George Kerevan: Cameron fails at the first hurdle with incarnation of the Scotland Bill that falls far short of his vow

According to “explanatory notes” supplied by the Scotland Office: “The Scotland Bill will deliver the Smith Commission Agreement.” And pigs might fly. Close reading of the Bill – 74 pages of dense legalese – shows it falls far short of the original all-party agreement to transfer “extensive new powers” to the Scottish Parliament.

I quote, of course, from the famous vow signed by Messrs Cameron, Clegg and Miliband just before the independence referendum last September. Clegg and Miliband may be toast but David Cameron now commands a majority Conservative administration.

After winning on May 7 Cameron pledged: “I want to bring our country together, not least by implementing as fast as we can the devolution that we rightly promised for Wales and for Scotland. In short, I want my party, and I hope a government I would like to lead, to reclaim a mantle that we should never have lost – the mantle of One Nation.”

If the Scotland Bill is anything to go by, Cameron has failed his One Nation test at the first hurdle. True, the Scottish Parliament gets a raft of new fiscal and other powers, culled from the shopping list hastily cobbled together by the post-referendum Smith Commission.

But these were the lowest common denominator that the main parties and the SNP could agree on quickly. As a result, they are eclectic, piecemeal and still deficient in granting serious fiscal responsibility to Holyrood.

Nevertheless, they are a starting point in transforming the Scottish Parliament from being a subordinate legislature dependent on Treasury handouts into a sovereign entity with control over its own finances. For that reason, the SNP sought and gained a mandate on May 7 to ensure the Smith proposals are delivered quickly and in full.

Unfortunately, the new Scotland Bill falls far short of this. The most serious deficiency, to my view, comes in Part 1 of the draft Bill which inserts into the original 1998 foundation legislation the following phrase: “A Scottish Parliament is recognised as a permanent part of the United Kingdom’s constitutional arrangements.”

Don’t be fooled. This form of words does not entrench the Scottish Parliament, recognise its inherent sovereignty, or protect it from interference by Westminster at a future date. According to the explanatory notes prepared by the Scotland Office, which will be relied on by the courts if ever there is a dispute regarding the competency of Holyrood: “The UK Parliament will not normally legislate in devolved areas without the consent of the Scottish Parliament, whilst retaining the sovereignty to do so.”

In other words, the Big Veto is still there. Holyrood exists only on the sufferance of whoever has a majority at Westminster. Part 1 of the Bill should say something like: “A Scottish Parliament is recognised as a permanent part of the United Kingdom’s constitutional arrangements, and as such no change can be made to the status or powers of the Scottish Parliament without its consent.”

WESTMINSTER’S need to micro-manage runs through the Scotland Bill like Blackpool through a stick of rock. The Bill and the explanatory notes parrot the mantra that Holyrood Ministers “must have consulted with, and obtained the agreement of, the Secretary of State”. The Scottish Secretary of State’s veto covers such areas as the rules governing universal credit, fuel poverty support schemes, and the regulation of energy companies.

An official Scotland Office “spokesman” – in other words, David Mundell, Scotland’s only Tory MP, now Secretary of State – instantly denied the existence of any such veto powers. “It is factually wrong to claim there are vetoes in the Bill,” this wag said. “These are sensible, practical arrangements to ensure the transfer of new powers smoothly.”

But the reason such escape clauses exist is for when bully Westminster needs an excuse to get its way. This is not federalism or home rule, it is subordination. The crux of federalism – as practised in Germany or the US – is shared sovereignty between different communities or jurisdictions within a single state. If any elected level within the federation oversteps its allotted powers, it is open to legal challenge in a constitutional court – by citizens or some other branch of the state. That’s a very different matter from the only Tory MP in Scotland being appointed arbiter of what the elected Scottish Parliament can or can’t do.

THE Bill gives Scotland some control over setting income tax. But while campaigning in Aberdeenshire in April, Chancellor Osborne went further: “If you have a Scottish rate of income tax, a consequence of that is you have an English rate of income tax and I think it’s only right and fair that English MPs would then have a decisive say over that.” According to Osborne, MPs in England will vote separately to set income tax south of the Border and only then will all MPs vote on the substantive budget.

That seems straightforward but what happens if the UK Government of the day only commands a minority of English constituencies? If, say, there is a future Labour or progressive alliance at a UK level but a majority of Tory and right-wing MPs south of the Border? The government of the day will not be able to plan a UK budget because it won’t determine the overall level of Treasury income from England. That systemic uncertainty will drive the financial markets bonkers, pushing up the cost of borrowing.

The Bill has other economic contradictions. For instance, the Treasury keeps control over the definition of what constitutes taxable income, over income tax recipes from non-earned income (eg, from dividends and other savings), and over the threshold at which income tax is paid. If Chancellor Osborne arbitrarily decides to alter the starting threshold, it automatically throws out the calculations made by the Scottish Finance Secretary regarding future revenues.

There are ways round this potential constitutional car crash. In Germany, for instance, the different branches and levels of government are legally bound to co-operate in setting taxes. Under German rules, the states (Länder) co-determine federal income tax and VAT – rates and shares – through direct representation in the upper chamber, the Senate. Going down that road would challenge the monopoly of centralised power that the Tories cling to, despite Cameron’s protestations to the contrary. It may, however, be the only way of devolving tax-raising powers to all the UK nations (including England) without creating an inevitable constitutional deadlock.

Which brings us neatly to the SNP’s demand to go beyond the Smith proposals and grant the Scottish Parliament a more rounded and rational set of fiscal powers. These would be based on the twin principles of raising our own revenues and of having sufficient domestic fiscal levers to influence Scottish economic growth.

Yes, that would set us on the road to full fiscal responsibility. But it also recognises that fiscal devolution on any great scale requires to be approached on a co-ordinated and sustainable fashion for the UK as a whole. What the proposed Scotland Bill offers is lopsided and full of constitutional and fiscal inconsistencies. Which even Unionists must admit is going to resolve nothing.