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

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Everyone's forgotten the one issue that united the Labour party

There was a time when Ed Miliband spoke at Momentum rallies.

To label the row over the EU at Thursday’s Labour leadership hustings "fireworks" would be to endow it with more beauty than it deserves. Owen Smith’s dogged condemnation of John McDonnell’s absence from a Remain rally – only for Corbyn to point out that his absence was for medical reasons – ought to go down as a cringing new low point in the campaign. 

Not so long ago, we were all friends. In the course of the EU referendum, almost all of the protagonists in the current debacle spoke alongside each other and praised one another’s efforts. At a local level, party activists of all stripes joined forces. Two days before polling day, Momentum activists helped organise an impromptu rally. Ed Miliband was the headline speaker, and was cheered on. 

If you take the simple version of the debate, Labour’s schism on the EU appears as an aberration of the usual dynamics of left and right in the party. Labour's left is supposedly cheering a position which avoids advocating what it believes in (Remain), because it would lose votes. Meanwhile, the right claims to be dying in a ditch for its principles - no matter what the consequences for Labour’s support in Leave-voting heartlands.

Smith wants to oppose Brexit, even after the vote, on the basis of using every available procedural mechanism. He would whip MPs against the invocation of Article 50, refuse to implement it in government, and run on a manifesto of staying in the EU. For the die-hard Europhiles on the left – and I count myself among these, having run the Another Europe is Possible campaign during the referendum – there ought to be no contest as to who to support. On a result that is so damaging to people’s lives and so rooted in prejudice, how could we ever accept that there is such a thing as a "final word"? 

And yet, on the basic principles that lie behind a progressive version of EU membership, such as freedom of movement, Smith seems to contradict himself. Right at the outset of the Labour leadership, Smith took to Newsnight to express his view – typical of many politicians moulded in the era of New Labour – that Labour needed to “listen” to the views Leave voters by simply adopting them, regardless of whether or not they were right. There were, he said, “too many” immigrants in some parts of the country. 

Unlike Smith, Corbyn has not made his post-Brexit policy a headline feature of the campaign, and it is less widely understood. But it is clear, via the five "red lines" outlined by John McDonnell at the end of June:

  1. full access to the single market
  2. membership of the European investment bank
  3. access to trading rights for financial services sector
  4. full residency rights for all EU nationals in the UK and all UK nationals in the EU, and
  5. the enshrinement of EU protections for workers. 

Without these five conditions being met, Labour would presumably not support the invocation of Article 50. So if, as seems likely, a Conservative government would never meet these five conditions, would there be any real difference in how a Corbyn leadership would handle the situation? 

The fight over the legacy of the referendum is theatrical at times. The mutual mistrust last week played out on the stage in front of a mass televised audience. Some Corbyn supporters jeered Smith as he made the case for another referendum. Smith accused Corbyn of not even voting for Remain, and wouldn’t let it go. But, deep down, the division is really about a difference of emphasis. 

It speaks to a deeper truth about the future of Britain in Europe. During the referendum, the establishment case for Remain floundered because it refused to make the case that unemployment and declining public services were the result of austerity, not immigrants. Being spearheaded by Conservatives, it couldn’t. It fell to the left to offer the ideological counter attack that was needed – and we failed to reach enough people. 

As a result, what we got was a popular mandate for petty racism and a potentially long-term shift to the right in British politics, endangering a whole raft of workplace and legal protections along the way. Now that it has happened, anyone who really hopes to overcome either Brexit, or the meaning of Brexit, has to address the core attitudes and debates at their root. Then as now, it is only clear left-wing ideas – free from any attempt to triangulate towards anti-migrant sentiment– that can have any hope of success. 

The real dividing lines in Labour are not about the EU. If they were, the Eurosceptic Frank Field would not be backing Smith. For all that it may be convenient to deny it, Europe was once, briefly, the issue that united the Labour Party. One day, the issues at stake in the referendum may do so again – but only if Labour consolidates itself around a strategy for convincing people of ideas, rather than simply reaching for procedural levers.