Agenda item 2 is an evidence-taking session on further fiscal devolution with Peter Kelly of the Poverty Alliance and Dave Moxham of the Scottish Trades Union Congress. Unfortunately, Mr Moxham has not yet appeared or given any indication of where he might be, so we will have to go straight to Peter Kelly. Thank you very much for arriving on time, Peter. I will ask some questions about your written submission and then open out the session to colleagues around the table.
The Poverty Alliance submission is excellent and makes a lot of interesting points. You say that you were looking for “powers for a purpose” and that, in your considerations, you examined whether powers would
“help address poverty and inequality”,
which
“should be the primary purpose”
of any powers that are devolved. You talk about
“the need to work towards a ... fundamental transformation of the Scottish economy and society.”
Let us look at some of the powers, which you say have to be “real and effective.” One of your recommendations states:
“Powers over oil and gas to remain at UK level but Scotland to receive fair share of revenues raised.”
How would you define a “fair share”?
It is a pity that Dave Moxham is not here, because we followed the STUC line on the taxes that we said should not be devolved to Scotland. Obviously, our primary view was that income tax should be devolved, and that Scotland should receive a share of those other taxes, with, I think, an apportionment of 50 per cent of VAT. We have not done any calculations to say what would be fair, but it should be in line with the revenues that are raised in Scotland through taxes such as VAT. That money should be disbursed back to Scotland.
Does assignment give Scotland any control over policy direction? Would you like that to be considered in discussions between the Scottish Government and the United Kingdom Government?
That is one of the weaknesses. One thing that we said in our submission is that, no matter whether we are talking about powers over social security and welfare or powers over taxation, we must reflect the outcome of the referendum, which suggested the need for powers to be shared between Scotland and the rest of the UK. We will not have the power to vary VAT—although, as far as I understand it, we cannot have that power anyway because of European Union VAT rules. I guess that the proposals do not give us full control to vary the amount that is raised, and they are limited in that they do not provide for the full economic impact of tax-raising powers.
Obviously, welfare is a key issue for the Poverty Alliance. Paragraph 5.2 of your submission states:
“It is essential that any powers over welfare must come with necessary financial controls and policy-making powers to allow for effective delivery.”
Does the Smith agreement allow for that?
We called for the income tax bands and rates to be devolved, and that has been delivered, which is a good thing. However, the key or fundamental flaw in what Smith has recommended is that there is no power over allowances. The power to vary the starting rate—or the allowances at the bottom—is fundamental in tackling poverty. There are mixed views on the impact on tackling poverty of increasing the allowance to lift people out of tax altogether, because, in essence, such an approach gives a tax cut to everyone who earns more than the allowance. There are debates to be had about that but, if we are not given full control over income tax in that way, we will be somewhat limited in what we can do with it.
As for whether other powers on taxation can help us address poverty more effectively, we are pleased that corporation tax is not to be devolved. We did not call for that, so we are pleased that it did not happen.
The welfare powers that are to be devolved are a bit of a mixed bag. The powers over health and disability benefits that are to be devolved can be used—any new powers on welfare will be useful—but there is no coherence. One issue that we mentioned in our submission and that many of our members and many people in civil society have talked about is the need for coherence in the powers that are devolved. I am not sure that I see the logic with regard to the welfare powers that are proposed to be devolved to Scotland; I am not sure whether they are being devolved in order to give us the ability or capacity to address poverty more effectively.
Thank you. In paragraph 5.3, you say:
“Benefit rates should be set at a level where no one is left in poverty and all have sufficient income to lead a dignified life”,
and you also talk about creating new benefits, including
“Lone Parent Grants, Health in Pregnancy grants and Child Trust Funds.”
Do the Smith proposals allow for enough resources to be raised in Scotland to pay for those additional benefits and create the equality that you are seeking?
I will answer that with an obvious statement: the issue is quite complicated. The powers are potentially being devolved, but because the Barnett formula will remain, it will need to be adjusted. We have new borrowing powers, but the fact that they will need to be negotiated with the UK Treasury might give some flexibility. We have new powers to create additional benefits, but they will need to be paid for. It is not yet clear whether the fiscal powers will allow us to pay for new benefits if we choose to create them, or whether the powers over new taxes will be sufficiently flexible to allow us to raise money so that we can spend more on programmes that we think will help target social injustice. Over the piece, we are not convinced that some of the powers, particularly those relating to income tax, will provide us with sufficient flexibility to get to the heart of tackling poverty in Scotland.
Thank you. Is it your view that the proposals are a step in the right direction?
We are trying to be as positive about this as possible. There are other powers that we think should have been devolved but which have not been. Control over the minimum wage, for example, would have been important in helping us address labour market inequality. That said, we would agree that it is a step in the right direction.
On employment and equalities, you have said:
“91.5 per cent of people believed Scotland should have the power to set and enforce the minimum wage”.
Given that that figure came from responses to your survey, how do you feel about the fact that the minimum wage is not being devolved?
It is a missed opportunity. After all, we are talking about coherence. There are issues around the work programme, which seems to have been devolved in a more or less useful way. I say “seems to have”, because a lot still has to be worked out. We might be discussing the Smith commission’s recommendations, but where we get to with those recommendations remains to be seen.
We will have control over parts of Scotland’s employability system, and the work programme is a big part of that. However, although we will have control over the work programme, we will not have control over Jobcentre Plus or sanctions. The minimum wage should be seen as part of an attempt not only to address exploitation in the labour market and pay inequality but to encourage people back into the labour market; indeed, that was one of the arguments that was used when the minimum wage was first introduced.
There was a good case for devolving the setting of the national minimum wage to make it coherent with other parts of policy in Scotland, but we did not get some of the other machinery such as Jobcentre Plus and sanctions. I see the minimum wage as part of the architecture for helping people back into the labour market, and it would have been useful to have had control over that.
Thank you for that. I will open up the questioning to my colleagues after I ask one final question. Given that you are happy with some of the measures recommended for devolution by Smith but are frustrated that others have not been delivered, are you of the view that the Smith report is—for want of a better phrase—the settled will, or do you feel that there is still an opportunity to campaign for additional financial and other powers that the Poverty Alliance would like to come to Scotland?
10:15
Because not all of the powers that were in our submission to the Smith commission have been recommended for devolution to Scotland, we want to retain a focus on opportunities to devolve new powers, as we have done in the past. For example, when power over the social fund was given to Scotland, we campaigned for it to be delivered in a particular format, and we would certainly consider any opportunities to do the same in line with the recommendations in our submission.
Proposals in the Smith report refer to future negotiation between the Scottish Government and the UK Government. For example, the report refers to the co-location of services in Jobcentre Plus and better co-ordination of the delivery of Jobcentre Plus services. I am far from clear about what that means in practice, but it suggests to me that there is an opportunity to work out such matters in the future.
One thing that has not been picked up much is what the Smith report says about the intergovernmental relationship, which does not seem to be at all strong at the moment. There needs to be more co-decision making, and Jobcentre Plus is one such area that is highlighted in the report.
I am not sure whose settled will the Smith report represents. I can speak only for the Poverty Alliance, and we certainly want to campaign on issues that we think need further investigation. We will also campaign to ensure that the powers that come to Scotland work best to enable us to tackle poverty.
Thank you for that.
I have learned that Dave Moxham will not be coming this morning. Apparently, he had the meeting in his diary as taking place tomorrow, and he apologises to the committee for that. You are on your own for the rest of the session, Peter.
I will speak to Dave later.
We have been given a copy of your submission to the Smith commission, which is quite wide ranging and goes beyond the issues that the committee deals with. However, in your general comments, you make some interesting observations. In paragraph 2.6, you say that
“This means a different approach to economic development”,
which suggests to me a culture change. Does the culture change need to be separate from the powers that we might get or is it linked to them?
That is a really good question. They are linked. With more powers, there is more potential to do things differently. As I said, there are constraints on some of the powers that will be devolved, and there is a question about the extent to which powers allow for the culture change to take place and a different set of priorities to be introduced.
To focus not on fiscal powers but on welfare, the fact that we will, it appears, have full control over the work programme will allow us to set up the programme differently and say how it will operate. Rules on conditionality are inherent in the work programme, and we could operate them in a slightly different way. However, the fact that we will not have power over Jobcentre Plus, universal credit or sanctions and conditionality in the main will militate against us having full control over the work programme and developing it differently if we choose.
On economic development, we need to set different priorities. That is about raising revenues through taxation, but having different priorities for how we spend them. In particular, we need to think about local economic development. We can do some of that now; indeed, we recommend that we ought to focus on the things that matter to people in their communities and that are important for economic stimulus, rather than constantly focus on economic growth. If Dave Moxham were here, I am sure that he would talk about the foundational economy. We are starting to see some developments on that. There are perhaps not moves away from the focus on economic growth, but there is interest in new thoughts on how we grow our economy in a way that does not entail rising poverty or inequality.
We need to think about how we use the new powers differently, rather than simply varying tax rates to stimulate economic growth—hence our concern about using corporation tax just to stimulate economic growth. Is using it in that way enough? We would say no.
We are covering quite a lot of ground here.
Yes.
If the work programme could be done differently and we changed the emphasis on how people are treated, would that become a problem, because we would have one ethos in the work programme and a different ethos in Jobcentre Plus?
In our submission, we talked not only about the work programme but about Jobcentre Plus. There are other reasons why it would have been useful to bring Jobcentre Plus to Scotland. We have extensive employability programmes delivered by local authorities and others that, based on feedback, sometimes come into conflict with the way in which Jobcentre Plus delivers support to people returning to the labour market. It would have been better to have a greater level of coherence between the work programme, Jobcentre Plus and the employability programmes that are delivered by others.
Your submission includes a section on taxation powers in which you talk about various taxes. You have mentioned income tax and how it would have been useful to have had control over the allowance. Would that make a big difference? Is the big thing not that we decide whether the rate should be 10p, 15p or 20p for example?
That is important. There is the potential for the allowance to be raised by the UK Government, which would surely have an impact on the rates that we set in Scotland, but we would not have control over that.
For the purposes of coherence and making income tax work properly, we argued for full control, including control over allowances.
Yes. Is there a timing issue relating to when that would work in practice? If the Scottish Parliament set the rate in, for example, October, and the allowances were set in March, would you foresee a problem?
There could be a problem, but that is not an issue that I have considered. The issue is perhaps again about how the two Governments work together in setting the policies. Obviously, we go through a budget process in Scotland, and we might need to consider that in terms of the setting of the UK budget.
How will national insurance tie in with income tax? We have had two views expressed at committee. Some people have said that national insurance is effectively the same as income tax; others have said that it is closely linked to welfare, pensions and other such policies, and that we should keep the two separate. Do you have a view on that?
Again for reasons of coherence, we would have favoured the devolution of national insurance to Scotland. However, if we retain pensions at UK level, perhaps there is good reason for retaining national insurance at UK level. National insurance is a major form of taxation. Its devolution would have allowed the Scottish Government more control over fiscal policy and economic growth, so the ability to control and vary it would have been an important power.
Your submission states:
“Income tax can be a tool for redistribution of wealth”.
Is that what you mean, or do you mean redistribution of income? That brings me to inheritance tax and where it fits in, as I think that you also say that that tax can be used to redistribute wealth.
It is about redistribution of income.
However, you also support the devolution of inheritance tax. Dealing with poverty is presumably not just about redistributing income, as we have to get some of the wealth from the wealthy into the hands of the poorer. Is there any way of doing that apart from inheritance tax?
The most effective way of raising incomes for most people is to get them into work, which should be quality work and not low-paid work. We argue that that is the most effective route over the long term.
For the taxation of wealth, we need to look at powers over council tax and at the way that property taxes work. As property is a major way of holding on to wealth and passing it on through inheritance, we need to consider that, and I know that that will be done in the future.
The committee has heard arguments on both sides of the issue. Some say that, as inheritance tax is linked to land, which is not moveable, it would be a good tax to have control over. On the other hand, we have heard that some people’s wealth is in shares, which can be moved around very easily, so inheritance tax is not a good one to control. What is your thinking on that balance?
We are in favour of inheritance tax being devolved. We do not see great cause for concern about avoidance, if that is what you are thinking about. Having control over inheritance tax would be useful in setting a different approach to taxation and in trying to do things differently in Scotland.
Good morning, Peter. You mentioned coherence. Last Thursday at the Devolution (Further Powers) Committee, we had a panel of academics who basically said that the proposals as they stand are incoherent and unsustainable. Do you share that view?
As I think that I have said, we have struggled to identify the logic for some of the powers.
You mentioned in your written submission the participatory process of the independence referendum and your concern over the way in which the Smith commission process had lost almost all of that participatory element, due to its timetable.
Do you see a risk that the wider public, who became exceptionally engaged during the referendum campaign—including, in particular, those in some of our most deprived communities—will be disengaged as a result of what is seen by them as a closed-doors political carve-up rather than a properly participatory process?
That is an issue that we and others, such as the Scottish Council for Voluntary Organisations, the STUC and the Electoral Reform Society, have raised about the Smith commission process. There was simply no way that, in the period that the Smith commission had to produce its report, it could use anything approaching the kind of participatory approach that many of us were calling for.
It is down to the political parties, the Scottish and UK Governments, and civil society organisations to find ways to ensure that participatory elements remain in the process. There is a danger that, in the post-referendum period, people come to see it as a closed process and one that they have very little opportunity to influence.
10:30
I do not know whether you have had a chance to look at the STUC submission—Dave Moxham is not here to answer questions on it, and I will not ask you to do so—but it refers to a “citizen led process” that includes, for example, citizens juries. Is there a role for such a process in improving the proposals? Do you view what the Smith commission has come up with as being more of a floor than a ceiling? Is that the spirit that you would want to see being taken forward?
Earlier, we talked about the settled will, which is a phrase that is probably thrown about too much. There are still opportunities for those of us who are campaigners and want to see more powers. We have set out our position and the STUC has set out its position, and we both argue for more powers.
Many of us were concerned that it was the usual suspects—organisations such as the Poverty Alliance and the STUC—that expressed a desire for genuinely participatory elements in the process. We supported the call by the STUC, the Electoral Reform Society and others for a participatory process that allowed for citizens juries and so on. Time is moving on and I do not think that that process is being delivered. We are now in the next stage of the Smith process, which is the devolution of more powers but, as far as I am aware, the opportunities for such engagement are not being developed.
Turning to the detail of how things might pan out, an issue that was raised by Professor David Heald at last week’s meeting of the Devolution (Further Powers) Committee was the potential for gaming in the process. An example of where that might happen is land and buildings transaction tax. The Scottish Government consults early on the proposed system and bands, and the chancellor stands up for his budget speech and announces that he is making changes at midnight that evening. That was seen by some as an attempt to circumvent decisions on which the Scottish Government had consulted.
There is also the fact that the negotiation on the block grant for devolved taxes has still not been resolved. Do you foresee difficulties ahead for the Scottish Government in administering some of the new powers if the way that the process operates is not corrected?
That goes back to the issue of intergovernmental relationships. Those relationships may well never be easy, but they will become all the more important when we have enhanced powers, particularly fiscal powers. That requires clearer communications and processes for negotiation and agreement than have been in place until now, in order to get round the possibility of gaming, where decisions that the Scottish Government arrives at are potentially undermined by the UK Government.
Our favoured position would be for the two Governments to work in concert. If the Scottish Government is taking action to address poverty and inequality—whether that is using new powers to create new benefits or abolishing the bedroom tax—we would not want policy activity at the UK level to undermine those efforts. That will be difficult to achieve, but at the base of that are clearer and better intergovernmental relationships.
To go back to the issue of coherence, one point that has been raised is that, although the Scottish Government has the ability to create new benefits and to top up benefits, the variability of the tax base from which it can draw more income is limited, so income tax is essentially the only significant lever available, and there are only so many different ways to go to the same well. Are you concerned that a consequence of that could be that, although we will have the powers to do those things, we will not have the financial base to be able to do them in a meaningful way?
That was always a concern, and many civil society organisations expressed their concern that, if new powers—particularly around welfare and benefits—were to be given to Scotland, we would need the wherewithal to do something creatively with those benefits. Whether we increased benefits, delivered them in a different way or created new benefits, we would need to have the tax-raising powers and, in difficult times, the borrowing powers as well. Given what I have said about the Smith proposals on income tax, I would say that we perhaps do not have all the powers to raise money that would be needed to deliver some of those benefits. Although we will have the power to create new benefits, it is not yet clear to me how we would pay for some of them.
The convener of the Devolution (Further Powers) Committee received a note from the Scottish Parliament information centre that suggested that, if the Scottish Government were to top up a reserved benefit in future, it could have a knock-on effect on a claimant’s universal credit. Paragraph 55 of the Smith commission report appears to suggest that that should not happen, but do you foresee that being a potential issue and does it need to be absolutely bottomed out before powers are transferred?
That would be my reading exactly. The Smith commission says clearly that that should not happen but, as far as I understand it, that could happen under the current set-up of our welfare and benefits system. Something that needs to be addressed and set out clearly is what the impact of any additional new benefits or top-ups to existing benefits would be on claimants’ other benefit income.
Last week, we had a pretty interesting session with tax experts, who looked at the powers that were going to be devolved—primarily the financial powers—and outlined some of the challenges that we might face and the difficulties of implementation. There are one or two issues in relation to VAT and there is a stamp duty issue that had not been picked up by anyone until then. I want to ask you the same questions. When it comes to the powers that are being devolved, starting with welfare powers, are there any difficult decisions that we will have to make and are there any challenges for implementation that you can highlight for the committee now, so that we and anyone reading our report can think about those issues as soon as possible?
We need to think about the delivery mechanism for any new benefits. At the moment, where new powers have come—with the Scottish welfare fund—local authorities have been used as the delivery mechanism. That seems to be working at the moment for the Scottish welfare fund, but we need to think about how the range of benefits that are being devolved to Scotland will be delivered, and that will undoubtedly be a challenge. Obviously we do not have a separate Scottish social security system, so we need to think about delivery of those benefits, which will be an initial challenge.
This might be an unfair question, but I think that you have highlighted a good issue. Do you or your organisation have initial views on how benefits should be delivered, or are you simply highlighting the issue?
To be honest, we have not taken a position on that yet. The work has not been done. I am trying to think whether any of our members has raised any issues with us with regard to delivery, and I have to say that I do not think so. They have raised the question whether local authorities would be able to deliver those responsibilities if we went down this route. I have not had any clear answers to that question, but there was certainly equivocation on the issue.
Perhaps I can apply my initial question to the issue of the work programme. Are there things that we really need to think about now to ensure that we get implementation correct?
With regard to the criticisms that were made of the work programme during its development, I note that one of the rationales behind it was that a lot of it would be delivered by the voluntary sector. However, the reality across the UK has been quite different, with third sector providers being squeezed out or given very small parts of the programme to deliver. We need to think about how the prime contractors were brought into the work programme and in particular how the third sector, which has a great deal of expertise in delivering back-to-work programmes, was involved. We also need to think about the role of the public sector in delivering aspects of the programme.
We would say that the work programme is not really delivering, and we need to take a fundamental look at it. Its success rates might be improving very slowly, but they are still no better than those of its predecessors. We must have much more ambition for the successor—if we can call it that—to the work programme that comes to Scotland, and we must think fundamentally about how it is constructed, who delivers it and how it is delivered.
The Smith commission has produced its report but I note that in your submission you talk about the assignment of alcohol, tobacco, fuel and gaming duties in, I guess, a similar way to the assignment of VAT revenues. The argument for assigning VAT revenues was that, although we would not control the rate, we would be able to collect more VAT if the economy grew. What was the rationale behind your stance on the assignment of revenues from alcohol, tobacco and so on? I presume that public policy would be seeking to reduce alcohol and tobacco consumption, which would mean that there would not be the same opportunity to grow those revenues.
I suppose that we were focusing more on fairness rather than on using those powers as you might use other taxation powers—in other words, to grow the economy. Our point was that because that money has been raised in Scotland, it should be assigned to Scotland.
Thank you. That is all, convener.
How many member organisations do you have, and what range of members does your organisation cover?
We have about 200 members. Around a third are individual members, many of whom have direct experience of poverty and have worked with the Poverty Alliance, and the other two thirds are made up of a range of voluntary community organisations. Moreover, some statutory bodies are associate members. Most of the main anti-poverty organisations in Scotland are members of the alliance.
10:45
That is helpful. What would be your top priorities in terms of extending the provisions of Smith? You mentioned the minimum wage, but it would be interesting to hear more about that. If we take tax and welfare separately, what would be your top two priorities for further devolution?
On what we do as an organisation for the future, there is something around ensuring that the taxation powers that are eventually devolved are delivered in such a way and used by the Scottish Government in such a way that they help to address poverty and help to fund the fight against it.
On future priorities, looking at potential further devolution, I think that we will have to go back to the question of allowances—this might be over the longer term—and look at how it works in practice once new taxes are devolved. Once we see what happens in practice, there might be a strong argument for the devolution of allowances. That would be around taxation.
In a way, then, that is more important to you than additional taxes such as inheritance tax or whatever other taxes you would like to be devolved.
That would be fairly central to what we would be calling for. We would need to go back to our members and have a discussion about the post-Smith situation. We had as much discussion as was possible before the Smith commission to try to get feedback on the paper that we produced and get people to feed in their views.
On the specifics around taxation, there are opportunities for us to have more of a discussion than we have had in the past about what we will do with taxation in Scotland with the new powers that will come. The tax-varying powers that we had were limited and, in common with many other people, we did not campaign around them. Now, there is more scope for us to think about how we use the new taxation powers that will come to Scotland and, given that not all the things that we were lobbying for have been delivered, to consider what emphasis we can put on further devolution.
It will be a question of what our members think are priorities. Given our previous experience, I imagine that they will want us to focus on the powers that we have and on ensuring that they are used to best effect.
It seems that your tax proposals in general are not too dissimilar from what the STUC is proposing, but it also says that it feels that it would be right for about two thirds of the money that we spend to be raised by our taxes. Do you have a view on that or is that not really a matter of priority for you?
It is not something that we have had a view on up to now.
Perhaps you are a bit more divergent from the STUC on welfare. What would be your top priority for additional welfare powers, beyond what has been proposed?
Again, we will need to look at how the new powers play out. The main thing that we have talked about is the devolution of powers around working-age benefits, and we still need to look at how those are delivered at the UK level.
Up to now, we have campaigned and lobbied on the delivery of welfare in Scotland in the UK context, so our lobbying has been focused on Westminster. I guess that, in some ways, it will remain as such. In line with our partners in the Scottish campaign on welfare reform, we will want to see adequate benefits and delivery that actually supports people back into work. We want to see a system that treats people with dignity.
Universal credit will be the main part of welfare in the future, and we want those principles to be applied to its delivery. While we might argue for those powers to be devolved to Scotland, we will take those arguments to where control lies at the moment. Maybe I am giving you my campaigning strategy rather than saying what our priorities are.
We will have to argue with Westminster as universal credit is retained there—it is the main benefit and there are potentially significant problems with it. As I have said, the conditionality regime will remain at the UK level but we will argue that Jobcentre Plus should be devolved. That position was starting to be discussed prior to the referendum, although it had not been clearly articulated by many organisations. That would still make sense, and the devolution of the work programme makes it more logical. As I said earlier, it is important that employability programmes are coherent. On the basis of subsidiarity, which we mention in our submission, it makes sense for those services to be delivered and controlled in Scotland to make them coherent with the employability programmes that we already have here.
Do you see any risks in the devolution of welfare that you are suggesting? If there is a big rise in unemployment, for example, how will that be catered for within the devolved settlement?
If those powers were devolved, we would need additional fiscal powers to be devolved too. Borrowing powers will be devolved, to some extent. Rising unemployment in the UK has not been addressed in the way that it should have been addressed over the past few years. We do not believe that the Government should have been cutting benefits and services. Many people would agree that the balance of cuts and borrowing should have been different.
If unemployment were to increase and if we had control over some of the welfare benefits that we have talked about, we would need to consider a different way of supporting the increase in expenditure on those benefits. However, we do not have those powers over welfare, so it is not a question that we need to address at the moment.
Thank you for your written submission, which is very interesting.
Do you think that the Smith commission’s attempt is too broad and that there is a little bit of leeway in a number of areas rather than any dramatic change through the devolution of real power to the Scottish Government that would mean that the general public in Scotland would be aware of a significant difference in one area?
Are you suggesting that the Smith commission’s recommendations are too broad and too thin to have a sufficient impact on any of the areas? Have I got that right?
Yes. I will clarify what I am trying to get at. There are many similarities between the wish list in the STUC’s paper and your own wish list around welfare, income and work programmes. In its response to those issues, the Smith commission seems to go so far but not far enough almost in every area. Do you agree with that?
Yes. That is a correct assessment.
If we accept that, are there areas in which we might not have seen any devolved power but where things had gone as far as the requests in other areas that would have made a more dramatic difference? In other words, if we had devolved the entire work programme—employment, the minimum wage and so on—at the expense of not doing so much on welfare, could that have made a greater difference to the overall picture?
The suggestion is that, had we focused our attention on particular aspects of taxation policy or welfare policy, we might have seen more of a difference. That was more or less what we suggested in our paper. We used a phrase about devolving
“all welfare powers that are best delivered in Scotland”.
That was a fairly open phrase—deliberately so—which should allow particular packages to be devolved. If that was not to cover all of welfare, we and many others talked about working-age benefits being devolved.
I do not know whether this would be enough to be called a package, but sets of benefits around disability are an example in which we will see a difference, and people could feel that difference. In getting the powers, we must decide whether we will do something different with them. That is the important thing. If we just administer the powers in the same way as the UK Government did, people will feel no difference.
There are risks and potential issues around disability benefits in the period up to devolution. Cuts are already being made in some of those benefits. When they eventually come to Scotland, they will have been cut and they will be worth less than they are at the moment. That immediately presents a challenge for the Scottish Government post 2016 and it may wish to do something different with those benefits. I am sure that many people in disability organisations will say that they need to be restored to their current or even previous levels. That will present a challenge.
Would the population in general have felt that things were being done differently if there had been a different focus to the powers that have been devolved? Yes. With the powers that are being devolved, we could see a big difference, depending on the decisions that are made once those powers come here.
In your submission, you mention possibilities involving a percentage of VAT and other taxes and duties. We do not understand the Barnett formula, so I wonder whether such measures will make any difference at all. Would we not need to know with real clarity how the Barnett formula is arrived at? For example, if the economy improves and there is a higher income from VAT, that would surely have to show somewhere in order for us to be convinced that Scotland was better off.
A number of economists are raising concerns that Scotland could end up worse off. We might alter income tax, and we might improve the economy. We might do better with a work programme. However, that would all be for nothing if we do not understand how an improvement in the Scottish economy is reflected in the Barnett formula calculation.
Correct me if I am wrong, but I think that one of the proposals from the Smith commission, and one of the discussions, was about the reworking of the Barnett formula. That needs to be done, and that seems to be part of the discussion about what happens after Smith.
I am not sure about the context in which we could lose out through the assignation of those taxes to Scotland. I am not sure of that scenario; I just do not know enough.
11:00
Okay. That was all I wanted to ask.
We heard a lot of evidence in the run-up to the referendum. After the referendum, in anticipation of the Smith commission’s outcome, we also took a lot of evidence from experts, academics and others. Quite a number of people made the point that there seemed to be an assumption that our getting more powers would automatically make things better. However, a lot of organisations, in their analysis and in their anticipation of the possible changes, failed to mention the risks involved in some of the decisions that would have to be faced. I commend you for not falling into that trap. You say quite clearly in your submission:
“The devolution of further powers to Scotland must take into account the need to reflect the desire to share responsibilities, risks and powers with the rest of the UK.”
Those risks relate to the economy. The more powers we get over economic levers, the greater the risks are in terms of what the Scottish economy can allow the Scottish Government to do to create greater levels of benefit, a stronger, organised welfare system and the types of programmes that will create the dignity that we would hope for. Is there a danger that we do not take account of those risks when we make that analysis?
One of the fundamental points that we were trying to get across in our submission, which you touched on at the start of your question, is that it is not simply about having more powers—it is about what we do with those powers. It is about using those powers in different ways to tackle poverty.
There are risks in any change in the balance of responsibilities between the UK Government, the Scottish Government and the other devolved Administrations. There is a risk that policy-level decisions will be made that, from the point of view of the Poverty Alliance, will not help to address poverty. However, those risks remain in the current or previous division of powers as well. Are you asking whether devolving those powers to Scotland will increase the risk of economic failure?
The reality is that it is about two sides of the same coin. Unfortunately, some people see only one side of the coin and talk about the devolution of powers being only a benefit, an improvement and an enhancement. However, unless we take into account the risks on the other side of the coin, it is not a fair analysis.
That is true, and it is what we tried to get across in our submission. We tried to say—as has already been highlighted—that the devolution of further powers to Scotland needs to take into account what the Scottish people said in September. What did the Scottish people say in September?
They said no.
A lot of the discussion up to September and afterwards has been about the desire for more powers. We need to recognise that, in the context, that means sharing both powers and risks.
In the paper that we submitted to the Smith commission, we argued that the retention of certain powers at the UK level should be taken into consideration—we were referring to things that are best done at that level. We tried to emphasise that we should have a set of powers that would best help us to address poverty and inequality, which we think is the aspiration of most Scottish people.
In your paper, you recognise that some progress had been made on the reduction of poverty for a period of time. A catastrophic economic change took place in 2008-09 that must have contributed hugely to the halting of that progress, but in 2013 the Joseph Rowntree Foundation produced a report that looked at the powers that were already held by the Scottish Government and that report was fairly critical of the Scottish Government for its failure to do more with the powers that it had to address poverty. Is there not a concern that, if we do not focus on how the powers are used, we will end up continuing the constitutional discussion rather than having a discussion about what we want to do with the powers and whether it would be best to use the powers that we already have?
We are in the middle of a constitutional discussion. We need to look again at the powers that it would be best to have delivered in Scotland and that it makes sense to have delivered in Scotland within the overall constitutional settlement of a division of powers between the UK Government and the Scottish Government. Those of us in civil society will always be concerned about what happens to those powers and how they are used.
I keep going back to the Scottish welfare fund, because I think that the approach that we ended up with in Scotland is important. The fact that we had that power—the fact that it was devolved to Scotland—allowed us to do something different that reflected the desire of many in civil society to have a coherent and consistent approach to the delivery of emergency support to people who need it.
A different approach has been adopted in England and Wales, which I would argue has been far less effective. No one was arguing for the social fund to be devolved to Scotland for the sake of it. If a power comes to Scotland, those of us in civil society will want to do our best to make sure that it delivers most for people who are living on low incomes.
It is not simply a constitutional question; it is about what we do with the powers once we get them.
I agree with you—that is the point that I was trying to make.
That concludes questions from the committee. Are there any further points that you would like to make before we wind up the session?
I do not think so.
Thank you very much for shouldering the burden of the evidence giving. Your responses are very much appreciated.
Had we had both witnesses here, the session would have been expected to last for 90 minutes, and at this point I would have allowed us a short break before moving on to our next evidence session. However, it looks as though it will not be possible for us to do that for another 20 minutes or so. I therefore suggest that we now take item 4 in private, after which we will have a break until our next panel of witnesses arrives.
11:08 Meeting continued in private.