Keynote Address - SOLAR Conference

The Advocate General explained proposals for further devolution in Scotland following the recommendations of the Smith Commission.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Lord Wallace of Tankerness QC

The political calendar has its seasons and its moods. There are long languid summers and wild angry autumns. The cycle of Parliaments, Budgets and Elections does its round and we adjust to it.

But, as we enter the campaigning period for the General Election, some of you must wonder if the current bout of turbulent debate will ever end. We had two years – in fairness, more like three years – of campaigning for the referendum last September, and the polls had barely closed before the Smith Commission was appointed and started gathering views for its Report. It was only really a matter of weeks (November) before it reached agreement with all five political parties represented in the Scottish Parliament. Then the Government produced the draft clauses for a new Scotland Bill – delivering a commitment to let people see what the new Bill would look like by Burns Night.

The Labour Party, the Conservative Party and my own Liberal Democrat Party all agreed to bring forward legislation in the next Parliament, following the forthcoming General Election.

Those of us who argued – successfully – last year for remaining in union with our neighbours in England, Wales and Northern Ireland, pointed out consistently that devolution was a product of that union and depended upon it. A system of government whereby we have decision-making powers in Scotland, while continuing to have a say in decisions for the whole UK, depends upon our continuing constitutional relationship with the UK.

And, it is the view of this Coalition Government, that, following that decisive vote on 18 September last year, the United Kingdom should now come together and move forward. That aim can be achieved, and I think will be achieved, if we build a balanced constitutional settlement – one that is fair to all parts of the UK.

The devolution settlements for Scotland, Wales and Northern Ireland, and, in time, for England, need to be fair to, and meet the needs of, the people of all those nations. Fairness and balance, and being built to last, is more important than symmetry, than making each settlement identical.

Devolution has not been a Scotland-only event. For Wales, for example, proposals for an enhanced devolution process were promised in time for St David’s Day – another target achieved.

This Government has also published a command paper on the implications of devolution for England.

In Scotland, however, there was a particular historic resonance to this agreement, because it is the first time that a settlement for devolved government has been agreed by all the five major parties in Scotland – that is, the five parties currently represented in the Scottish Parliament. Those are the representatives of nearly every voter in Scotland.

We now have a period of engagement, when the draft clauses are being scrutinised by committees in the UK Parliament and considered by the Scottish Government, Parliament and civic organisations in Scotland. Of course, the detail must be scrutinised closely to ensure that the provisions do what they are supposed to do, but the substance of the scheme of devolution agreed by those who signed up to the Smith Commission must be respected.

And I believe that it will be respected, and I fully expect that the Bill will be introduced in Parliament whoever wins the Election in May.

It seems to have been a very fast process – faster than we might normally expect for a constitutional development. But we must remember that it followed a period of two or three years of intense debate. And, Lord Smith himself talked with people all across Scotland, and considered contributions from organisations and communities throughout Scotland.

His Commission published more than 400 submissions – from businesses, charities, political groups – all sorts of civic organisation. In excess of 18,000 emails were received from members of the public (and considered by the Commission).

So, it is not as if this new settlement was created overnight, or came out of nowhere. It arises from the tradition of political debate in this country.

Consider this statement:

“This country starts with a congested centre which needs, if is to do efficiently that which is common to the whole, to be relieved of everything else, and to delegate local interests to local management”.

That is taken from a speech, not last week or last year, but from April 1912 – It is Herbert Asquith, as Prime Minister (introducing the Irish Home Rule Bill) speaking at the time of the birth of the welfare state and just before the explosion in government functions and legislation which followed the First World War.

If anything, the centre became more congested during the 20th century; and required the introduction of devolved government to put that process into reverse.

There are now significant further powers to be devolved to the Scottish Parliament, which I’ll discuss later, but firstly, on reading the Smith Report, I was particularly struck by some comments Lord Smith made in his introduction to the Report. He explains in that introduction that he sought to broker the best possible agreement based on strong, clear principles, but he never sought to influence the outcome of the discussions and he will not be offering a personal opinion on it. He says “I entered this process without a political affiliation or publicly stated view on the constitution and I intend to leave it that way.”

That is, of course, what we would expect from the independent broker. But he also notes some points in his introduction which are not directly related to the question of further powers to the Scottish Parliament. For example, he calls for improved public understanding of Scotland’s constitutional settlement. I certainly agree with Lord Smith that there is unfinished business in terms of building a better understanding of which tier of government is responsible for which functions in Scotland.

Lord Smith also notes – and I think this point is of particular significance to all of you here – that local areas should benefit from the powers of Scottish Parliament. He writes:

“There is a strong desire to see the principle of devolution extended further, with the transfer of powers from Holyrood to local communities. This is an issue that will require significant further thought and discussion and I welcome the enthusiasm of all parties for greater empowerment of our communities. The Scottish Government should work with the Parliament, civic Scotland and local authorities to set out ways in which local areas can benefit from the powers of the Scottish Parliament.”

In other words, Edinburgh should not become the “congested centre” any more than London.

That struck me as a particularly pertinent personal plea from Lord Smith, informed by his discussions with all the parties. His brief, however, was to make recommendations to “deliver more financial, welfare and taxation powers, strengthening the Scottish Parliament within the United Kingdom.” Those terms of reference were set out on 23rd September last year, only a few days on from the referendum result. Heads of Agreement were to be produced by 30th November (St Andrew’s Day), and the Government would then publish draft clauses by 25th January (Burns Night). That was a demanding timetable – but its demands have been met, and it will deliver substantial new powers.

The powers on income tax will build on those in the Scotland Act 2012, which will see the Scottish Government set its own Scottish rate of income tax from April 2016.

Half of all Value Added Tax collected in Scotland will be assigned to the Scottish Government. Air Passenger Duty will be devolved.

The Scottish Parliament will be able to pass legislation on employment programmes, so that it can work with Scottish business and Scottish local authorities to provide jobs, and to address the problem of long-term unemployment.

In short: most of the money spent by the Scottish Government will be raised in Scotland. And with new tax powers will come new powers to borrow – recommended by the Smith Commission to allow the Scottish Government to ensure budgetary stability and manage economic shocks. These powers will be managed within the overall UK fiscal framework.

Substantial elements of the welfare system will be devolved but again within the UK overall welfare framework (and safety net).

The Bill which will follow from the Smith recommendations will also include recognition that the Scottish Parliament is considered a permanent part of the UK’s constitutional arrangements. Already, the two Parliaments have taken steps to devolve the power to extend the franchise to 16 and 17 year olds, so that the Scottish Parliament can pass legislation – if it wishes – in time for the 2016 Scottish election and 2017 local government elections.

So, where does all this lead to? If I had three wishes from the political fairy godmother, this is what I would like to see:

First: we now move on from the constitution, from the process of government, to deal with the stuff of everyday lives. People want a place to work, a place to live and raise their family, schooling for their children, healthcare when they’re unwell, and pensions when they retire. Let’s debate how best we can deliver those outcomes.

Second: that the powers of the Scottish Parliament are used to deliver those outcomes and not break up the UK. That’s what a clear majority voted for. Let’s strengthen our position within the United Kingdom (and, while we’re at it, within the European Union).

And third: that we look to deliver those outcomes, where possible, at local level. Devolution must not stop at Edinburgh.

An example of how this further devolution can work is in relation to the Crown Estate. On the basis of the recommendations of the Smith Commission, the draft Bill would devolve management of the economic assets of the Crown Estate in Scotland, and the revenue generated by those assets would be at the disposal of the Scottish Parliament.

I expect most of you are familiar with the Crown Estate, the public body which has responsibility for managing and accounting for Crown Property which forms part of its estate. Perhaps its most famous property is the freehold of most of Regent Street in London (sadly for the Scottish economy, that will not be devolved). In Scotland, its holdings include about half the coastal foreshore and almost all of the seabed; and many a battle I had in times past, over the Crown Estate’s claims and the claims of Udal landholders.

But in most parts of Scotland, the Crown Estate exercises an important role in ports & harbours, aquaculture, offshore renewable energy and all the various forms of leisure activity on the sea and by the seaside.

But unfettered devolution would have an impact on what Asquith would have called “that which is common to the whole” – the interest of the UK as a whole: interests in defence and energy for example.

The Smith Commission recognised this common interest and called for a Memorandum of Understanding between the UK and Scottish Governments to ensure that devolution of the Crown Estate would not be detrimental to UK-wide infrastructure in relation to defence & security, oil & gas and energy.

The Smith Commission, therefore, recognised an interest in the Crown Estate beyond Scotland’s borders, but it went further still – it recognised the interest of local authorities within Scotland. So, the Report says:

“Following this transfer, [ie, the transfer of the Crown Estate] responsibility for the management of those assets will be further devolved to local authority areas such as Orkney, Shetland and Nan h-Eilean Siar or other areas who seek such responsibilities.”

I understand that the three island councils have all welcomed this development.

My hope, the third of the wishes I set out earlier, is that devolution beyond Edinburgh is set to become the new frontier of reform.

The UK Government has been working for some time now to deliver local devolution, or “localism”, with projects such as the City Deals, the Borderlands Initiative and, for Scotland’s island communities, “Our Islands, Our Future”.

The Borderlands Initiative involves local councils working together across the Scotland-England border to maximise economic and cultural opportunities. Five councils are working with the Government on the initiative: Scottish Borders, Dumfries & Galloway, Carlisle City, Cumbria and Northumberland. We can expect further developments, and only yesterday, in Parliament, the Scottish Affairs Committee published its report – “Our Borderlands – Our Future”, with a number of recommendations for improving the life of people living in the most southerly local government areas of Scotland.

As for City Deals, this is an innovative form of devolution that began rolling out to some English cities a few years ago. And last November, the Government announced the creation of the Greater Manchester Devolution Deal, followed shortly after by Sheffield City Devolution Deal.

The underlying belief with City Deals is that if power is transferred to cities it will be easier for them to achieve economic growth. The aim is to create innovative cities, able to shape their own economic destinies, with their own local leadership looking to its own businesses and communities for solutions, rather than central government.

The City Deals initiative extends to more than 20 cities and is now UK-wide. As you may have seen in last week’s budget, we are now committed to opening negotiations with local authorities and the Scottish Government on City Deals for Aberdeen and Inverness with the aim of enhancing their status as energy capital and Highland capital respectively. This follows an ambitious £1.3 billion City Deal for Glasgow and the Clyde Valley.

The Government is open to discussions from areas or cities who are interested in greater devolution of power. So, what I would anticipate for the future is the increasing use of bespoke devolution arrangements for different parts of the UK, depending upon the needs of each area.

Another example of power being devolved relates to Scotland’s island communities. Last week we saw the first Islands Summit, which brought together, in Lerwick, representatives of the UK Government, Orkney Islands Council, Shetland Islands Council and Comhairle Nan Eilean Siar. The Islands Councils, the first unitary local authorities in Scotland, have chosen to work cooperatively with the UK Government, with particular focus on matters reserved to the UK Government and on the interaction between reserved and devolved matters.

We have a commitment to work together on “island proofing” – that is, a process whereby legislation to be put before the UK Parliament and policy being developed by Government Departments will be examined for particular impacts on island communities. The Island Councils will liaise with a specific desk officer in the Scotland Office, with further named contacts in the UK Government Departments. We know that oil and gas policy has a particular effect on island communities, as well as renewable energy policy. We know that fisheries and agriculture policy – devolved, but with EU and international negotiation led by the UK – must be considered for its impact on the islands, and we are also aware that telecommunications and transport have a special significance to those living in Scotland’s island communities.

We have recognised, for example, the important role the islands play in the UK’s energy economy, and to realise their full potential for renewable energy generation we must secure the necessary grid connections. The UK Government supports renewable energy by setting a “strike price” (in short, a guaranteed price for the energy generator, to protect against market fluctuations), and we now aim to set a strike price specific to the islands, a price which recognises the extra challenges faced by producer on these islands. That would, of course, constitute a form of state aid, and we are seeking approval from the EU for recognition that it is a necessary aid to allow development of renewable energy on the islands (we expect to receive that approval later this year).

And we also recognise that oil and gas policy has a particular significance for Scotland’s island communities, and to address the challenges faced by that industry, the first meeting of the Islands Oil and Gas forum is to be held at the end of April with representatives of the islands, the hydrocarbon industry and government, round the table, working together.

Although energy, both renewable and hydrocarbon-based, is so important to the future of the Scottish island communities, fuel poverty remains a persistent feature of island life. Some of the levers for addressing this problem (the Energy Company Obligation and the Warm Homes Discount) will be devolved when the Smith Commission’s recommendations are implemented, but some aspects of the obligations of fuel suppliers will remain with the Department of Energy and Climate Change, to ensure the continued effectiveness of the UK single market.

We also know that the interests of the islands have to be borne in mind when policy across Europe is being considered – that it must be possible for the Island Councils to feed into UK negotiating positions when EU Directives and policies are under consideration, at every stage of their development.

It is not only possible – it relates to a matter of EU law, and institutions in Europe know this. They are aware that Article 5 of the Treaty on European Union, requires decision-making to be made at the most appropriate level – at national, regional and local level (that is, the principle of subsidiarity). And Articles 170 and 174 of the Treaty on the Functioning of the European Union, require that the Union must support universal access to infrastructure for transport, telecommunications and energy. It must aim to reduce disparities in development, particularly with regard to rural areas, areas with low population density, and island communities. The importance we and the Islands attach to this is reflected by specific reference to these parts of the Treaty in the Framework for the Islands we agreed in the summer of 2014.

For the UK Government, this means it must work to ensure that the islands play a part in the decision making processes of the EU – not only in areas of concern, such as connectivity or fuel poverty, but in areas where the islands are traditionally strong: tourism, farming, textiles. The structure is there – the UK permanent representation in Brussels (UKREP) is aware of the issues that affect the islands, and cases where EU initiatives affect the islands disproportionately.

But to have a say in the process, or any EU policy development – and this applies to all local authorities and all levels of government - it is necessary, essential, to have skin in the game. To influence the policy and legislation of the European Union you have to be in the club.

So, finally, I would like reflect on that issue: whether we work for local government, devolved government or UK government, our relationship with the European Union is fundamental. We are all Europeans – citizens of the European Union.

We sometimes hear of the attractions of the Norwegian or Swiss relationship with the EU, where, on a superficial analysis, the benefits of a huge single market are available without the loss of national freedom of manoeuvre. That is a dangerous illusion.

What is sometimes called “the Norway option” or, perhaps more colourfully, “Britzerland”, means, in reality, being subject to EU rules but having no influence over them.

The standards which we have agreed with our trading partners in Europe for goods and services would apply to any business or manufacturer in the UK who wanted access to European consumers, and perhaps even to other markets around the world (which had concluded a trade agreement with the EU).

Those countries who remain outside the EU find themselves in the position of being informed by fax machine of the policies and rules which have been decided in the institutions of the European Union. It may be that EEA countries such as Norway and Switzerland judge that, even within the EU, they would have limited influence over EU law and policy. However, a country the size of the United Kingdom does not have that excuse.

That was the position we were in in 1971 when our entry to the EU, or “Common Market” as it was referred to at the time, was being negotiated. At that time, the legislation which had been made by the EU amounted to about 13,000 pages of text. The leader of the British delegation at the talks, Sir Con O’Neill, once said “many of those laws were objectionable. But they had to be accepted, for the larger purpose. If Britain had been there, we would never have allowed a situation to develop which made it so difficult…”

The point being, that we had to become a member of that club if we wanted to influence the direction of its rules.

For many who would argue for leaving the EU, the question of “free movement of citizens” is paramount. Very few people argue against free trade nowadays, but some take exception to “too many” (in quotation marks) people crossing our border. How we can have a free trade with goods and services crossing borders without people crossing them too has never been apparent to me. The founders of the EU considered that one followed from the other.

So, one of the most perplexing oddities of the British exit position is that if we did have a free trade agreement in place of full membership of the EU, it would not be possible to take the UK out of the provisions on freedom of movement. The people of EU would flow in and out of our borders along with the goods and services, and we would have no say in the terms of, or the practicalities of, that movement.

The issue of EU membership may be much discussed in the coming weeks and into the new Parliament, but it is surely important that it is discussed and debated in an informed context.

But the European dimension is important too in discussing the decentralisation of government. I was in Strasbourg earlier this week speaking on behalf of the Government at the Congress of the Council of Europe - the organ of the Council of Europe which comprises delegates from local and regional government.

The sessions I spoke at reflected a genuine interest across Europe on Scotland’s referendum experience - how Scotland’s two governments had reached agreement on holding a legal fair and decisive referendum and what further powers are now to be delivered. But what was particularly striking, although maybe not so surprising given the local and regional government background of the delegates, was the appetite for greater empowerment of local communities. The English members of the UK delegation, whom I met, felt that our referendum debate had inspired a new debate on more devolution within England. And contributors in the plenary sessions, from across Europe, spoke of their experience in their own countries of decentralising power.

No one should underestimate the challenge. Within Scotland, there has, in a number of respects, been an unhealthy centralisation of power. But from numerous meetings I’ve attended recently, home and abroad, I’m encouraged that a real debate and movement for localism is under way.

I hope we can seize the moment.

Published 1 April 2015