Devolution Commission reflections: Key decisions on welfare and tax

On the face of it Labour’s proposals for more devolution would appear to fall well short of what might be required to convince voters that a No vote would be followed by the kind of enhanced devolution that a majority of people in Scotland would apparently like to see.

In recent years the Scottish Social Attitudes survey has consistently found that around three-fifths of people in Scotland believe that the Scottish Parliament ‘ought to make most of the important decisions for Scotland’ about both taxation and welfare benefits.  Yet Labour is proposing that the Scottish Parliament should still only have shared responsibility for income tax, while it makes no proposals for any other new taxes to be devolved. As a result Holyrood would still be responsible for raising well under half of the money that it spends.

True, Labour do suggest that responsibility for two welfare benefits, housing benefit and attendance allowance, should be passed from Westminster to Holyrood. However, between them these two benefits account for only around one in eight of the pounds the UK government currently spends on ‘social protection’ in Scotland.

Such a prospectus hardly sounds like Holyrood becoming primarily responsible for the key decisions about welfare and tax.

However, public attitudes towards more devolution are not so straightforward.  For while a majority say that the important decisions about tax and welfare should be made by the Scottish Parliament, voters are not so ready to embrace the corollary of devolving decision making -  that the funding for services and benefits in Scotland comes out of the tax revenues raised in Scotland.

Voters are, for example, evenly divided between the idea that the revenues from income tax north of the border should only be used to fund public services in Scotland (47%) as opposed to being part of a UK-wide pool (48%). Similarly, exactly half (50%) say that existing devolved services should be funded out of Scottish taxes, while almost as many are content for them to be paid for out of a grant that comes from Whitehall (46%).

Meanwhile, there is an even greater reluctance to see welfare benefits such as pensions funded out of a Scotland only pool. Just 34% back this idea, while no less than 61% believe they should be funded out of taxes collected across the UK as a whole. Attitudes towards unemployment benefit are much the same.

In short, attitudes towards how benefits should be funded are almost the reverse image of attitudes towards how decisions should be taken.

Equally, there is far from widespread enthusiasm for another corollary of devolving decision-making – that levels of taxation and benefits might be different from those south of the border.  While 44% think it is OK for the basic rate of income tax to be different in Scotland from that in England, as many as 52% believe it should always be the same. When it comes to the old age pension the equivalent figures are 37% and 58% respectively.

In short, many a voter seems to be pulled in two directions. A majority apparently feel that the legitimate locus for making decisions about the country’s domestic affairs lies with Edinburgh, not London. But at the same time, voters are attracted to notions of equity with the rest of the UK and perhaps the sense of security that comes from being part of a UK-wide funding system.

Labour’s document too suggests a party that is being pulled in two directions. As Johann Lamont states in the opening sentence of her foreword, ‘Scottish Labour is a party of both devolution and the union’. Much of the rest of the document reads like an exercise in trying to resolve that tension.

For example, despite the party’s commitment to ‘social solidarity’ and thus an inclination for the UK to have a common welfare system, it now proposes (in contrast to its position twelve months ago) that housing benefit be devolved. That almost undoubtedly reflects the strength of the SNP’s attacks on the so-called ‘bedroom tax’, attacks that have made a continuing commitment to this aspect of the UK welfare state at least politically unpalatable.

Meanwhile, despite the party’s commitment to devolution, Labour’s document states that the 60% of the Scottish Parliament’s budget that is spent on health and education should be funded out of UK-wide taxation on the grounds that these services constitute ‘UK social rights’.

What remains to be seen is whether reflecting voters’ own apparent contradictions is indeed the best way of helping to win a No vote in the referendum and thereafter acquire the keys to Bute House. Or will voters come to have doubts about a proposal that ends up leaving them still feeling somewhat confused about what is the best way forward?

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John Curtice's picture
post by John Curtice
University of Strathclyde
19th March 2014

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