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

Photo: Getty
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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.