Policy

Maintaining and strengthening the Scottish devolution settlement

Issue

Scotland has two governments: the UK government is responsible for matters including, defence, foreign affairs, the economy, social security and the constitution; and the Scottish government is responsible for matters including health, education, justice and policing and local government.

Although responsibility is divided in this way, the two governments work together on many issues and cooperate to make sure that the devolution settlement is well managed.

The division of responsibilities is not fixed, and it has changed several times since devolution began in 1999. In 2009, the independent Calman Commission recommended a significant transfer of tax raising powers to make sure the Scottish Parliament has responsibility for raising money, as well as spending it.

The UK government agreed with the Calman Commission’s recommendations, and through the Scotland Act 2012 provided the largest transfer of financial powers from Westminster since the creation of the United Kingdom.

Actions

The Scotland Act 2012 transferred new powers to the Scottish Parliament so that it can raise its own taxes. It also introduced a range of measures to strengthen the devolved administration in Scotland.

Some of these changes have already taken effect. These include the transfer of powers to set the drink-drive limit, ban air weapons and set the national speed limit in Scotland.

The tax-raising powers will come into effect in full by April 2016. These powers include the introduction of a new Scottish land and landfill taxes and the new Scottish rate of income tax.

Every year an annual report is published setting out the progress towards implementing the new tax powers.

Scottish Government bonds

On December 12, 2014, HM Treasury announced that it had commenced section 32 of the Scotland Act 2012. Section 32 relates to borrowing by the Scottish Ministers and amends sections 66 and 67 of the Scotland Act 1998 to revise the circumstances under which the Scottish Ministers may borrow. Section 32 sets out the main controls and limits on such borrowing.

New subsection (1A), inserted into section 66 of the Scotland Act 1998 by section 32, enables the Scottish Ministers to borrow to fund capital expenditure, subject to HM Treasury’s approval. The borrowing must be in the form of a loan either from the National Loan Fund (through the Secretary of State) or from another lender, such as a commercial bank. The section does not allow Scottish Ministers to issue Scottish gilts or bonds as the section requires borrowing to be by way of a loan.

On December 15, 2014, an Order was laid in Parliament to amend this new subsection (1A). This Order, being made under section 66(5) of the Scotland Act 1998, provides that, in addition to being able to borrow by loan, the Scottish Ministers can also issue bonds (other than bonds transferrable by delivery).

Being able to issue bonds will give the Scottish government an additional source of capital funding as part of its new tax and borrowing powers contained in the Scotland Act 2012. This is part of the UK government’s promise to deliver on its previous commitments on devolution.

Background

The Scotland Act 1998

The first democratically elected Scottish Parliament was set up in 1999 following the Scotland Act 1998.

The Commission on Scottish Devolution

In 2008, the Scottish Parliament and UK government established an independent Commission on Scottish Devolution (‘the Calman Commission’) to review the ‘devolution settlement’ - the powers of the Scottish Parliament and its relationship with the UK government.

The commission published its report, ‘Serving Scotland Better: Scotland and the United Kingdom in the 21st Century’, in June 2009. The commission recommended that the Scottish Parliament should be given more control over its own finances, and made recommendations to improve and develop the devolution settlement.

In the coalition programme for government in May 2010, the UK government committed to implementing the commission’s recommendations which were set out in the Scotland Act 2012. This Act transferred more powers to raise taxes from the UK government to the Scottish Parliament along with other measures to strengthen and develop the devolved institutions.

Cross party talks

The 3 pro-union parties have made clear commitments on further powers for the Scottish Parliament and the UK government will ensure that they are honoured in full.

Lord Smith of Kelvin has agreed to oversee the process to take forward the devolution commitments, with powers over tax, spending and welfare all agreed by November and draft legislation published by January.

Concordat Agreements

The United Kingdom government and the Scottish government maintain a list of agreements between the UK and Scottish governments which ensure close and effective working between the two governments.

You can read more detailed information about how the UK and Scottish parliaments make laws relating to Scotland.

Bills and legislation

The Scotland Act 1998 established the Scottish Parliament.

The Scotland Act 2012 devolved more tax-raising and other powers form the UK government to the Scottish Parliament.