New powers for Scotland threaten constitutional crisis for the UK

David Cameron’s claim that the Smith report will create “a stronger Union “ rings hollow when  set against  his insistence that the case for  English votes on English laws is “ unanswerable,”  If it means that English MPs should have a veto on any measure they don’t like that a future  Labour government proposes, it will create a constitutional crisis . Equally hollow sounding  is Scottish Labour’s praise for a good deal from Smith on the   transfer of income tax powers to Holyrood, when only a couple of weeks ago,  Gordon Brown was calling it “a Tory trap” to prevent a Labour majority at Westminster  dependent on Scottish MPs from governing at all. Now he has to swallow his words. The leader of the No campaign Alastair Darling has warned that it will all end in tears. But the reservations of the old grandees who were dominant so recently have been swept aside. .

In this political firestorm the rebalancing of powers between Westminster and Holyrood in the Smith report is too subtle to take it easily. That it’s also a Scottish solution to an all-UK question done in a panic hasn’t helped. The panic has spread to England.  This is no way to bring about the biggest constitutional changes for centuries but it’s the only way we’ve got. For MPs what’s at stake first is their own survival:  for Scottish Labour against the threat from an SNP acting like winners; for English Tories from the UKIP.   The truth is that the bulk of MPs – who are English – have reduced the future of the Union to  an issue about their own powers  – over immigration, the EU and taxation. For now the Union will have to look after itself.

The issue hangs on Smith’s declaration that  “income Tax will remain a shared tax and both the UK and Scottish Parliaments will share control of Income Tax.”  This technically accurate statement  also  defines  the case for allowing  Scottish MPs  to vote for the UK Budget  in full. But it doesn’t wash with the bulk of English MPs.  For them the powers Westminster loses and Holyrood gains are the ones that matter, the ability to set different rates and bands – the amount people pay before different rates apply.   The balancing of powers between the two parliaments is too confusing a political message. They appear to take no comfort from the fact remaining with Westminster will be the personal allowance, the taxation of savings and dividend income and  tax credits, which have been the main instrument for relief in recent years, together with the level at which taxation begins.  Split responsibility doesn’t end with income tax. It continues over welfare.  BBC Scotland has exposed it as a last minute mish mash.

The case for and against EVEL – English votes for English laws – is actually quite a fine one but the Conservatives led by Cameron don’t appear to see it that way. Ferocious interparty battles seem inevitable. With political opinion in England already febrile, the prospect of the biggest constitutional crisis in a century can’t be ruled out. So stand by for months if not years of angry and divisive politics further fuelled by neurosis over immigration and EU membership.

We are also left an ever more lopsided Union which will be very complicated to run. Wrangling and competition between the territories will be built in factor in UK politics from now on. Will people see  a post code lottery for services or the fair choices that devolution  is about?

Welfare is already devolved to Northern Ireland ( at least in law and theory) why  not to Scotland? If corporation tax is denied to Scotland why is it being  granted to Northern Ireland? The reason for  such asymmetry is in fact a paradox .

If the “social union “ that is the  UK is to be defended,  basic principles are applied but local variations that take account of local circumstances  are allowed. The SNP and Scottish Labour portray themselves as more social democratic than England. Very well , let them be more generous but they will have to pay for their generosity themselves.  Impressions that  Barnett formula levels of subsidy will remain are misleading. Barnett levels will  be reduced. They are already too high in Scotland as they are calculated on the basis of similar spending in England but before sweeping English cuts were imposed.

On a differential corporation tax for Northern Ireland ,  the private sector is too tiny for England to worry about tax competition, assuming that brass plating will be  prevented.  The land border with a low rate to the south is enough to make NI a special case.  But with the Barnett formula becoming  ever more controversial, local hearts will be in their mouths  at the consequences for the block grant.

But make no mistake. A lower corporation tax will draw Northern Ireland closer to the Republic and further away from GB, if the results are as good as the most favourable predictions for growth. It’s encouraging the unionist politicians don’t seem to mind and for once are putting a view of the common interest ahead of the old obsession.

Let’s just note a hint of momentum on the inter- party  talks, with Enda Kenny suggesting a joint visit to Belfast with David Cameron.  As  Cameron said about a plan for a constitutional convention. ” I can hardly wait.”