Referendum repercussions

10 Jan 12
Don Peebles

Could the spat over the timing of an independence referendum adversely affect discussion of the Scotland Bill and prevent inclusion of more appropriate borrowing arrangements in the legislation?

As normal life resumes after the festive season, Scotland finds itself in the midst of a full-blown debate on the timing of an independence referendum.  Until now, any debate on a referendum was limited to politicians within Scotland and with no real evidence that timing had yet captured the interest of the wider public.  The intervention by the Prime Minister however means that constitutional change is now firmly on the agenda.

What most of the public probably didn’t know was that constitutional change was coming anyway, irrespective of any referendum.  That change was coming as a result of the Scotland Bill which enacts the findings of the Calman Commission.  The highest-profile provisions are proposals for significant new powers for a devolved Scotland on income tax and borrowing.

It was just before Christmas that a report was released by the Scottish Parliament which, probably because of pre-festive period timing, received little media attention.  That report from the Scotland Bill Committee set out the views based on three months worth of evidence that was gathered from around 100 stakeholders.  It represents the most recent reflection of Scotland’s views from both the political and non-political classes on the country’s appetite for more powers and for wider constitutional change.

The Scotland Bill is, of course, a Westminster Parliament Bill.  Westminster will not normally legislate with regard to devolved matters in Scotland without Scottish Parliamentary consent.  The conclusion of the Committee in its report is that it is unable to recommend the Scotland Bill in its present form.  Recommendation would only come if modifications to the Bill are granted.  The convener of the Committee goes further than the conclusion in the report, stating that the Scottish people now support greater powers than are currently included in the Bill.

One of the risks of an escalation of an emotive debate is that the professional solutions necessary to ensure the successful implementation of the Bill’s provisions could be delayed.  For example, in the case of borrowing powers, the Bill proposes a specified borrowing limit of £2.2bn.  CIPFA’s evidence, however, set out the control mechanism for local government and explained how a prudential framework operates.  The principles of affordability, prudence and sustainability were explained as was the importance of being able to afford debt servicing rather than sole reliance on a specific debt ceiling.

The Committee agreed with this evidence and one of its 45 recommendations, arguably the most important in terms of public finance, was to recommend that a prudential borrowing framework be introduced.  The consequences of the ability to borrow today will be paid for by the generation of tomorrow and it is essential that the planning for implementation of the framework takes place at an early stage.  But there is now an emerging risk that this significant public finance development could fail to gain the necessary momentum or profile because it is lost within the current ‘spat’ on timing of a referendum.

Interestingly, the report by the Committee itself does link the Scotland Bill to a referendum and somewhat significantly states that the electorate has moved beyond the powers in the Bill. It concludes that the financial provisions in the Bill are not fit for purpose.  Only time will tell if this recent escalation of debate heightens public interest or if it results in unintended consequences by endangering any prospect of enhanced devolved powers.

Don Peebles is policy and technical manager for CIPFA in Scotland

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