Is the time ripe for Scotland to seize its energy future?

Energy policy has become an increasingly hot topic with the recent publication of both the European Union's third energy package and the UK Government's energy bill.

The Scottish Government, not wanting to be outdone by its counterparts in Westminster and Brussels, has been ploughing its own furrow, developing a renewable energy target of 50% by 2020.The existence of that Scottish target begs the question – what is the legal basis for a Scottish energy policy?

The Scotland Act 1998 established the powers of the Scottish Parliament and Government. Essentially, the Scottish Government can act in any area that is not 'reserved' to Westminster (i.e. listed as a reserved item in the Scotland Act).
 
In relation to energy, there are a number of such specific reservations to Westminster, including the generation of electricity. This does not, however, mean that Scottish ministers cannot influence energy policy; they can do but only in a more indirect fashion. This can be confusing.

Because the Scottish economy does not operate in neat legal silos of 'reserved' and 'not reserved' matters, actions taken by the Scottish ministers or the Scottish Parliament in areas that are not reserved may have an impact on the development of UK Government policy in those that are. For example, Scottish ministers potentially have the ability to shape the direction of energy generation by using the Scottish planning system to prevent further nuclear development in Scotland. In a renewable energy context, the proposed marine and climate change bills provide opportunities for Scottish ministers to prescribe rules in non-reserved areas that, nevertheless, make the development of renewable energy more attractive in Scotland. Therefore, using areas of devolved power can allow the Scottish Government to ensure its preferred policies are pursued.

The Scotland Act anticipates the possibility of such interference and creates a tolerance within which Scottish ministers can legitimately act. In broad terms, provided the purpose of the relevant action or legislation is to deal with non-reserved policy areas, then it will be lawful, irrespective of any interference with reserved policy areas. Where such interference is tolerable within the meaning of the Scotland Act then the action or legislation will be regarded as falling within devolved competence.

So what is the process by which any questions around this issue can be resolved? There are a number of routes available. At the legislative level, there are three main routes prescribed by the Scotland Act:

1. the sponsoring Scottish minister and presiding officer of the Scottish Parliament must confirm that, in their opinion, any bill before the Parliament is within devolved competence
2. even if such opinions are given, the UK Government can make a referral to the Judicial Committee of the Privy Council for a definitive ruling on whether a bill is within devolved competence and
   
3. where a bill actually modifies the law relating to reserved matters (e.g. the rules of company or contract law), then the UK Government can veto it where it reasonably believes the bill will have an adverse impact on the operation of such law. Similar routes exist in relation to ministerial action.

Of course, there are other routes for dealing with disputed questions not prescribed by the Scotland Act. In an extreme situation, for instance, the UK Parliament could always intervene to modify the Scotland Act. Additionally, it is possible for those affected by ministerial action or acts of the Scottish Parliament to challenge them directly in the ordinary courts, e.g., on the grounds that they fall outside devolved competence.

It is also worth noting that the Scotland Act also provides for additional functions or powers to be bestowed by Westminster and when the Scottish Ministers are acting on the basis of those other transfers it won't necessarily matter if their action relates to a 'reserved' area.

There have already been significant new areas of devolution since the Scotland Act, most notably aspects of rail policy. Gordon Brown's recent statement that after 10 years of devolution, there was a very strong case for reviewing the powers currently devolved to the Scottish Parliament emphasises current opportunities for extra powers, perhaps relating to energy, coming the way of Holyrood.

However, some of the main practical barriers to the development of renewable power, such as the availability of grid capacity, remain controlled by London. Commercially, the electricity market into which renewable generators sell is a GB one and it is that market that dictates the value (of the subsidy) that renewable certificates provide. This also means that the idea of Scotland exporting 20% of the electricity it generates is not one which the legal framework would recognise.

Scotland can have its own energy policy but as things stand it has limited legal tools to implement that policy. The new draft European renewables directive may lead to regions such as Scotland becoming much more active in developing renewable generation so the time is ripe for a review of Scotland's energy powers.

07/03/2008

Powers of the Scottish Parliament up for review

The Prime Minster, who only a year ago, was implacably opposed to the idea of any more powers for the Scottish Parliament is said to be considering whether and how Holyrood might take on more responsibility for raising its own revenue.

Gordon Brown recently stated that after 10 years of devolution, there was a very strong case for reviewing the powers currently devolved to the Scottish Parliament. Backing his leader in Scotland, Wendy Alexander’s plans for a fresh study of devolution, Mr Brown has said: "There is an issue about the financial responsibility of an executive or an administration that has £30bn to spend but doesn't have any responsibility for raising that. In any other devolved administration in the world, there is usually a financial responsibility that requires not only the spending of money by the administration but also its responsibility to take seriously how it raises money."

What is being contemplated?
Mr Brown suggests that some extra powers such as more powers over transport might be passed to Holyrood, however, he warned that this is a two way street and that other powers such as risidual security matters  may be returned to Westminster. The details, he maintains, will be worked out by a review but he believes that it is logical to revisit the ways in which Holyrood accrues its revenue.

Currently, all revenue is accrued by the Treasury which then assigns it to Holyrood and elsewhere. However, Mr Brown has spoken about deploying some sort of assigned revenue system (which was originally considered in the 1990 report from the Convention, Towards Scotland’s Parliament but was later dropped in favour of the current arrangement.)

What would these changes mean?
If the system of assigned revenues was undertaken, then the product of certain taxes, for example income or VAT would go straight to Holyrood. This would give MSPs an incentive to grow the economy and accrue extra revenue for Holyrood. Seems straight forward enough, however, the Prime Minster has not stated which taxes would be assigned to Holyrood and if, for example, VAT or corporation tax were included it would rather defeat the purpose of allowing fiscal discretion, as the Scottish Parliament would be prevented from varying the rate under EU rules.

What about income tax ?The Scottish Parliament already has powers to vary the rate of standard taxation but has chosen never to use this as it would be politically unpopular and cause too much political pain for fiscal gain. Under the new system, would the Parliament be granted the power to vary the upper rate of taxation ?

In short the Prime Minster has opened a  can of worms that seems to have more questions that answers – answers which hopefully will be answered by the review which he hopes to establish.

07/03/2008

A day in the life of a parliamentary researcher

07/03/2008