Labour in U-turn over new powers for Scottish Parliament

The shadow foreign secretary will tell Labour members in Glasgow that defending the Union against independence “does not and need not require simply a defence of the status quo”.

Instead, he says the pre-referendum period must herald “a new affirmation of Scottish Labour’s agenda for our nation”.

While he does not specify exactly what shift the party should support, his comments indicate clearly that Labour is now going beyond the reforms being piloted by the Conservative-Lib Dem coalition in the Scotland Bill.

That bill will hand MSPs limited power to vary income tax and will devolve a series of other taxes, such as stamp duty, to Holyrood. But Mr Alexander’s comments suggest Labour is now moving towards a so-called “devo-max” model, under which most taxes would be set by the Edinburgh parliament, rather than Westminster.

The devo-max option would keep Scotland within the United Kingdom but would almost certainly bring to an end the current block-grant system, under which some £30 billion is sent to the Scottish Government every year from Whitehall for ministers to spend on schools, hospitals and other public services.

Labour sources said they were “open-minded” on options.

However, party figures say they want to flesh out their proposals in the run-up to the referendum, arguing they cannot ignore the message sent by voters in May, who handed the SNP an unprecedented landslide in the Scottish Parliament elections.

But Mr Alexander will insist today the SNP should not seek to “conflate” any move to strengthen the devolution settlement with independence by putting both options in the referendum. First Minister Alex Salmond has indicated he wants to ask Scots one question on independence and another on devo max.

Mr Alexander argues “devolution is not a stop on the railway line to a separate state” and should be considered entirely differently. As a result, he says, “a referendum on separation should only have one question”.

On reforming the devolution settlement, he will say: “In the run-up to that referendum now promised by the Nationalists, assuming they do actually summon up the courage to go ahead, we must do more than oppose separation. We must be true to our own history and advocate devolution.

“That does not and need not require simply a defence of the status quo. Indeed, the Scotland Bill now before the Westminster parliament evidences an open-minded approach as to how the architecture of devolution can be improved.”

He will continue: “I believe that Alex Salmond will be defeated in his referendum on separation. I believe that once again it will be re-asserted that devolution is the settled will of the Scottish people. But that does not mean that the settlement itself cannot respond to circumstances.

“I stress, devolution and separation are two very different concepts. We must make sure that if we look again at the devolution settlement, it is not a response to the SNP’s separation agenda, but part of a new affirmation of Scottish Labour’s agenda for our nation. Let us defeat separation and re-assert devolution in this way.”

Confirmation from she shadow foreign secretary that the party wants to back a further devolution of powers comes after Labour leader Ed Miliband held discussions with senior Scottish party figures, including former First Minister Henry McLeish, on the subject of Holyrood’s powers over the summer.

Senior Scottish Labour MPs have said privately they no longer believe they can hold to the line of the status quo – as proposed in the Scotland Bill – given the SNP’s victory in May.

One MP said: “Prior to May, it may have been that the Calman plans were what people wanted. But, clearly, May has changed that and you can’t ignore it.”

Scottish Labour’s three leadership contenders, Johann Lamont, Ken Macintosh and Tom Harris, have said they are open-minded about backing more powers for the Scottish Parliament.

In his speech, to Scottish Labour’s Youth and Student Conference, Mr Alexander will suggest that Scottish Labour must accept that, under any government, there would be a slowdown in public spending.

He will say: “On any scenario, given the present economic situation, public expenditure will be constrained in the immediate years ahead. It is, therefore, vital that Scottish Labour looks imaginatively and urgently at what new approaches can advance our vision of a socially just Scotland.”

He will argue government action “is necessary but alone is not sufficient to build the good society”. Scottish Labour should be for both the individual and society, he will say. Reflecting on the decision of Scottish Labour not to pursue New Labour reforms in England, he compares the party to one of the world’s IT giants. “IBM delivered the PC. Scottish Labour delivered devolution. But just like IBM had in the 1980s, in the years after 1999 we failed to fully comprehend how devolution altered the environment in which we operated,” he will tell his audience.

He will also say the “antipathy” between Labour and the SNP has prevented the party from getting its core messages heard. He will add: “Put more bluntly, if the Scottish people believe that we hate the SNP more than we love Scotland, we will continue to lose.”

A spokesman for SNP external affairs secretary Fiona Hyslop said: “Douglas Alexander, along with Henry McLeish and others, now at least seems to realise that the Scotland Bill goes nowhere near enough in satisfying the aspirations of the people of Scotland – yet their MSPs at Holyrood don’t seem to have got the message, and now Labour are deeply split on the issue of including a ‘more powers’ option in the referendum. The only alternative is being in cahoots with the Tories in opposing any more powers for Scotland – a disastrous stance in Scottish politics.”