needs assessment review.

English disquiet

But, by definition, any cash lump sum paid annually to Scotland would be much lower than the present Barnett Formula level. That is because Scotland would retain, primarily, the product of one or more taxes.

The equalisation payment would be a top-up rather than the sole sum.

So Gordon Brown could, arguably, tell the good and sensible people of England that he had cut the grant to Scotland.

Depending on the equalisation formula which replaced Barnett, it might also be the case that the overall funding available to Scotland would indeed be cut.

It is scarcely likely to be increased, given disquiet in England.

Good advice to all politicians: be careful what you wish for.

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