Tax Transfer to Scotland Raises Questions in England

More devolution of powers to Scotland raises political questions in England as well.

The Scottish Parliament was promised control over income tax and welfare policy on Thursday in an attempt to placate Scottish nationalism after a referendum failed to deliver a majority in favor of independence from the United Kingdom two months ago.

The reforms, which were agreed to all by major parties in Scotland, are worth £11 billion and amount to the biggest transfer of power to the region since the Scottish Parliament was set up in 1999. The new powers would not be implemented until after next year’s general election.

Besides the power to levy incomes taxes, the Scottish legislature would be given authority over air passenger duties, housing credits and winter fuel payments.

Labour, the second largest party in Scotland and currently polling ahead of Prime Minister David Cameron’s Conservatives in national polls, was skeptical of the reforms. Former prime minister Gordon Brown described the proposals as a Tory trap. Brown’s former chancellor, Alistair Darling, who led the campaign against independence in the referendum, warned that transferring tax authority to Scotland would undermine the principle that risks are shared across the United Kingdom.

Current party leader Ed Miliband nevertheless acquiesced, possibly in a bid to halt Labour’s decline in Scotland. Labour also extracted two concessions from the other parties: The personal tax allowance will continue to be decided in Westminster and the system overall should remain British.

The latter point seems largely symbolic but Labour hopes it will guard against the chance that Conservatives undermine a future Labour chancellor in London who is likely to depend on the support of Labour lawmakers from Scotland — the “Tory trap” Brown warned against.

The simple promise that there will be no “second-class” parliamentarians does not resolve the strange situation in which Scottish lawmakers in the House of Commons vote on legislation that only affects England or other parts of the United Kingdom while English lawmakers have no say over Scottish affairs. This arrangement will only seem more unfair to the fifty million English — out of a population of just over sixty million for the whole United Kingdom — if Scotland gets the power to set its own tax rates.

Some Conservatives demand “English votes for English laws” in return, a move that could effectively lead the federalization.

The government could forestall this by devolving more powers to local authorities within England. Chancellor of the Exchequer George Osborne has already offered more control to what he calls the “powerhouses” of Northern England such as Liverpool and Manchester.

Labour leaders from those cities joined with their counterparts from Birmingham, Bristol, Leeds, Newcastle, Nottingham and Sheffield as well as the Conservative mayor of London, Boris Johnson, in asking the government on Thursday for a “comparable package of measures for local government in England” to Scotland’s.

Assembly members in Northern Ireland and Wales also want greater control over their affairs.

Finally, the BBC’s Nick Robinson argues that far from undercutting Scottish nationalists, the transfer of tax authority could bolster their case that the region is better off on its own. “The backers of independence will argue that control over some taxes and benefits and not others makes no long-term sense and the Scottish Parliament should control the lot,” he suggests.

The proposed reforms are the result of a promise British party leaders made to Scottish voters before the referendum in September to give them more control over their own affairs if they voted against secession.