The Scotland Act 2012: The Next Phase of Devolution in Scotland and its Potential Impact on Wales

Abstract

The need to introduce more transparency in the way devolution is funded in Scotland and Wales is more pressing than ever, given the international financial crisis and the national policy of fiscal austerity implemented by David Cameron’s Coalition-Government. In fact, the financial relationship between Scotland and Wales and Westminster has been uncertain for several years and the Celtic nations are all the more vulnerable as their only source of revenue is the Barnett Formula. At present, the Scottish Parliament and the Welsh Assembly spend money from a block grant which they do not raise and for which they are not accountable to their electorate. Devolutionists have long argued that it is paradoxical to give wide powers of autonomy to a Welsh Assembly and a Scottish Parliament, but deprive them of direct financial resources which denies them a full status as assemblies.The government’s Scotland Act directly raises this issue for the first time. Its fairly smooth legislative progress in the Westminster Parliament has revived the desire to abolish the Barnett grant and replace it with a needs-based formula but has also raised expectations of financial autonomy for Scotland and Wales. In effect, the Scotland Act 2012 implements the proposals of the Calman Commission for Scotland. It will give the Scottish Parliament new tax- raising power as well as a new rate of income tax. Furthermore, it will enable the Scottish Government to borrow money for Scottish projects.The question of Wales is now looming on the horizon as the Welsh Assembly’s report by its Independent Commission on Funding and Finance for Wales, chaired by Gerry Holtham, called for similar powers to be granted to the Welsh Assembly. All in all, the Scotland Act 2012 is an important step forward in the process of devolution. However, it raises as many issues as it settles in both Scotland and Wales.