SCOTLAND could lose its veto over a new generation of nuclear power stations, it emerged last night following a major report into the devolution settlement.
The Calman Commission – set up to look into the powers of the Scottish Parliament – warned yesterday of "friction" between London and Holyrood over nuclear power and said the issue had to be resolved.
Its report did not come up with a conclusion, but suggested that the issue had to be sorted out without disrupting the UK supply network – a statement which the Nationalists interpreted as a clear threat to Scotland's veto.
The interim report also suggested that Westminster might lose control over a number of areas which it currently controls in Scotland, including drugs policy, firearms, drink-driving limits and broadcasting.
But it rejected calls for Scotland to be given complete control over tax and revenue raising. Instead, it suggested that "assigning" tax revenues to Scotland might make the Parliament more accountable, without handing over control over the tax rates themselves.
Energy policy is reserved to Westminster and, as the UK government has a pro-nuclear policy, it should be able to press ahead with new nuclear stations in Scotland.
However, the Scottish Government has the final say over any major electricity generating stations through planning legislation which gives it an effective veto over any new nuclear stations.
This ability to block any new stations has angered UK ministers, who believe they should be able to site new nuclear stations in Scotland.
Yesterday's report by the commission warned of problems that would only get worse unless the issue was resolved.
It said it wanted further evidence on how this "friction" could be sorted out.
One way would be to hand all energy policy in Scotland over to the Scottish Parliament – but this would cause problems over the control of the national grid and be opposed by business organisations and the UK government.
The other alternative would be to strip the Scottish Government of its veto. This could be done by amending the relevant electricity control legislation, depriving Scottish ministers of any power of planning for large-scale generating stations.
The Nationalists claimed the report was a clear indication that the Calman Commission wanted to end the Scottish Government's veto. Shirley-Anne Sommerville, an SNP MSP and a member of the Scottish Parliament's climate change committee, said there would be a "real explosion" of anger if an end to the veto was recommended.
She said: "The commission's questions on energy and planning are clearly designed to please the Labour government in London, whilst taking little account of the clear desire in Scotland for more energy devolution, not less."
She added: "Calman must confirm that he does not intend to see Scotland's essential planning powers returned to the UK government."
Sir Kenneth Calman insisted yesterday that he had not made up his mind on any of the issues in his report and his commission would hear further evidence before making its final conclusions next year.
The commission was set up to review the devolution settlement, and yesterday it set out the issues where it believes changes could be made.
Sir Kenneth divided these areas into two categories, the first being more likely to be changed – broadcasting, energy policy, animal health and movement, drink-driving legislation, firearms, the misuse of drugs, the regulation of healthcare professionals and marine planning.
The second category includes those issues where there might be a case for change, but where there is more uncertainty due to a lack of evidence. These include the civil service, insolvency law, employment law, health and safety regulations and some aspects of immigration policy.
The commission will spend the next nine months or so taking further evidence on these areas before its final report.
It did, however, rule out several issues, including full fiscal autonomy for Scotland – the handing over of complete tax- and revenue-raising powers to the Scottish Parliament.
In a blow to those who wanted to see Scotland gain maximum control over its finances, Sir Kenneth said: "Full fiscal autonomy is inconsistent with the Union, and we do not consider it further."
He added: "Some functions are an integral part of the Union and can only be dealt with at the UK level. For example, defence and national security, international representation, an integrated single market."
The monarchy, the UK constitution, foreign affairs, currency and coinage, as well as some aspects of the economy, also fall into this bracket.
Although Sir Kenneth made clear he does not believe in full fiscal autonomy, there are many different tax and revenue functions that could be devolved to Scotland short of full fiscal autonomy, which might be recommended in the final report.
These include the assigning of tax revenues to Scotland – giving the Scottish Government the exact amounts from each tax raised, without giving the administration the ability to change the tax rates.
Yesterday's report suggested that revenues raised by VAT, excise duty, corporation tax, national insurance contributions and income tax could be assigned to the Scottish Parliament, with Westminster left to set the UK rates.
This would allow the Scottish Parliament to grow these revenues through other policy initiatives, giving it more accountability for the money it spends than at present, but without endangering the Union.
The Scottish Parliament already has the power to raise or lower income tax by up to 3p in the pound, but this so-called Tartan Tax has been rejected by the main parties because it would cost too much to set up, is too blunt a tool to use and would either make Scotland the highest-taxed part of the UK, or lead to a loss in revenue the Scottish Government cannot afford.
Set spending priority but don't set tax rate
THIS is the biggest and most important area for the Calman Commission to consider.
Sir Kenneth Calman made it clear yesterday that full fiscal autonomy is not an option – that would involve handing over control over all tax powers to Holyrood and asking the parliament to send a small amount back to London to cover reserved issues such as defence.
One of the most likely options is the assignment of tax revenues. This would give the Scottish Parliament some accountability for the money it spends but would not give it the freedom to raise its own income.
While the Scottish Government would not be able to control the rates of those taxes, it would have an incentive to introduce other policies to boost its tax take.
The taxes identified by the report which could be assigned are – VAT, corporation tax, excise duties, income tax and National Insurance contributions.
On the transfer of powers over corporation tax, the report said there was a "case" for it to be devolved but warned that some business organisations were strongly against that move.
The report also pointed to "real problems" with the devolution of VAT or excise duty rates between Scotland and England.
All this suggests that the commission is likely to recommend the assignment of tax revenues, in some form, but not the handover of tax levers.
The commission may recommend that the Scottish Government be given the power to borrow money, which it cannot do at the moment.
THE laws relating to corporate insolvency are among the minor issues to be considered by the commission, but they may be among the only ones that the commission recommends returning to Westminster.
The Institute of Chartered Accountants in Scotland told the commission that laws in this area (which are partly devolved) had not kept up with changes in England.
As companies tend to operate across the Border, there is, therefore, an argument for allowing Westminster to legislate for the whole of the UK.
The commission wants to hear more before making a recommendation, but this is likely to be one area that could see the devolution settlement weakened and Westminster's powers increased.
There also might be a move to bring together some charity laws under Westminster, too.
Cross-border battle for control
ENERGY policy is almost entirely reserved to Westminster. However, the Scottish Government has power over planning for electricity generation and it is able to use this power to block the development of new nuclear power stations, even though it does not have responsibility for nuclear power.
The Calman Commission believes there should be changes in this area to stop this "friction" between the two administrations.
It could recommend that control over energy policy for Scotland as a whole is transferred from Westminster to Holyrood. That would appeal to the SNP, but it would lead to further disputes over the grid.
Alternatively, the commission could decide to favour the UK government and recommend that the Scottish Government be stripped of its powers over planning legislation. That might be the simplest option, but again it would lead to problems if the UK government imposed nuclear power stations on Scotland.
Yesterday's report was very cautiously worded, asking for further submissions on the issue to find out whether changes could be made "without compromising the integrity of the UK supply network".
The Nationalists believe the commission will side with the UK government and recommend the clawing back of power, but the commission insists that no decision has yet been made.
Channelling new powers to Holyrood?
THIS issue was one of the first tackled by Alex Salmond when he became First Minister.
He called for broadcasting to be devolved to Scotland and set up the Scottish Broadcasting Commission to look into the issue of Scottish programming and control.
The Calman Commission has decided there is enough evidence to take this issue further.
It could decide to recommend devolution of the whole of Scottish broadcasting to Holyrood. This would delight the Nationalists but would also present new problems.
It would have serious implications for the UK-wide BBC and for the regulator, Ofcom – a fresh regulator just for Scotland might be needed.
It is more likely, therefore, that the commission will call for greater devolution of broadcasting to the Scottish Parliament but leave central functions – including regulation – in London.
Sir Kenneth Calman admitted yesterday that it would be all but impossible to create a new Scottish digital channel, which has been proposed, while having Westminster as the sole body tasked with scrutiny of the BBC.
If a Scottish digital channel is created, then the Scottish Parliament would have to be given a role in scrutinising and holding the managers of that channel to account.
What the Calman Commission has not revealed, however, is how much control Scottish ministers will get over broadcasting in Scotland. It will decide that crucial issue over the next few months.
Holding fire on guns
THE commission received evidence calling for tighter laws on firearms, particularly as the Scottish Parliament has control over other offensive weapons.
The Association of Chief Police Officers told the commission differences in approach between Scotland and England would be manageable if they were kept to the "margins" but would be difficult to resolve if they were substantial.
With this in mind, the commission said it wanted to receive more evidence before making a decision.
Blurred dividing line
ROSS Finnie, the former rural development minister, who led Scotland through the foot-and-mouth crisis in 2001, told the commission there were clear problems in the division of responsibilities between Scotland and England.
He warned that the two administrations had not functioned as effectively as they might have done.
There was one clear problem: animal health is devolved, yet the funds for managing exceptional circumstances, such as major disease outbreaks, are reserved to Westminster.
This was illustrated when Richard Lochhead, the current rural affairs secretary, had major problems when he tried to get funding for a slaughter scheme for hill lambs last year. This is something the commission will look at and almost certainly recommend for more power to the Scottish Parliament.