Issue 14 - December 2016

IS UNCERTAINTY NOW A WAY OF LIFE?

By Lynda Towers, Director of Public Law, Morton Fraser

The Scotland Act 1998 was a game changing piece of legislation. It set up the Scottish Parliament, the Scottish Government and a new relationship between Westminster and Holyrood. The people of Scotland were in a new political place. Little change was made to the 1998 Act until the Scotland Act 2012 and that was supposed to be that! The Referendum in September 2014 arrived, and shortly thereafter so did the child of the Smith Commission which became the Scotland Act 2016. Once again we are in a period of considerable change and uncertainty.

During its progress through the Scottish and UK Parliaments, the 2016 Act was hailed as the most far reaching piece of constitutional legislation in respect of powers coming to Scotland since 1998. Obviously it was not seen as such from all sides of the political divide. At this time the Scottish Government was still in the process of implementing the provisions of the 2012 Act some of which were extended by the 2016 Act.

On any view, there was and is a substantial amount of work for the Scottish Government and the Scottish Parliament to do to make all these new powers work. This is against a background of fewer financial resources available to them, fewer people to do the work, new skills required and higher expectations from people in Scotland.

On any view, there was and is a substantial amount of work for the Scottish Government and the Scottish Parliament to do to make all these new powers work. This is against a background of fewer financial resources available to them, fewer people to do the work, new skills required and higher expectations from people in Scotland.

The two most potentially far reaching sets of powers to come down are likely to be the taxation and benefit provisions. They raise legislative, policy, practical, financial and political issues. They also have to be perceived by the ultimate recipients to work effectively and presumably to be an improvement on the existing regimes.

The 2012 Act introduced the Landfill Tax and the Land and Buildings Transaction Tax, together with changes to income tax and created "the Scottish Tax Payer". Neither of these proposals were going to bring huge tax revenues into the Scottish Consolidated Fund but the Scottish Government determined the policy and it was scrutinised by the Parliament. A new way of thinking had to emerge. The Scottish Government and the Scottish Parliament were now tax raisers as well as spenders. Revenue Scotland was established and came into existence in January 2015. It had therefore taken quite a long time to develop and implement the policy, establish the mechanisms and start to ingather the new devolved taxes. It is worth remembering these were relatively straightforward taxes.

So the foundations are certainly there. Relationships have been established. Tax experts are engaged and policy successfully delivered. Tax has been collected. However what the 2016 Act has brought is in a different league. The context of raising taxes in Scotland is new. HMRC will continue to collect the income tax (for a fee). VAT collected in Scotland will be assigned to Scotland. Further devolved taxes have arrived: Air Passenger Duty and Aggregates Levy taxes. The Scottish Government has new borrowing powers. This is complicated since figures set are very dependent on correct assessments having been made by the OBR and others as to the predicted level of tax take to avoid the Scottish budget finding itself with a deficit arising out of less tax take in the following years. The Barnet calculations will be duly adjusted on the basis of the assessments. The aim of the transfer of the powers was to achieve "no detriment". If the Scottish Government raise more tax than anticipated because the economy is more buoyant than anticipated then they get to keep it. If they raise less tax then they have a deficit. They have more control over money raised in Scotland but there are risks.

Similarly social security benefits are a whole new world. Scottish Ministers will be able to deliver certain "devolved benefits" in a "Scottish way" and create new benefits where these do not cross over the area of UK reserved benefits. Universal Credit provisions remain reserved although Scottish Ministers can change the way they are paid. Again this is all against a background of no detriment which is probably even more complex that in the tax context. This complexity may be reflected in the recent announcement that the UK will continue to administer the benefits on behalf of the Scottish Government for some time ahead.


Implementing either of these projects would have challenging. Detailed and complex negotiations will be needed with the relevant UK departments. The Scottish Government will need experts to help them through this legislative and practical area. The Parliament committees need advisers, staff to support them and Members who have the expertise to scrutinise the detailed legislation and make sure it works. The Presiding Officer has set up an Independent Commission on Parliamentary Reform and these issues should probably be well up the list to consider. The Parliament is likely to face these pressures in the not too distant future.

Implementing either of these projects would have been challenging. Detailed and complex negotiations will be needed with the relevant UK departments. The Scottish Government will need experts to help them through this legislative and practical area.

To set up the relatively straightforward Revenue Scotland and regulate its two current taxes took 4 Acts, an Order and 28 SSIs. The number and complexity of legislation which may be required to implement the tax and benefit provisions alone, never mind the other outstanding provisions can not be underestimated in terms of numbers of staff, expertise and general resource needed in both the Government and the Parliament. Successful change takes time and resource to get it right.

The government itself has its own political priorities looking at delivery by local authorities, reform of the council tax and reform of education in Scotland. These are all big ticket items. Into this already pressured environment Brexit has landed and all that means by way of developing positions and policy to a tight timetable if Art 50 is triggered by the end of March 2017.

We cannot ignore a possible Indyref 2. We now have a draft Bill issued by the Scottish Government at the end of October for consultation. It may not have taken a huge legal resource to instruct and prepare the wording of the draft Bill but you can be assured there will have been a lot of thinking, talking and advice behind those relatively few pages, which will no doubt continue over the months ahead.

Lynda Towers is Director of Public Law at Morton Fraser

By Lynda Towers, Director of Public Law, Morton Fraser

Issue 14 - December 2016

PREVIOUS ISSUES

Looking for a previous issue? Use the menu below to select an issue.