Increments [of devolved powers]...expose yet more anomalies and disadvantages to Scotland that only the full powers of independence would resolve.
At the point when taxes or spending responsibilities are shifted from UK level, the money yielded or spent moves over to the Scottish budget for subsequent changes to be made by devolved political decision. But in practice the overall effects are complicated. The concept of the ‘block grant adjustment’ is also meant to protect the UK from Scotland’s making a lesser tax effort than England in its own-resource area (either through setting lower rates or achieving a lower yield through weaker economic growth). Until 2022 the ‘indexed per capita’ transition mechanism is meant to prevent Scotland from losing out from the new arrangements, but in the long term more devolution means more risk. Calculations of spending and tax yields are unstable and often revised retrospectively. Covid has added swathes of new UK spending either bypassing the Scottish budget altogether or generating Barnett consequentials requiring decisions on when and how to spend them. Accounting management within and between financial years in consultation with the Treasury is as delicate as ever.
Beyond the detail is the status of the main mechanism of territorial stabilisation in the UK in recent decades – the granting of incrementally more devolved powers sufficient of stave off nationalist demands. The SNP’s argument is that such increments, while in principle welcome, expose yet more anomalies and disadvantages to Scotland that only the full powers of independence would resolve. In the meantime they have a dilemma – do they turn down more powers to protect the UK funding supply? So far they have understandably fudged and manoeuvred, preserving for as long as possible transitional rights from the pre-2016 pattern of very limited local revenue sources. It helps that the complexity of the issues keeps them below the political radar, and the new independent review may work to Scotland’s advantage. But lurking around is the dark secret that the Treasury’s position of ‘you’re welcome to more powers and please raise the money to pay for them’ is perhaps a poisoned chalice and a self-limiting factor on the amount of tax-and-spend devolution that a Scottish calculation of ‘transactional benefit’ would indicate.