The Prime Minster, who only a year ago, was implacably opposed to the idea of any more powers for the Scottish Parliament is said to be considering whether and how Holyrood might take on more responsibility for raising its own revenue.
Gordon Brown recently stated that after 10 years of devolution, there was a very strong case for reviewing the powers currently devolved to the Scottish Parliament. Backing his leader in Scotland, Wendy Alexander’s plans for a fresh study of devolution, Mr Brown has said: "There is an issue about the financial responsibility of an executive or an administration that has £30bn to spend but doesn't have any responsibility for raising that. In any other devolved administration in the world, there is usually a financial responsibility that requires not only the spending of money by the administration but also its responsibility to take seriously how it raises money."
What is being contemplated?
Mr Brown suggests that some extra powers such as more powers over transport might be passed to Holyrood, however, he warned that this is a two way street and that other powers such as risidual security matters may be returned to Westminster. The details, he maintains, will be worked out by a review but he believes that it is logical to revisit the ways in which Holyrood accrues its revenue.
Currently, all revenue is accrued by the Treasury which then assigns it to Holyrood and elsewhere. However, Mr Brown has spoken about deploying some sort of assigned revenue system (which was originally considered in the 1990 report from the Convention, Towards Scotland’s Parliament but was later dropped in favour of the current arrangement.)
What would these changes mean?
If the system of assigned revenues was undertaken, then the product of certain taxes, for example income or VAT would go straight to Holyrood. This would give MSPs an incentive to grow the economy and accrue extra revenue for Holyrood. Seems straight forward enough, however, the Prime Minster has not stated which taxes would be assigned to Holyrood and if, for example, VAT or corporation tax were included it would rather defeat the purpose of allowing fiscal discretion, as the Scottish Parliament would be prevented from varying the rate under EU rules.
What about income tax ?The Scottish Parliament already has powers to vary the rate of standard taxation but has chosen never to use this as it would be politically unpopular and cause too much political pain for fiscal gain. Under the new system, would the Parliament be granted the power to vary the upper rate of taxation ?
In short the Prime Minster has opened a can of worms that seems to have more questions that answers – answers which hopefully will be answered by the review which he hopes to establish.