Mundell hails ‘Holyrood 2.0’ powers

Scottish Parliament
By Robert Outram and Christine Scott

11 January 2016

The Scottish Secretary says new tax and welfare powers will have a "significant and transformational effect on the devolution settlement".

Party leaders in Scotland should set out how they plan to use significant new powers for Holyrood to help voters understand the change that is coming, according to Scottish Secretary David Mundell.

In a speech given in Edinburgh on Monday, Mr Mundell said that new tax and welfare powers being given to MSPs will have a "significant and transformational effect on the devolution settlement", and will in effect create "a new Scottish Parliament" or, as he also put it, “Holyrood 2.0”.

The new devolved powers, which are being brought in as part of the Scotland Bill, come into force from April 2017. The Scottish Parliament will have responsibility for income tax (on non-investment income) and will keep the cash raised from the levy in Scotland. That would be about £12bn a year, at current rates, but Holyrood would have the power to vary rates and bands.

In addition, MSPs will be given power over some welfare rules, including the ability to create new benefits in devolved areas and to top up UK-wide benefits, such as Job Seekers’ Allowance, for claimants in Scotland. They will set rates for air passenger duty, and the Scottish Parliament will be assigned half of the cash raised by VAT in Scotland - about £4.5bn.

Mr Mundell said that once the Scotland Bill comes into effect, Holyrood will be responsible for raising more than 50% of what it spends – the current figure is only around 10%.

That means, he argued, that political parties have a "great responsibility" to set out how they will use the new powers in the run-up to May's Holyrood election, and he added that party leaders should be "up-front and tell people what their plans are".

The Scottish Secretary said: "How will they use their new and increased influence over the tax people in Scotland pay and the welfare benefits they may receive? It is vital that people in Scotland understand the change that is coming."

It is a bit premature of David Mundell to be asking parties how they will use the powers proposed in the Scotland Bill, given that the financial arrangements underpinning them are still being negotiated

The new devolution settlement for Scotland follows recommendations of the Smith Commission, chaired by former ICAS Past President Lord Smith of Kelvin, following the vote against independence in 2014.

The Scotland Bill is expected to pass into law by the time of the Scottish Parliamentary Elections this May. The Scottish Government has said the powers do not go far enough, and so far the new fiscal framework for Scotland – which will set out how Scotland’s block grant will be affected by the changes – has not been agreed.

Scottish National Party MSP Stewart Maxwell told the BBC: "It is a bit premature of David Mundell to be asking parties how they will use the powers proposed in the Scotland Bill, given that the financial arrangements underpinning them are still being negotiated.”

ICAS analysis:

Today, the Secretary of State for Scotland, David Mundell MP, spoke to an audience of business leaders and representatives of community groups about the year of the new Scottish Parliament and coined the phrase Holyrood 2.0.

Some may think that the Secretary of State is getting slightly ahead of himself.  For sure the Scottish Parliamentary Elections will take place in May 2016 and there will be a new intake of MSPs.  However, whether the Scottish Parliament will have acquired the new suite of powers arising from the Smith Agreement by then is still in the balance: negotiations over the fiscal framework need to be concluded successfully before a new Scotland Act is likely to be passed.

The Secretary of State is confident that agreement can be reached and that Scotland’s political parties will have the opportunity to, and indeed must, set out how they plan to exercise these new powers in their election manifestos.  He emphasised that these new powers, including additional tax and welfare powers, combined with the Scottish Parliament’s existing powers are so substantial that in May 2016 Scotland will have “….a different parliament to its predecessor”.

The acquisition of new powers by the Scottish Parliament will require a high degree of co-operation between the Holyrood and Westminster governments if these are to be delivered effectively.

He called on the electorate to hold the parliament and the Scottish Government to account for the exercise of these new powers which he said deliver “…a huge increase in financial accountability”. The appeal to the electorate gives an insight into the true target audience of these messages: the wider public.

For organisations, like ICAS, and their representatives who have engaged in discussions about further devolution and given evidence to parliamentary committees about how the new powers may work, the content of the Smith Agreement is familiar. The Secretary of State, through this speech, is recognising that it is now time to take greater steps to increase public knowledge about the new powers.

The acquisition of new powers by the Scottish Parliament will require a high degree of co-operation between the Holyrood and Westminster governments if these are to be delivered effectively.  Like the fiscal framework, the need for effective working relationships emphasises that the success of further devolution depends on much more than mere legislation.

Christine Scott, ICAS Assistant Director, Charities & Pensions.

ICAS has hosted events to raise awareness of the new Scottish Rate of Income Tax, with input from HMRC.

ICAS also has a range of technical information on SRIT.

Topics

  • Tax
  • Pensions
  • Political landscape
  • Business

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