Scotland voted no to independence yesterday by a wider margin than many had expected, providing certainty to a legal market which has been hampered by the possible large-scale upheaval.
The future is not entirely settled with a promised greater devolution of powers now expected to be push forward. The pledge, made by the three leaders of the UK’s main political parties, is light on detail, promising to give ‘extensive new powers’ though failing to outline what they would be.
There are already some new powers coming to Scotland with extra income tax powers and the ability to raise debt under the Scotland Act 2012 but devolution will increase this with further powers handed down this parliament. This morning (19 September) David Cameron appointed Lord Smith of Kelvin to oversee devolution, which would include greater powers over tax, spending and welfare with draft legislation to be brought forward by January.
Speaking to Legal Business after a majority ‘no’ vote was confirmed, CMS senior partner Penelope Warne, who also heads its energy practice and established the Aberdeen office, said: ‘The biggest takeaway is at least we have the major uncertainty resolved as we have an outcome. There will still be uncertainty as to what extent there is more devolution, which powers will be transferred from Westminster to Scotland. It will take a little while to know whether it will be a small or large transfer but the expectation in Scotland is that it will be more signifcant. Whenever there is change there is a need for new legislation and I see the major areas where that will fall as the tax arena and energy. But it might be wider than that.’
In tax, the main question now facing the legal community is where the power to impose new taxes will lie. Increases in corporation tax may still see business shifting their headquarters south of the border affecting corporate work. Meanwhile, if income and property taxes are raised this might drive high-net -worth individuals to other jurisdictions.
Whatever happens, there will be much less complexity in devolution than in independence, according to Dan Neidle, a tax partner at Clifford Chance: ‘This will come as a huge relief to the business world,’ he said. ‘Independence would have thrust us into an unprecedented era of tax complexity, with companies that operate cross-border finding themselves effectively split in two. We have dodged huge expense and uncertainty for businesses, and a vast distraction for HMRC – a rare event that’s good news for the taxman and taxpayers alike.’
Meanwhile, in energy, the creation of a new oil and gas authority, based in Aberdeen, will now push forward and could bring more work for firms north of the border.
The margin of the vote with, 55.25% voting no, and the high turnout (84.6%) is also important in creating certainty. Warne added: ‘It’s very good news, whatever your political persuasion, whether you were for a no or a yes, that the vote was decisive and a not a very close one. It’s really helpful for both the business community in Scotland and the UK. I think there will be new regulation and significant changes may be made politically but there will be more confidence and clarity moving forward.’
Rod MacLeod, banking and finance partner at Tods Murray, said: ‘No matter which way you hoped the vote would go, today’s result should at least go some way to restoring a degree of certainty for the business community in Scotland and the rest of the UK on issues such as currency, pensions and EU membership, at least in the short term, and one would hope that this will help clear the backlog of instructions and delayed investment decisions in Scotland that have been on hold over the last six to 18 months.’
With those issues settled, and signs of both Holyrood and Westminster governments being able to work amicably together, the signs are positive for further economic recovery and greater work for the industry. Kirk Murdoch, Pinsent Masons‘ chairman for Scotland and Northern Ireland, said: ‘I would imagine, in some cases because of the result, but in most cases because of the early signs of both governments getting on and settling the devolution, there will be more confidence that business can see what’s coming and get on and do those deals that were on the table and, hopefully, on the back of that continue the economic recovery.’
Of course, hopes have been raised before over the prosperity devolution would bring to the Scottish legal profession which subsequently failed to materialise, but the certainty provided by the vote and the potential economic boost from delayed investment should result in a better business environment for lawyers to engage with their clients compared to recent years.
For an in-depth discussion of the impact of the independence referendum on the Scottish legal market, ahead of the vote, see Short-term boom but long-term questions loom for lawyers if Scotland votes to go it alone