The Scottish political context
Constitutional change in the United Kingdom is a live subject.
In this area, and others, the coalition is a force for radical reform:
- cutting the number of MPs
- recasting the House of Lords
- strengthening the devolution settlement in the constituent nations of the United Kingdom
As Secretary of State for Scotland one of my primary tasks has been to oversee the drafting of the Scotland Bill and its progress through the Houses of Parliament.
It has now completed its House of Commons stages and next week will begin its passage through the Lords for their consideration and amendment.
That Bill will further empower the Scottish Parliament, making it more accountable to the Scottish people.
It constitutes the greatest single transfer of financial powers from London to Scotland since the creation of the United Kingdom.
It is a further milestone in the devolution of power from central government to the nations, communities and individuals who are best placed to ensure that the exercise of power serves the people.
I am proud of it.
But I acknowledge that there is a distinct danger that the real time context in which it progresses upstages the very significant changes it brings.
2011 has, after all, been a big year in Scottish politics.
The Scottish National Party’s outright win in May’s election means that Scotland has its first single-party majority government since the Scottish Parliament was re-established in 1999.
That is historic.
The Scottish National Party (SNP) has all the Member of the Scottish Parliament (MSP)s it needs to set the legislative agenda at Holyrood.
In the context of Holyrood’s powers, it has the mandate to pursue its policies.
It would be churlish to deny the scale of the SNP’s electoral achievement:
And foolish to underestimate the work that will need to be done by the other parties to recover the ground that we have each lost.
Of course, the SNP’s majority has also laid bare the constitutional position.
After the fruitless pas-de-bas about an independence referendum in the last Scottish Parliament, the new majority government has pledged to bring forward its plans for the break-up of the United Kingdom, to establish Scotland as a separate state.
They have been uncharacteristically shy in setting out exactly what independence would involve and what it would cost. Indeed, quite reticent about what they even mean by independence.
But the rest of us, who believe strongly in the continuation, and development, of a modern United Kingdom, must not be complacent about making the case for Scotland’s continued presence in the United Kingdom.
And so, ladies and gentlemen, in this new, even heady, political climate, I hope this evening to provide an assessment of where Scotland’s constitutional position stands and how we can move it forward in a way that allows our politics, economy and society in Scotland to develop in line with our aspirations.
First of all, I want to sketch out for you the implications of the UK government’s Scotland Bill.
And not just the list of powers that we intend to devolve.
As an accountant by training and a politician by profession, I am aware of the very real temptation to speak in terms of process.
But we know that when people consider politics they don’t think in terms of process.
They tend to think in terms of what they need and what is being delivered for them: needs, outcomes and results, if we must resort to jargon.
So I want to show the very real difference that the Scottish government and Scottish Parliament will be able to make to the lives of men, women and communities after the Scotland Bill becomes law.
I want to take this opportunity to explore some policy options for Scotland in the 21st century.
Secondly, I want to explore how best to consider constitutional change and to prepare the way for it. In passing, I want to contrast the legitimacy gained by patient consensus-building, as shown in the Calman process, with the uncertainties of the politics of assertion, which for now is the modus operandi of those who make the case for independence.
And, finally, recognising the fact that the UK and Scottish governments differ in their visions for the future of the United Kingdom, but must co-operate in Scotland’s interests, I want to be clear about our respective roles and responsibilities today. An important aspect of this is to disentangle the thorny issue of political mandate and relations between the Scottish and Westminster governments.
David Hume made the great insight that human behaviour is based on passion and emotion rather than rationalism. He combined that with being a sceptic and an empiricist.
I suspect that he could have given us all quite an insight into the current state of politics and thinking here in Scotland.
But for the next 30 minutes, I’m afraid mine will have to suffice.
The Scotland Bill: achieving our potential, possibilities for Scotland
Let me underline an important, but rather obvious, starting point - the UK government remains committed to the Scotland Bill.
It is fundamentally based upon the work of Sir Kenneth Calman’s Commission on Scottish Devolution.
Established in 2007 by a vote of the Scottish Parliament, with the support of the then UK government, and complemented by the work of Professor Anton Muscatelli’s independent expert panel on finance, it was tasked with assessing whether the Scottish Parliament had the powers it needed to deliver for the people of Scotland.
The Commission included Conservative, Labour and Liberal Democrat members but was broad based, with non-partisan representatives from business, education, the wider public sector and civic Scotland.
It engaged and consulted widely with people throughout Scotland by means of public events, survey evidence and oral evidence sessions.
By doing so, it drew from a spectrum of views and interests from public life and the business community.
The Commission’s final report in 2009 concluded that devolution was serving the Scottish people well and that it was here to stay.
But it also identified a number of additional powers that ought to be devolved.
Specifically, it highlighted the problem of a Parliament tasked with spending money, but which was unaccountable for how that money was raised.
Professor Calman recommended a number of measures to address that anomaly.
Drawing directly on those ideas, the Scotland Bill will re-write the fiscal responsibilities of the Scottish Parliament.
It will provide a package of taxation and borrowing powers that will see the Scottish Parliament become accountable for more than a third of the money it spends.
And it will open a new chapter in Scottish devolution, whereby an empowered and accountable Scottish Parliament can innovate in new and exciting ways.
When we look back at the last twelve years, it is clear to see the difference that devolution has made.
In the first term we had free personal care for the elderly, land reform, and the scrapping of section 2a.
In the second term it was fair votes for local elections, a ban on smoking in public places, and free eye and dental check ups.
These were big, bold achievements.
They showed Holyrood innovating and, often enough, Westminster following.
I have every confidence that the new powers we devolve can also be used to radical effect.
To allow Scotland to go down new and unique policy paths.
Because these new powers are very extensive.
The Scotland Bill will create a Scottish rate of income tax by cutting 10p of every income tax rate, reducing the Scottish block grant in proportion and obliging the Scottish Parliament to set a new rate to meet its spending plans.
It will allow the Scottish Ministers to borrow up to £500 million for current spending and a minimum of £2.2 billion in capital spending.
And, in the light of a request from the Scottish Parliament, it will make part of that capital investment available in pre-payments for approved projects by 2012.
It will also devolve landfill tax, stamp duty, and the power to create new taxes - with air passenger duty and the aggregates levy to follow in due course.
The Bill will phase in these powers up to 2016.
So I want you to think about the policy levers that will be at the disposal of the Scottish government elected that year.
I want you to picture the kind of changes that MSPs will be empowered to make.
Not to endorse any vision or policy.
Let me be clear for everyone - especially for the journalists in the room - that I am not advocating what should be done, but rather showing what could be done.
And the range of options is extensive.
Let me give you some examples.
With the new capital borrowing powers, the Scottish government could be far into the construction process of a new Southern General hospital in Glasgow, or a Borders railway, or a new Forth Crossing by 2016.
And with pre-payments, the preparations for that work could begin as soon as next year.
With the new tax powers the Scottish government could stimulate the construction sector and boost the housing market by cutting stamp duty by 5% at a cost of £25 million to the Scottish budget.
Or it could ensure that Scotland competes to be the greenest country in Europe by proposing innovative new green taxes - offset by other tax cuts - to ensure that Scotland moves the tax burden from people to pollution.
Or it could use the new Scottish Income Tax to raise investment in public services higher still than that in other parts of the UK.
With a 2p rise raising £208 million or the equivalent of the combined budgets for alcohol misuse, tobacco control, health protection, specialist children’s services, research, clean hospitals, MRSA screening, and mental health services
Or it could do just the opposite, cutting the rate to attract the bright and ambitious to Scotland and reduce the brain drain from within.
With a 2p cut putting £350 back in the pocket of the average earning Scot.
These options - these alternatives - show the extent and range of powers on offer.
And this freedom to innovate - these possibilities for Scotland - will ensure that future administrations can take our country in new directions.
But even if they simply maintain the status quo, there will be more debate and greater accountability.
Scottish public services funded by money raised through taxes levied here in Scotland, not at Westminster.
The debate will be sharper and will ensure that every Scottish government is answerable to the Scottish people for the money they raise and the decisions they take.
This is the balance that the Scotland Bill strikes.
The political legitimacy of constitutional change
While it is the UK coalition’s Scotland Bill that will bring about the next phase of Scottish devolution, we have not acted alone.
So let me now reflect on how we have approached this constitutional change and established its legitimacy.
Without the expert, cross-sector Calman Commission, supported by all three of the Conservatives, Labour and the Liberal Democrats, we would not have proceeded.
Because we would not have achieved the political consensus or wider buy-in that is critical to constitutional reform in this county.
Over a comparatively short period of time, the UK has developed a convention by which significant constitutional change is agreed either by consensus, or direct democracy - and, where appropriate, both.
The UK’s membership of the European Economic Community was reaffirmed in the 1975 referendum, which featured cross-party campaigns.
Proposals for devolution in Scotland and Wales also resulted in cross-party camps and a popular vote in 1979 that saw devolution rejected outright in Wales and supported in Scotland albeit by fewer votes than the then required threshold.
And, after support for devolution resurged in the 1980s and 1990s, the 1997 referendum campaigns were once again fought by broad yes and no groups.
On this second occasion, with a much happier conclusion.
The resounding yes vote in Scotland owed much to the years of consensus-building that led up to the ballot.
The Scottish Constitutional Convention brought together the Labour Party and the Liberal Democrats alongside representatives from academia, business, the trade unions, the churches and wider Scottish society.
Together, they reached a consensus, they drew up the blueprint, they defined the settled will of the Scottish people.
All of this is very important.
Because it is from consensus or direct democracy that constitutional change derives its legitimacy.
Certainly, in politics, momentum matters.
But while the fortunes of political parties wax and wane, the constitutional settlement - the delineated borders of devolved and central government - ought not to be bent or blurred in reaction to a singular election result nor at the will of one party or government.
For countries with written constitutions, there are established legal safeguards against that possibility.
In the United States, for example, an amendment to the Constitution requires a two-thirds majority in Congress.
But in the United Kingdom, there is no codified constitution.
The division of power between Westminster and the nation states can be changed with a parliamentary majority of just one.
But much of the legal space occupied in other countries by constitutional law is filled in this country by constitutional convention.
And the boundaries of devolution have become one of those.
So it is also with the current Scotland Bill.
Clearly, the powers we are devolving do not mark as great a constitutional shift as the re-establishment of the Scottish Parliament.
And for that reason there is no discernible appetite for a referendum.
But the provisions of the bill are based on a great deal of work and consensus-building.
Not just through the Calman Commission, but also in the passage of the Bill itself.
It has been subject to public consultation, scrutiny by Scotland Bill committees at both Holyrood and Westminster, and the legislative procedures themselves.
We have also established a high level implementation group of outside experts that meets regularly with me, my Ministerial colleagues and government officials to ensure that we hear informed, outside opinions about the Bill and its future implementation.
And the Bill has already been approved in draft by an overwhelming vote of the last Scottish Parliament.
Before it becomes law the amended Bill will go back to Holyrood for its approval once more.
Throughout this process we have been clear that while the Bill is based primarily on the Calman Commission’s consensus, we are open to amendments that improve it.
But for any amendment to be acceptable - wherever it comes from - it must meet three key tests.
First, it must be a detailed proposal that materially strengthens the Bill.
Second, it must maintain the broad consensus on which the Bill is based.
And third, it must be without detriment to the UK as a whole.
These are not random tests designed to fail any new proposal - indeed we have already changed the Bill to reflect ideas put forward by the previous Scottish Parliament and others in Westminster.
The tests reflect the standard that the Calman proposals themselves achieved - thorough, detailed plans based on arguments that were developed to secure consensus and always in the context of the broader common interests of the United Kingdom as a whole.
Since the Scottish National Party’s re-election in May, they have pushed hard for the UK government to make a series of further amendments to our Bill.
They have prioritised 6 areas in which they want to see further devolution of power:
- corporation tax
- EU representation
- excise duty
- The Crown Estates Commission
We have perfectly reasonably asked that the proposals should match the Calman standard.
We have asked for detailed information from the Scottish government on each of these proposals and we will give a serious and considered response to each.
That is the right and reasonable thing to do.
Our minds are not closed, but we are crystal clear that those three tests would need to be met.
The Scottish government has now submitted papers on four of its demands, plus a consultation document on corporation tax.
We have yet to receive anything at all on excise duty.
It is fair to say that there are still very significant questions outstanding in each of these areas.
In the case of corporation tax, I am pleased that the Scottish government has now at least acknowledged in its consultation paper that there are real issues to address.
And the UK government’s announcement that the Crown Estate will fund a UK-wide coastal communities fund, from which Scotland will benefit disproportionately, has clear significance for the discussion of changes to its structure.
We will keep talking to the Scottish government about these proposals.
But stepping back for a moment, I am bound to say that their latest strategic move - the so-called ‘Six Demands’ - has come rather late in the day.
It was only last year that they sought to turn the cross-party Scotland Bill into a vehicle for delivering the ambition of ‘fiscal autonomy’.
A loosely-defined notion of devolving all tax-powers, based on one academic paper, which left key questions unanswered.
‘Fiscal autonomy’ has never been spelt out in detail, there is certainly no consensus about it and it would have major implications for the UK which have not been explored, so it clearly failed the three tests.
Rather than develop the arguments, the Scottish government has shifted ground and put forward its new agenda.
Whether or not this is a scaling back or not is a matter for the Scottish government to answer, but the new approach has to be subjected to the same scrutiny.
The politics of assertion will not be enough.
A lot is at stake and time is tight for the Scottish government to get the details of their ‘Six Demands’ sorted.
There is at least agreement on the need to provide more powers as speedily as possible.
As I pointed out earlier, the Scotland Bill has already left the Commons and gone to the Lords.
If it were not passed by the end of this Parliamentary session, it would fall.
That is not something we are willing to contemplate.
My own view is that the manner of the SNP’s last minute approach is further evidence of the need for broad engagement at the start of a constitutional process rather than towards the end.
Had the Nationalists agreed to be part of the Calman process when it began, or even articulated their thinking in a parallel process, they could have made the case for their Six Demands or indeed for fiscal autonomy.
They chose not to, for whatever reason.
Of course, much of our current thinking now focuses on the prospect of a referendum on independence.
Independence has been debated for decades, and amongst the politicians it now has a much sharper focus.
But among the Scottish people, independence remains very much a minority pursuit.
In 1999, the Scottish Social Attitudes Survey showed that 27% of Scots wanted Scotland to separate from the UK.
In 2009, that percentage was unchanged.
And no opinion poll before or since has shown a majority of Scots in favour.
The same survey shows that in both 1999 and 2009 support for a devolved Scotland within the UK hovered at around 60%.
Whatever factors played a part in May’s election result, it was not a rise in support for Scottish independence.
That is not to say we should ignore the challenge.
On the contrary, we should take it on.
So when the Scottish government does come forward with its referendum proposals, there will need to be proper scrutiny.
From politicians yes - but also from business, from civil society, from all groups and individuals with an interest in Scotland’s future.
What question will they ask? How many questions will there be? How will the campaign be conducted?
And it is important that they are asked fairly and without an inherent bias designed to deliver the referendum result that the SNP wants.
And those are only the organisational aspects.
They must also answer the substantive questions about what they mean by independence.
The Scottish government has unbounded enthusiasm for talking about its Six Demands of the Scotland Bill.
But here are just six of the many questions for them on what an independent Scotland would look like.
Six specific questions, in six areas of key importance, that the SNP must answer.
What regulation would be applied to our banks and financial services and who would enforce it?
Which currency would Scotland adopt and how could entry and influence be guaranteed?
How would membership of international organisations - including the EU - be assured?
What would be our defence posture and the configuration of our armed forces?
How many billions would we inherit in pension liabilities and who would pay for future pensions?
And above all, how much would independence cost: what is the bottom line?
OK, that’s more than six questions in truth.
But once you start, it’s hard to stop.
Because the questions keep coming, the implications keep emerging and the imperative to answer keeps growing.
All of these are fundamental to the notion of an independent Scotland.
And given that independence is the SNP’s key article of faith - and that a referendum was a core policy pledge - we are all, as Scots, entitled to know what the answers are.
Because here in Scotland we benefit massively from our position in the United Kingdom.
In terms of economic strength, international standing and so much more.
And until the SNP sets things out, the Scottish people are being asked to take a punt.
Well, our future cannot be taken on trust; it’s just too important.
And if we adapt the three tests of the Scotland Bill to independence and we ask -
Is it a detailed proposal that will materially strengthen Scotland?
Has it generated consensus across Scotland?
Will it be without detriment to the UK as a whole?
- then what we have is a proposition that fails three times.
The politics of assertion won’t pass the tests - we need and deserve the detailed arguments.
The real risk for Scotland is that the uncertainty caused by delay undermines public confidence in the Scottish government’s intentions and saps investor confidence when it comes to deciding where - that is in which country - jobs should be based.
What we can say with certainty is that whenever a referendum is held, this government will fight for a secure Scotland within a strong and prosperous UK.
We will make what the Prime Minister calls the ‘big, optimistic case’ for the United Kingdom.
And I am confident that we will win the day.
2 governments, 2 mandates
As I have already said, the SNP’s victory in May was a very significant achievement.
But it is important, three months on, to be clear about the nature of their mandate and the responsibilities it brings.
Let me therefore, finally, turn my attention to the mandates each of the governments hold.
I have heard it said - not least by Nationalists themselves - that May’s result changes everything.
The implication is that the Scottish government is now alone in understanding and representing Scotland’s interests and beyond challenge in interpreting where they lie.
In this new world their interlocutors - including the UK government - must give ground where disagreements arise.
And whether by accident or design, this approach feeds an insidious narrative in which the Scottish government is standing up for Scotland’s interests any time it is in dispute with the UK government.
So let me be very clear about something which UK Ministers have been perhaps too slow - or considered it unnecessary - to point out.
Scotland has 2 governments - distinct, elected and legitimate.
Each takes decisions in the interests of Scotland, in light of their respective powers and their democratic mandate.
It is, after all, worth noting that in the 2010 election the coalition parties, taken together, won more votes than the SNP got on the party list in 2011.
That is not to say that either government has a greater mandate than the other.
It is simply to state that these are 2 separate and legitimate governments, each of which is responsible for taking decisions in Scotland’s interests.
And as a member of the UK government - as Secretary of State for Scotland - I can assure you that we are doing exactly that.
By restoring the pensions-earnings link to benefit one million Scottish pensioners.
By taking 91,000 low paid Scots out of income tax altogether by April of next year.
By ending the scandal of child detention at Dungavel.
And by making record investment in superfast broadband, cutting the price of fuel in our most rural communities, and agreeing to defer the first year of spending cuts in Scotland because we responded to the specific circumstances and needs of the Scottish economy.
The decisions we make - against the backdrop of the worst finances in modern history - are decisions taken to get the best for Scotland in the hardest of times.
So the Scottish government need not worry about the motives of the UK government.
Scottish Ministers, after all, have plenty to be getting on with.
The new Scottish government, supported by a majority in the Parliament, does have an enhanced mandate.
But it has that within the context of devolved government.
Under the terms of the 1998 Scotland Act - supported overwhelmingly by the Scottish people in a referendum - the Scottish Parliament has defined and extensive powers.
Indeed, written into the Act, is the assumption that all power is devolved other than that which is specifically reserved - rather than the other way around.
These are powers that cover the bread and butter policy issues that matter to the Scottish people.
The schools where we send our children, the hospitals where we treat our sick, the police forces that protect our communities, the transport systems that get us from A to B, the local authorities that provide the services on which we all rely.
All of these fall within the remit of the Scottish Parliament.
As does economic development.
The Scottish government already has its hands on a great many economic levers, particularly with relation to economic development:
Through our schools, colleges and universities it has the power to ensure that our workforce has the capabilities, skills and qualifications it needd.
Through Scottish Enterprise, VisitScotland, and Skills Development Scotland, to think of just 3 bodies, it has the capacity to nurture talent and attract jobs.
And through council tax, local business rates and what would have been a 3p income tax varying power, had the Scottish government maintained it, they also have powers to vary public revenue and public spending levels.
On education, on health, on the economy - the Scottish people’s priorities - the Scottish government already has the powers it keeps claiming that it needs.
They should get on with the job.
And all of us - as Scottish voters like millions of others - have every right to expect them to do so.
Yet, all too often, their minds appear to be focused on other things - particularly if those things are happening south of the border.
Macroeconomic policy, Corporation Tax, constitutional change.
These are of vital importance to Scotland, and it is unrealistic to expect the SNP to have no view.
But these are issues reserved to Scotland’s government at Westminster.
And the Scottish government’s concentration on them leaves the impression that Scottish Ministers lack interest in the powers they do have while being obsessed with powers they don’t have.
Rather than get on with developing a radical and effective economic strategy using powers at their disposal, they have instead committed themselves to undermining the UK government’s economic policy, albeit with the flimsiest of evidence.
The UK government has taken the hard decisions needed to bring our economy back from the brink, drive down the deficit and rebalance our national finances.
In doing so, we are determined to rebuild and rebalance our lop-sided economy and ensure that Scotland is a place of opportunity with a sustainable jobs market.
It is for this purpose that we are cutting corporation tax to the lowest rate in the G7, reforming national insurance contributions and keeping interest rates low to reduce the cost of borrowing.
But the Scottish government has attacked our policy consistently, and made much of their case for a Plan B.
On publication, that case amounted to 2 sides of A4, with the policy content confined to just one page.
At its relaunch a week later it had grown to five and a half pages, with the addition of charts and graphs but not much extra detail.
That is not a plan, it’s a stunt.
But now is not the time for stunts and blame-shifting.
With a majority comes the opportunity to innovate and the responsibility to govern.
Mr Salmond should seize those.
So I look forward to the First Minister’s statement next week on the Scottish government’s programme for the coming year.
I hope that it will map out a serious course of action, using the Scottish Parliament’s current powers to improve the lives of people throughout our country.
Of course, there will always be areas of genuine policy overlap and disagreements that arise between the 2 governments.
But where the latter arises, effective mechanisms already exist.
The Joint Ministerial Council - or JMC - plenary including the Prime Minister, the Deputy Prime Minister and the Secretaries of State and First Ministers for Scotland, Wales and Northern Ireland meets annually to discuss issues of mutual importance.
The JMC domestic and JMC Europe meet several times a year with relevant ministers from each country.
And the Finance Quadrilateral brings together finance ministers on an increasingly regular basis to discuss economic issues.
In addition there are bilateral relationships between departments and Ministers.
The Scottish and UK governments are, for example, in the process of establishing a Joint Exchequer Committee to plan and coordinate the devolution of the tax and borrowing powers outlined in the Scotland Bill.
And on a more personal note, since May 2010 Scotland’s First Minister has had face-to-face meetings with the Prime Minister, the Deputy Prime Minister, the Chancellor and many others.
Diplomacy prevents me from saying how often Mr Salmond met with the last occupant of No 10.
But this is about more than meetings: it is about trust and respect.
When the coalition took office last May, the Prime Minister made an early trip to Scotland and made clear his commitment to a respect agenda.
He meant it - we meant it - and we still do.
But we need to be clear that respect is a 2 way process.
We need to be clear that the respect agenda is in fact a mutual respect agenda.
Scotland’s 2 governments should acknowledge one another’s legitimacy, respect one another’s mandates, and ensure that they fulfil those mandates to the best of their abilities.
The Scottish people expect nothing less.
Ladies and gentlemen, Scotland’s constitutional settlement sits in a well-established framework.
Within that framework our laws are made, our politics is conducted and our economy is shaped.
It is therefore in the interests of all of us to get that settlement right:
To make sure that it serves the people of Scotland in line with their desires and needs.
12 years after the aspiration for a Scottish Parliament was met there is no going back.
Devolution is embedded in national life and national consciousness.
The debate is about how to take it forward.
Be assured that the coalition at Westminster is committed to creating a successful future for Scotland of which we can all be proud.