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Scottish Independence Referendum
Scottish Independence ‘No’ vote – What it means for business

Last night’s ‘no’ result in the Scottish independence referendum has created a brief respite for the Prime Minister and the leaders of the other main parties. It has also led to the resignation of Alex Salmond as First Minister of Scotland.

But as of today, the three Westminster leaders and Salmond’s successor all face the daunting challenge of negotiating a new plan for devolution with one another, their parties, and the public.

The respected Institute for Government think tank has already highlighted some of the key political challenges ahead (find out more about the Institute for Government at our exclusive guide to the UK’s think tanks).

Devil in the devolution detail

These difficulties all stem from the pledge made by the Conservatives, Labour and Liberal Democrats during the referendum campaign, to grant Scotland more autonomy over its own affairs in the event of a ‘no’ vote.

These so-called ‘Devo Max’ powers will have profound impacts on business, and not just those operating in Scotland.

While the details have yet to be confirmed, areas like taxation, public spending, employment, employment, trade and industry, energy, consumer rights, and data protection, are all up for grabs.

And the Prime Minister added yet more complexity today, when he argued that a broader constitutional settlement involving devolution of powers in England, Wales and Northern Ireland, was also needed.

“It is absolutely right,” he said, “that a new and fair settlement for Scotland should be accompanied by a new and fair settlement that applies to all parts of the United Kingdom.”

The PM added this should happen “in tandem with, and at the same pace as” greater devolution for Scotland. This would be a solution to the so-called ‘West Lothian question’ in which Scottish MPs are able to vote on English-only matters, but Westminster MPs have no influence over matters devolved to Scotland, Wales or Northern Ireland.

The move can also be seen as response to the concerns of Conservative backbenchers unhappy at the number of concessions being offered during the referendum campaign to secure a ‘no’ vote.

In particular, the promise to retain the Barnett formula which guarantees higher per capital public spending for Scotland irked many on the right.

The UKIP leader Nigel Farage has already tried to capitalise on this anger by writing to all 57 Scottish MPs calling on them not to vote on English matters.

What’s next?

Ironing out all the issues will be a highly complex process and cause periods of uncertainty for affected sectors.

The crossbench peer Lord Smith of Kelvin has been appointed to oversee the devolution of powers to Scotland. At the same time the Leader of the Commons William Hague has been asked to oversee arrangements for the rest of the UK. The ripples of their collective efforts will be felt across the civil service.

Work on this agenda will start almost immediately as the Government is planning to publish detailed proposals on which powers to devolve next month, and draft legislation in January, ahead of a Commons vote in the New Year.

But in the meantime, which issues do businesses need look out for?

  1. Devolution for Wales and Northern Ireland

Wales will have a strong case for gaining the same powers as Scotland. The Wales Bill before Parliament will need to be amended to include the additional powers promised to Scotland, and the Barnett formula potentially revisited. This could therefore impact areas of Welsh spending in the future.  Northern Ireland is already getting more fiscal devolution with the Chancellor expected to cut corporation tax for Northern Ireland, to put it more in line with the Republic of Ireland.

  1. English v Scottish, Conservative v Labour

While those on the right, including potential UKIP supporters, will welcome the commitment to greater powers for England, Labour is unlikely to be pleased. This is because reducing Scottish MPs’ voting rights will have a considerable impact on Labour’s power in the House of Commons. Indeed the Shadow Foreign Secretary Douglas Alexander has already morning branded the PM’s plans as a “knee-jerk response” and “wholly inadequate”. If gaining cross-party agreement on any wider settlement proves impossible, this could cause the Scottish nationalists to cry betrayal and call again for independence.

  1. Constitutional affairs will become a key election issue

Under the Government’s timetable, legislation giving effect to any of these changes would not complete its passage through Parliament until after the May 2015 General Election. This means that proposals developed over the coming months could all be amended by the next Government. All political parties will therefore need to give constitutional matters greater prominence in their election manifestos, and potentially use that to win support in different parts of the UK.

  1. Cities, regions and local authorities could become new powerhouses

Some MPs, commentators and think tanks have highlighted the difficulties of devolving more power in a nation like the UK. These stem from the fact that England is far bigger and more powerful than Scotland, Wales, and Northern Ireland, and that devolving too much power over areas like tax could cause damaging internal competition. The localism agenda could offer a way through this. There is already a fair degree of consensus on this between figures like Lord Heseltine and Lord Adonis, who respectively authored reports for the Government and Labour party on local growth. And with the Government currently making a great push around boosting key regional cities like Manchester and Leeds, we can expect the English regions and city authorities to have much more impact on businesses in the future.

It sounds like the Co-operative Party has been listening to Vanilla Ice ...
Ice with that?

At the launch of the Co-operative Party’s “Co-operative Capital” pamphlet of essays on Tuesday 9th September, it seemed that the Party’s message had been inspired by the immortal words of Vanilla Ice’s hit ‘Ice Ice Baby’. Collaboration with, and close consultation of, the communities that local councils govern was hailed as the way to improve public services and engagement at a time of huge spending cuts.

The Co-operative Party, founded in 1917, aims to promote co-operative and mutual forms of organisation, working in partnership with Labour. ‘Politics for the people’ underlines its ethos that working together will achieve more than working alone.

Launched just nine months before the general election, and a year before the London Mayoral Elections, there is a good chance the ideas in this pamphlet could affect both Labour’s 2015 general election manifesto and the campaign for London Mayor. The pamphlet is a series of short essays on a variety of topics including transport, childcare, housing and healthcare emerged from a conversation between Gareth Thomas MP and Steve Reed MP on how London can become a more engaged community.

If there was a problem, yo, I’ll solve it

The problem of transport was covered by Val Shawcross, whose approach appeared to take Vanilla Ice’s infamous words to heart. She urged the Government to stop the imbalance of resources between boroughs. Instead, local councils should collaborate with Transport for London to devolve power back to the residents and local government and listen to the concerns of their passengers.

Quick to the point, no faking

Given the presence of two rumoured candidates for the Mayor of London election, Tessa Jowell and David Lammy, it is perhaps no surprise that discussion centred on the housing crisis and included discussion of London Mayor, Boris Johnson’s ‘affordable’ housing schemes. David Lammy took the limelight on this particular issue and encouraged no faking in the design of housing schemes that echo the residents’ needs and desires. Lib Peck also backed the idea of no faking as she spoke of being honest about the scale of cuts local governments face and the transparency that must exist.

My town, that created all the bass sound

Lambeth Council Leader, Lib Peck, spoke of the pride she takes in her town and the Labour Co-operative run-council. Lambeth could well be hailed as the borough that created all the bass sound as it became the first Labour Co-op council in 2006, then under the leadership of Steve Reed, who edited this pamphlet. She particularly highlighted the Digi Buddies scheme that aims to resolve the issue of IT literacy. The scheme pairs those in need of developing IT skills with people who already have those skills and is a good example of using the existing community’s skills for mutual benefit.

Take heed, ‘cause I’m a lyrical poet

It remains to be seen whether Labour will take heed of the arguments put forth by the Co-operative Party.  It requires a new approach to communication and must ensure engagement of all of the community, not just the loudest voices.

The Queen delivers the Queen's Speech 2014
The Queen’s Speech 2014: What does it mean for each of the political parties?
Guy Corbet argues that City execs need to finally engage with their critics and rethink their own story

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