Scots LibDems propose federal UK
By Keith Aitken in Edinburgh | 18 October 2012
Scotland should be given greater tax raising powers as part of a shift to federal government in the UK, the Liberal Democrats’ Home Rule Commission said yesterday.
Under the proposals, Scotland would raise two-thirds of the money spent by the Holyrood Parliament, and have powers to borrow a further £1bn from the UK government.
The eight-strong party commission, chaired by former leader Sir Menzies Campbell, seeks to replace the 1707 Treaty of Union with a Declaration of Federal Union, formalising a federal relationship among the regions and nations of the UK.
The report suggests passing responsibility to Holyrood for setting and collecting almost all income tax, capital gains tax, inheritance tax and air passenger duty, while leaving VAT, alcohol taxation and excise duties with a federal UK Parliament, which would retain responsibility for foreign affairs, defence, welfare and monetary policy.
It would give Edinburgh a right, in the event of ‘shocks’ to Scotland’s fiscal cash flow, to borrow up to £1bn from the UK Treasury – twice the upper limit set out under the terms of the latest Scotland Act.
Campbell, MP for Northeast Fife, said the current constitutional settlement was unsustainable and that the proposed fiscal division would create a strong Scotland within a strong UK. It would also roughly double the proportion of taxes that will eventually be raised by Holyrood under the Scotland Act reforms.
‘The point of principle is to find a balance between what you would get by way of an equalising grant from a central United Kingdom government, and what you should have responsibility for spending and raising yourself,’ Campbell said.
His report extols the vision of a federal UK, while acknowledging the current lack of enthusiasm for home rule in many localities and envisaging variable speeds of progress.
‘Over time, we are confident that the constitutional debate in England, currently under-developed, will progress and reach a conclusion,’ the report says.
‘Federalism is the answer to many of the anxieties people have, particularly the anxieties they have about independence,’ Campbell said today.
The report follows Monday’s agreement between First Minister Alex Salmond and Prime Minister David Cameron on the terms for a one-question referendum on Scottish independence in autumn 2014.
Both the LibDems and Scottish Labour, whose own commission on further devolution has recently begun sitting, have been criticised for refusing to put their proposals before voters at the referendum. Campbell said the question of independence or not needed to be resolved before moving to consider alternatives.