Labour must not retreat from further devolution to Scotland

The weaker the party's offer of more powers becomes, the greater the risk that voters will opt for independence.

Those concerned about the survival of the Union would do well to turn their attention away from David Cameron’s "seven months to save the UK" speech and look instead at developments taking place in the Scottish Labour Party. Worryingly, just at the moment when the Yes camp appear to be gaining some momentum in the polls, Scottish Labour appears to be retreating from providing Scottish voters with a clear alternative to independence in the form of additional powers for the Scottish Parliament.

Specifically, there are signs that Scottish Labour are preparing to dilute the centrepiece of their package of new powers: the devolution of income tax. This was the recommendation of the interim report of their devolution commission published last April (a recommendation which builds on the partial devolution of income tax set out in the Scotland Act 2012). Since then, the proposal has been met with fierce opposition within some sections of the party. Initially this was managed in private but it has now spilt out into the open with Ken Macintosh MSP coming out strongly against (remarks echoed by Ian Davidson MP, and Owen Smith MP in a Welsh context). So strong is the opposition, that a number of Scottish Labour MPs have threatened to boycott the party’s spring conference, where the commission’s final report will be unveiled.

The prospect of a retreat is worrying precisely because surveys have consistently shown that there is a real appetite for more powers in Scotland, including tax powers – indeed, stronger devolution is more popular among voters than either the status quo or independence. Thus, the weaker Labour’s offer of more powers becomes, the greater the risk that significant numbers of the large pool of undecided voters will opt for independence. Equally, pollsters are finding that while the No vote has a healthy lead over those saying they will vote Yes, it may be softer than people realise. "Give us something to feel good about voting No" is a complaint heard in the focus groups.

Why Labour might be prepared to take such a gamble over income tax devolution is puzzling. It is widely accepted that there is a case for enhancing the revenue raising powers of the Scottish Parliament. In policy terms, income tax is the most sensible tax to devolve; people are more mobile than land, but less mobile than other things you might tax.  It is also a highly visible tax, and accounts for a significant amount of tax revenue, so if any tax is to be devolved, it is the one to go for. If devolved, the Scottish Parliament would become responsible for raising about 40 per cent of its spending.

But the claims that income tax devolution would undermine the capacity of the UK state to redistribute across the nations of the UK or that it would lead to "independence by default" are highly disingenuous. Devolution of income tax is emphatically not "full fiscal autonomy": it only accounts for 23 per cent of total UK tax revenues. VAT, corporation tax, vehicle, fuel, alcohol and tobacco duties, and National Insurance contributions (NICs), as well as a host of smaller taxes like capital gains tax, would still flow to the UK Exchequer. And the UK government would continue practising fiscal redistribution across the whole UK through the benefit system and through the grant that goes to Scotland (and no-one is planning any changes to that in the foreseeable future).   

And don’t forget that the UK government will continue to set a tax paid by every Scottish wage or salary-earner – National Insurance - which is about 10 per cent of total tax revenues from Scotland. NICs pay for key UK welfare benefits like Jobseeker's Allowance and the old age pension, which will remain in UK hands. Perhaps NICs are not wholly suitable to be a UK-wide income tax, but that is an argument for a long-overdue review of how NICs work, not for keeping both income taxes in UK hands. 

Holyrood is already responsible for roughly 70 per cent of public spending in Scotland, and such key public services as schools and the NHS.  Isn’t it right that the Scottish Parliament should also set some visible taxes to help pay for such vital everyday services? That is undoubtedly the view of the English. Addressing concerns emanating from south of the border will only help strengthen the Union.

Income tax devolution is central to any form of further devolution for Scotland, as it is to Labour’s reputation for fiscal responsibility: it should support a Scottish Parliament that is able to take tax and spending decisions - not just the latter. Rejecting it means Labour would be opting out of any meaningful extension of devolution, though that is clearly what Scottish voters want and what both the Conservatives and the Liberal Democrats are considering. Is Labour really determined to nail its colours to the mast of "devolution less" rather than "devolution more"? 

Guy Lodge is Associate Director of IPPR. Alan Trench is Professor of Politics at the University of Ulster. Both are working on IPPR’s ‘Devo More’ programme.  

Scottish Labour leader Johann Lamont speaks at the Labour conference in Brighton last year. Photograph: Getty Images.

Guy Lodge is Associate Director of IPPR. Alan Trench is Professor of Politics at the University of Ulster

Show Hide image

An unmatched font of knowledge

Edinburgh’s global reputation as a knowledge economy is rooted in the performance and international outlook of its four universities.

As sociologist-turned US Senator Daniel Patrick Moynihan recognised when asked how to create a world-class city, a strong academic offering is pivotal to any forward-looking, ambitious city. “Build a university,” he said, “and wait 200 years.” He recognised the long-term return such an investment can deliver; how a renowned academic institution can help attract the world. However, in today’s increasingly globalised higher education sector, world-class universities no longer rely on the world coming to come to them – their outlook is increasingly international.

Boasting four world-class universities, Edinburgh not only attracts and retains students from around the world, but also increasingly exports its own distinctively Scottish brand of academic excellence. In fact, 53.9% of the city’s working age population is educated to degree level.

In the most recent QS World University Rankings, the University of Edinburgh was named as the 21st best university in the world, reflecting its reputation for research and teaching. It’s a fact reflected in the latest UK Research Exercise Framework (REF), conducted in 2014, which judged 96% of its academic departments to be producing world-leading research.

Innovation engine

Measured across the UK, annual Gross Value Added (GVA) by University of Edinburgh start-ups contributes more than £164m to the UK economy. In fact, of 262 companies to emerge from the university since the 1960s, 81% remain active today, employing more than 2,700 staff globally. That performance places the University of Edinburgh ahead of institutions such as MIT in terms of the number of start-ups it generates; an innovation hothouse that underlines why one in four graduates remain in Edinburgh and why blue chip brands such as Amazon, IBM and Microsoft all have R&D facilities in the city.

One such spin out making its mark is PureLiFi, founded by Professor Harald Haas to commercialise his groundbreaking research on data transmission using the visible light spectrum. With data transfer speeds 10,000 times faster than radio waves, LiFi not only enables bandwidths of 1 Gigabit/sec but is also far more secure.

Edinburgh’s universities play a pivotal role in the local economy. Through its core operations, knowledge transfer activities and world-class research the University generated £4.9bn in GVA and 44,500 jobs globally, when accounting for international alumni.

With £1.4bn earmarked for estate development over the next 10 years, the University of Edinburgh remains the city’s largest property developer. Its extensive programme of investment includes the soon-to-open Higgs Centre for Innovation. A partnership with the UK Astronomy Technology Centre, the new centre will open next year and will supply business incubation support for potential big data and space technology applications, enabling start-ups to realise the commercial potential of applied research in subjects such as particle physics.

It’s a story of innovation that is mirrored across Edinburgh’s academic landscape. Each university has carved its own areas of academic excellence and research expertise, such as the University of Edinburgh’s renowned School of Informatics, ranked among the world’s elite institutions for Computer Science. 

The future of energy

Research conducted into the economic impact of Heriot-Watt University demonstrated that it generates £278m in annual GVA for the Scottish economy and directly supports more than 6,000 jobs.

Set in 380-acres of picturesque parkland, Heriot-Watt University incorporates the Edinburgh Research Park, the first science park of its kind in the UK and now home to more than 40 companies.

Consistently ranked in the top 25% of UK universities, Heriot-Watt University enjoys an increasingly international reputation underpinned by a strong track record in research. 82% of the institution’s research is considered world-class (REF) – a fact reflected in a record breaking year for the university, attracting £40.6m in research funding in 2015. With an expanding campus in Dubai and last year’s opening of a £35m campus in Malaysia, Heriot-Watt is now among the UK’s top five universities in terms of international presence and numbers of international students.

"In 2015, Heriot-Watt University was ranked 34th overall in the QS ‘Top 50 under 50’ world rankings." 

Its established strengths in industry-related research will be further boosted with the imminent opening of the £20m Lyell Centre. It will become the Scottish headquarters of the British Geological Survey, and research will focus on global issues such as energy supply, environmental impact and climate change. As well as providing laboratory facilities, the new centre will feature a 50,000 litre climate change research aquarium, the UK Natural Environment Research Council Centre for Doctoral Training (CDT) in Oil and Gas, and the Shell Centre for Exploration Geoscience.

International appeal

An increasingly global outlook, supported by a bold international strategy, is helping to drive Edinburgh Napier University’s growth. The university now has more than 4,500 students studying its overseas programmes, through partnerships with institutions in Hong Kong, Singapore, China, Sri Lanka and India.

Edinburgh Napier has been present in Hong Kong for more than 20 years and its impact grows year-on-year. Already the UK’s largest higher education provider in the territory, more than 1,500 students graduated in 2015 alone.

In terms of world-leading research, Edinburgh Napier continues to make its mark, with the REF judging 54% of its research to be either world-class or internationally excellent in 2014. The assessment singled out particular strengths in Earth Systems and Environmental Sciences, where it was rated the top UK modern university for research impact. Taking into account research, knowledge exchange, as well as student and staff spending, Edinburgh Napier University generates in excess of £201.9m GVA and supports 2,897 jobs in the city economy.

On the south-east side of Edinburgh, Queen Margaret University is Scotland’s first university to have an on-campus Business Gateway, highlighting the emphasis placed on business creation and innovation.

QMU moved up 49 places overall in the 2014 REF, taking it to 80th place in The Times’ rankings for research excellence in the UK. The Framework scored 58% of Queen Margaret’s research as either world-leading or internationally excellent, especially in relation to Speech and Language Sciences, where the University is ranked 2nd in the UK.

In terms of its international appeal, one in five of Queen Margaret’s students now comes from outside the EU, and it is also expanding its overseas programme offer, which already sees courses delivered in Greece, India, Nepal, Saudi Arabia and Singapore.

With 820 years of collective academic excellence to export to the world, Edinburgh enjoys a truly privileged position in the evolving story of academic globalisation and the commercialisation of world-class research and innovation. If he were still around today, Senator Moynihan would no doubt agree – a world-class city indeed.

For further information www.investinedinburgh.com