After the immediate relief and disappointment felt variously by politicians, individuals and businesses following the clear majority against Scottish Independence, the scale and pace of change that will result — for the whole of the UK — is now starting to emerge in the broader context of a significant possibility that the next UK Government will hold a referendum on whether the country should leave the EU.

There are a range of potentially significant impacts for business even though many of the immediate questions which would have arisen in the event of a "Yes" vote may have receded.

However, the implications of the Scottish Referendum and the political response to it are uncertain and complex.  The Prime Minister's response has opened up broader issues about the governance of the UK, with the prospect of greater fragmentation and divergence of policy-making and regulation.  

It is too early to know what measures may have a direct impact on businesses, but what is clear is that, coupled with proposals for further devolution outside Scotland, there is a real prospect of increasing divergence of policy and regulation across parts of the UK. That will present challenges for businesses in assessing impacts, engaging effectively with a growing number of policy-makers and stakeholders and ensuring on-going compliance.
In the immediate term,  it will be vital for businesses to engage effectively in a policy-making process that is undoubtedly challenging in terms of timescales, uncertainties and political tensions.

What we are doing to help you

We have established a Constitution Taskforce, comprising specialists from our Global Policy Advocacy, Public Law and Financial Institutions, Commercial Regulatory, Tax and Employment practices.

The Taskforce will be actively analysing developments and will keep you updated on emerging issues. We will be planning a series of events and publications over the coming months.

Pre-Election Timetable

A range of conflicting proposals and views are now being voiced, and it falls to the newly-instituted Scotland Devolution Commission, led by Lord Smith of Kelvin to try to reconcile those proposals into a political consensus for Scottish devolution. 

Whilst the precise timetable for the broader change is currently unknown we do have a clear idea of what is planned in the run up to the next election.

Click here to view the table.

The Smith Commission has been charged with developing proposals in three main areas: welfare, taxation and spending. Although Gordon Brown's last-minute interventions revealed a wider-ranging twelve-point plan for further devolution, it is unclear how wide the Commission's remit – or the eventual agreement – will be. 

At the same time, William Hague is chairing a Cabinet Committee to develop proposals for wider change to the UK's constitutional settlement, in particular to address the so-called West Lothian Question; that is that Scottish MPs sitting in the House of Commons are able to vote on legislation covering policy areas wholly devolved to the Scottish Parliament and therefore not relating to their constituents. It seems likely now that progress on this issue will not be a condition of further Scottish devolution, and the timetable is not yet determined.

Tax changes 

The Scottish Parliament already has – but has never used – limited income tax-raising powers (it can set a different basic rate of income tax from the rest of the UK by up to 3%). Further devolution of tax-raising is already provided for, allowing the Scottish Government to vary the basic and additional rates of tax by up to 10%, plus or minus, provided the rates of basic and higher rate tax rise and fall relative to one another at a constant differential. There is also a mechanism for determining who is a Scottish taxpayer. As such, devolution of tax powers is already in place and ready to be brought into force. From April 2015 there will be a new Land and Buildings Transaction Tax which will be collected by the Scottish government and will replace SDLT in Scotland. This will apply to all real estate transactions in Scotland.

It is unclear whether proposals will emerge to go further than this, either in respect of income tax (for example, giving powers to determine personal relief) or on other taxes, such as VAT or corporation tax, or to establish a different rate of VAT in Scotland from the rest of the UK (which would be illegal under EU law as it currently stands). It is also uncertain as to whether there will be any devolution of oil and gas revenue raising powers. Of the other taxes - such as Climate Change Levy and fuel, vehicle and other excise duties including Air Passenger Duty – there has only been a proposal to devolve Air Passenger Duty so far. With no direct connection at present between Scottish Government spending budgets and Scottish tax revenues, it must be on the cards that Westminster will at least consider seeking to establish a closer connection between the two, which raises interesting questions about what that closer connection ought to be.