Scotland's Future

Chapter 10 Building a Modern Democracy

• Independence will ensure that Scotland always gets the governments that the Scottish people elect
• Independence will enable Scotland to build a modern, European democracy, founded on a written constitution, enshrining the fundamental rights and values that underpin our society and based on the principle of the sovereignty of the people of Scotland
• The Scottish and Westminster Governments are already committed under the Edinburgh Agreement to work together constructively in light of the outcome of the referendum in the best interests of the people of Scotland and the rest of the UK
• Following a Yes vote, the Scottish Government will negotiate to ensure that Scotland can become an independent country within the EU, with a fair allocation of assets and liabilities between Scotland and the rest of the UK and arrangements to ensure public services continue to be delivered in the interests of the people of both countries
• We propose that Scotland's independence day should be on 24 March 2016. The first election in an independent Scotland will then take place on 5 May 2016
• Between the referendum and independence, we will put in place the initial constitutional platform for independence and the arrangements for the transfer of powers to Scotland
• The legislation on independence will place a duty on the Scottish Parliament elected in 2016 to establish a constitutional convention to prepare the permanent written constitution of Scotland
• An independent Scotland will safeguard and strengthen Scotland's equality and human rights framework, and maintain our existing strong commitment to the European Convention on Human Rights
• We will support greater subsidiarity and local decision-making and work with local councils to embed the position of local government within a written constitution

Why we need a new approach

The Scottish Government's vision is of a Scotland, fit for the 21st century and beyond, which is founded on the fundamental principles of equality and human rights and characterised by our economic success and social justice and the ability of our people to have control over the decisions which affect them: the opportunity for all Scotland's people to play a part in our future.

The Scottish Parliament, re-established in 1999, was the result of widespread dissatisfaction in Scotland at the "democratic deficit" - decisions being made for Scotland by successive Westminster Governments without popular support here. However devolution, for all its successes, has been only a partial solution to the democratic deficit. The responsibilities of the Scottish Parliament are limited and are decided by Westminster. They exclude key reserved powers, such as welfare, pensions, taxation, energy, international relations, the EU and defence.

With independence, Scotland will always get the governments we vote for. The trend of Scotland voting for one government and getting another has become more stark since 1945^[368]. For 34 of the 68 years since 1945, Scotland has been ruled by governments that were elected by fewer than half of Scottish constituencies. Constituency results for Scotland rarely affect the outcome of UK General Elections. Indeed, in only two of the 18 elections since 1945 (October 1964 and February 1974) would the largest party at Westminster have been different if Scotland had been independent and not returned MPs to Westminster^[369]. The two governments which were elected lasted for less than 26 months in total.

This means that Scottish votes play a limited role in the results of UK General Elections. To win elections at Westminster, the UK parties have to present policies that appeal to voters in other parts of the UK, where voting patterns now differ markedly from those in Scotland.

These long-term developments in voting patterns in Scotland have created an unstable and unsustainable political system. Since 2010, the Westminster Government has been led by the Conservative Party. That party has only one Scottish MP and won either none or only a single seat in the preceding three UK General Elections. Conservative and Conservative-led Westminster governments attract the support of a small minority in Scotland^[370]. Nevertheless, those governments have responsibility for important areas of national and international policy for Scotland.

Independence for Scotland is the only solution that can eliminate this democratic deficit and remove these fundamental instabilities from the heart of the current political system in the UK. Only independence, completing the powers of the Scottish Parliament, can secure for Scotland the government and policy choices in reserved areas that the people of Scotland support.

With independence, Scotland will have the full range of responsibilities of a normal independent country and our parliament and government will receive their powers from the people. Independence will also enable Scotland to build a modern democracy.

A key responsibility of the first parliament of an independent Scotland will be to put in place a written constitution to underpin the democratic gains of independence. A written constitution will be a significant step forward for an independent Scotland. It will replace the central principle of the UK constitution - the absolute sovereignty of the Westminster Parliament - with the sovereignty of the people of Scotland, which has been the central principle in the Scottish constitutional tradition.

Is further devolution an alternative?

The devolution arrangements under the Scotland Act 1998 allow adjustments to the devolved powers of the Scottish Parliament. In practice, other than changes under the Scotland Act 2012^[371] (which introduced a limited extension of the Parliament's responsibilities for taxation due to come into force over the next few years), only minor powers have been transferred to Scotland since the creation of the Scottish Parliament in 1999. Even when the 2012 Act powers are in force, the Parliament will be responsible for raising only 15 per cent of tax receipts in Scotland.

With the agreement of Westminster, devolution could be extended within the UK to cover all domestic and economic matters and to provide full fiscal responsibility for Scotland. This would mean that Scotland would collect our own taxes and make a payment to Westminster for common services such as defence. Such a system operates in the Basque country and Navarra in Spain.

However, all the indications are that the Westminster Government believes that further devolution of taxes should be strictly limited. It is also unlikely that any significant elements of the welfare system will be devolved. Without further devolution in these key areas, Scotland will not have the powers needed to grow our economy or to deliver a fair society that meets the aspirations of the Scottish people.

Even full devolution within the UK would leave important matters of foreign affairs in the hands of Westminster. In particular, Scotland would not have independent representation in the EU, and would be subject to the decision on the UK's membership of the EU taken across the UK as a whole in the referendum promised by the current Prime Minister. This could result in Scotland being taken out of the EU against the wishes of the people of Scotland and contrary to our interests.

Westminster would continue to take decisions on defence matters and Scotland would remain the base for the Trident nuclear weapon system and its successor.

Westminster would also maintain its claim of sovereignty over Scotland in all matters. Although by convention the Westminster Parliament does not legislate for matters that are the responsibility of the Scottish Parliament, it retains the ultimate power to do so and could unilaterally change the powers of the Scottish Parliament, or indeed abolish the Parliament entirely.

So under devolution Westminster decisions on reserved matters - welfare and tax - have a direct effect on wide areas of Scottish life and the Scottish Parliament's responsibilities. Westminster decisions on funding for England of services devolved to Scotland also have a direct impact on the Scottish budget through the Barnett funding formula.

The possibility of full devolution of economic and domestic matters is not on the table. It is not being offered by the Westminster Government or the main UK political parties.

Independence, in contrast, is guaranteed to deliver all the powers Scotland needs if we are to make the most of our potential as a nation. Only independence will ensure Scotland's international position and full membership of the EU. It is the only option that enables Scotland to be a full and equal partner on these islands. Only independence will remove the residual power of the Westminster Parliament to legislate in devolved matters.

The Scottish Government therefore believes that independence is the optimum model for the government of Scotland and the one that will best serve the interests of the people of Scotland. It is by far preferable to the range of devolution alternatives that might be proposed.

The Scotland we can create

An independent Scotland will recognise the importance of empowering our communities, valuing the diversity of talents, skills and contributions of our people and the importance of ensuring that all are treated with dignity and respect. Independence would enable us to harness all of Scotland's resources, voices and energy to meet our current challenges head on - working with creativity and resourcefulness to shape the kind of society and economy we want for Scotland. Devolution has only taken us so far.

An independent Scotland will build on existing, robust and well-established foundations to develop our governance and a modern participative democracy.

The Scottish Parliament and Scottish Government have demonstrated their competence to govern Scotland. Scotland's independent judiciary is based on a historical tradition that predates the Treaty of Union, as is Scotland's distinct legal system.

Scotland also has well-established institutions for other functions of state governance: the police, local authorities and an active civic society and media. The basic building blocks of the nation are therefore in place and, in many respects, we are the best placed of any nation in modern times for a move to independent statehood.

The creation of a written constitution will be an important development for Scotland. A written constitution is more than a legal document. It is a statement of intent for the nation. The process of coming together to develop, draft and approve such a document is an important part of defining the sort of nation we wish Scotland to be.

Only with independence will Scotland have this opportunity to modernise and guarantee our democracy and protect, promote and extend the rights of our people, embedding them in our constitution, law and policy.

The transition to independence

Our priorities for action

The Edinburgh Agreement^[372] committed the Scottish and Westminster Governments to work together constructively in light of the outcome of the referendum in the best interests of the people of Scotland and the rest of the UK.

In the period between a vote for independence in the referendum on 18 September 2014 and independence day on 24 March 2016, agreements will be reached with the rest of the UK, represented by the Westminster Government, and with the EU and other international partners and organisations, on the issues set out in this guide. We are planning for independence in March 2016 to allow a realistic time for preparations and for the Scottish Parliament to take on the necessary powers.

The Scottish Government will enter this process in a spirit of constructive co-operation and friendship and will look to these agreements to provide the basis for a continuing close and fruitful relationship between Scotland and the rest of the UK, and to ensure the continued provision of services to the people of Scotland and the rest of the UK.

Constitutional platform for independence

Existing constitutional arrangements in Scotland will provide the basis for the transition to independent statehood, with additional powers transferred as soon as possible after the referendum, giving the Scottish Parliament the ability to declare independent statehood for Scotland in the name of the sovereign people of Scotland.

The key legislative steps towards independence will then be taken by the Scottish Parliament, following the initial transfer of responsibilities. As with the referendum, independence will be made in Scotland. Some parallel legislation, dealing with matters relating to the rest of the UK, will be taken forward at Westminster.

This early transfer will also enable the Scottish Parliament to extend the devolved competences of the Scottish Parliament and Scottish Government into all policy areas, including those currently reserved to Westminster, for the purpose of making preparations for independence.

The transitional period will also see the necessary foundations laid for Scotland's engagement with the international community. This will include the transition from membership of the EU as part of the UK to independent membership. It will also enable Scotland to move to a position of full participation in the international community. The arrangements will provide for the continuing application to Scotland of multilateral and bilateral international agreements and treaties with other countries and international organisations and enable Scotland to negotiate membership of international organisations. This will include giving the Scottish Parliament powers to ratify international treaties.

Legislation during the transition period will put in place a constitutional platform for independence. It will:

• bring Scotland fully into the European mainstream on the protection of human rights by giving the European Convention on Human Rights the same legal force for reserved matters as it already has for devolved matters
• provide for the continuity of the monarchy in Scotland
• implement agreements between the Scottish and Westminster Governments
• provide for a transparent and democratic system for ratification of treaties
• provide for the "continuity of laws": all current laws, whether in currently devolved or reserved areas, will continue in force after independence day until they are specifically changed by the independent Scottish Parliament
• define entitlement to Scottish citizenship on independence day and subsequently
• provide for the Supreme Court of Scotland
• place on the Scottish Parliament a duty to establish a constitutional convention to prepare the written constitution

During the transition, Scotland will also take on the powers it needs to establish a Scottish finance function enabling the Scottish Government to control and manage Scotland's public finances from independence day. This will build on the work already under way to implement the additional fiscal powers devolved by the Scotland Act 2012. It will also ensure that an appropriate macroeconomic framework for an independent Scotland is agreed, put in place and ready to operate effectively from independence day, in line with advice from Scotland's Fiscal Commission^[373].

The Scotland Act 1998 will also be updated to apply in the context of independence, so that the correct legal framework is in place for the Scottish Government and Parliament on independence day. The constitutional platform, along with the refreshed Scotland Act, will be the founding legislation of an independent Scotland and will not be subject to significant alteration pending the preparation of a permanent constitution by the constitutional convention.

Agreements and negotiations

Negotiations with the rest of the UK will cover a range of issues. These will include the arrangements for the Sterling Area (see Chapter 3), the role and governance arrangements of the Bank of England, a fiscal stability pact and Scotland's share of the UK's £1267 billion^[374] of net assets. This would include physical assets in Scotland, such as Jobcentre Plus, DWP and HMRC offices, the Crown Estate and the defence estate. It will also include assets outside Scotland in which Scotland nevertheless has an interest as part of the UK, such as the overseas missions of the Foreign and Commonwealth Office.

Agreements will also cover other national assets and institutions (for example official reserves, the BBC and its archives, and UK and GB-wide systems for administering welfare and taxation, wherever located). Scotland's share of UK assets will be realised in a combination of ways - through physical assets, cash transfer and continued use of assets through shared service agreements.

Discussion will also cover the allocation of liabilities, including apportionment of the national debt, the current and future liabilities on public sector pensions, civil nuclear decommissioning and social security benefits.

In addition, agreement will be sought on issues including:

• the continued delivery of services across GB and the rest of the UK where this is in the interests of service users and the two governments, either for a transitional period or in the longer term
• operational agreements for cross-border services (for example, for health treatment, for intelligence sharing, for mutual aid between police forces and health services) based on existing arrangements where appropriate
• the position of staff in reserved areas of public service, including the options for those in the armed forces, the diplomatic service and home civil service. Transitional arrangements for these organisations and staff will be developed with the current employers and trade unions
• the transition and management of contracts for goods and services

At the beginning of such a process of negotiation, it will make sense to agree a process for resolving any disputes in a way that both governments see as fair and equitable. Some matters will also continue to be discussed following independence, as was the case in the dissolution of Czechoslovakia in 1992.

The outcome will be an overall agreement between the Westminster Government and the Scottish Government, ratified at both Westminster and Holyrood.

Agreements will also be reached in relation to the terms of Scotland's continuing membership of the EU, and membership of other international bodies, including the United Nations, NATO, the Organisation for Security and Co-operation in Europe, the International Monetary Fund, the World Bank Group and the World Trade Organisation. Both the Scottish and Westminster Governments will be involved in these negotiations with our international partners.

Preparations will be required for Scotland to inherit the bilateral treaty obligations to which it is currently party as part of the UK. Relevant treaties will be continued on independence (for example on extradition, double taxation and mutual aid). Through this process Scotland will maintain and build upon our bilateral relations with major overseas partners. In line with established procedures, the Scottish Government will notify the UN and other states of Scotland's intention to succeed to the UK's existing international treaties.

Benefits and costs of establishing an independent Scotland

The Scottish Government is already responsible for the delivery of many public services in Scotland. After independence, the remaining functions of government - some of which, such as benefits administration, are already located in Scotland - will also become the responsibility of the Scottish Government.

The transition to independence is a major opportunity to improve service delivery. It is an opportunity for Scotland to create more effective and efficient public services designed to meet the needs of Scotland's people. We will not simply replicate existing UK approaches, which may sometimes reflect the past more than current needs and opportunities.

Examples of the opportunities include:

• better, simpler systems for tax that will reduce future operating costs for government and reduce compliance costs for taxpayers
• more streamlined systems for paying welfare that will keep costs down and which are easy to understand and access by everyone who needs them
• better targeted overseas representation in places of particular importance to Scotland in terms of business opportunities

Independence is also an opportunity to invest in providing public services and employment based in Scotland. This investment will deliver a longer term economic gain, with roles previously paid for by Scottish taxpayers elsewhere in the UK being located in Scotland. Employment of public servants in Scotland will contribute to the Scottish economy, thus offsetting on a continuing basis any one-off costs from establishing new government functions on independence.

Key functions that will transfer include welfare policy and administration, defence, international representation and international development, citizenship, nationality and borders, and fiscal policy, including tax policy and administration. An important element of the move to independence will be planning and carrying out the transfer of these functions in a way that gives the Scottish Parliament and people control of key decisions as quickly as possible, ensures continuity of services to the public with maximum assurance, delivers efficiencies, and keeps any one-off costs for the transition to a minimum.

Negotiations with Westminster to agree the shared service delivery mechanism will provide continuity of services during the transition, and will clarify the continued roles for UK civil servants working in Scotland in these areas. Additional roles will be created in Scotland to deliver some of the new services.

The forecasts of Scotland's fiscal position provided in Part 2 of this guide already include a proportion of the costs of delivering UK-wide services in Scotland. These forecasts include an element for the costs to Scotland of, for example, running Her Majesty's Revenue Customs and the Department of Work and Pensions, the Armed Forces, and the costs of other UK departments like the Treasury and Foreign and Commonwealth Office. Scotland's taxes, of course, already contribute to the costs of running these programmes and have helped to pay for major projects and assets such as computer systems.

A number of factors will influence the size of the one-off investment that Scotland will make in the transition to independence. These include the negotiations that will take place between the two governments on apportioning assets and securing public services in Scotland and the options chosen for improving systems and providing more modern and responsive public services for people in Scotland over the period following independence.

It will be for the Scottish Government, under the scrutiny of the Scottish Parliament, to decide whether, and how quickly, to introduce new systems, and therefore the scale of these one-off costs and whether they are spread over a shorter or longer period. The investment in systems and processes will be a small proportion of an independent Scotland's total budget, and will be offset by decisions taken in Scotland to deliver future services or projects differently from the rest of the UK. This investment will secure for Scotland a modern and efficient system of government, as well as additional public sector employment which is currently paid for by us but delivered from elsewhere.

Transfer of assets

Following a vote for independence, the Scottish Government will negotiate with Westminster to agree a sharing of assets and liabilities that is fair, equitable and reflects Scottish needs and those of the rest of the UK. Assets already used to deliver devolved public services in Scotland, such as schools, hospitals and roads, would remain in Scottish hands. Physical assets located in Scotland and needed to deliver currently reserved services, such as defence bases and equipment, and buildings to support administration of welfare, tax and immigration, will transfer to the Scottish Government.

Defence and overseas assets transferred as part of these negotiations will form a basis for Scotland's defence forces and overseas representation following independence.

The negotiations will also agree how best to share assets such as bespoke IT software used to deliver reserved services. Scotland has shared the costs of the development of these systems and so it would be reasonable to expect that access to these systems would be available for the transition period as needed.

Assets located elsewhere in the UK will also have to be included in negotiations, as Scotland has contributed to their value over a long period of time. For physical assets like these, the equitable outcome may be to provide Scotland with an appropriate cash share of their value. On a similar basis Scotland would be entitled to a copy of software and other systems to run currently reserved services and functions.

Assets that are not related directly to particular services, such as the UK's public shareholdings in banks, will also be part of negotiations. Scotland would expect to receive a population share of these assets, or their value in cash.

In some cases, the transfer of reserved assets to Scotland might take place over a period of time - for example, where it is agreed that services would be shared for a transitional period - or the value of the asset might be offset against the share of the inherited UK national debt that Scotland agrees to finance.

Transfer of liabilities

Negotiations would also agree how to apportion liabilities. Again, equity would be a guiding principle in the negotiations. The biggest UK public liabilities include pensions for public sector employees, the costs of nuclear decommissioning, and the national debt.

The Scottish Government already meets the cost of most public service pensions (NHS staff, teachers, police and fire-fighters) in Scotland, and Scottish local authorities are responsible for the costs of the funded pension schemes of which their employees are members. These arrangements will continue and no changes will be required following independence.

The Scottish Government has set out how responsibility for meeting the future costs of public sector pension schemes currently administered by to the Westminster Government could be apportioned^[375], based around which government each pension scheme member works for immediately after the date of independence. The same paper also proposes a simple and fair approach to apportioning responsibility for paying the state retirement pension, depending on country of residence at independence.

The Scottish Government will ensure that the costs of civil nuclear decommissioning in Scotland are met in future. Costs relating to nuclear decommissioning arising outside Scotland would be for the government of the rest of UK to meet. Costs which Scotland would be responsible for relate to the three civil nuclear installations in public ownership in Scotland. Meeting the costs of decommissioning the two operational civil nuclear sites in Scotland (Hunterston B and Torness) will be a matter for the owners, as now.

The national debt

The apportionment of the UK national debt - expected to peak at 86 per cent of UK GDP, almost £1.6 trillion, in 2016/17 - will be negotiated and agreed as part of the overall settlement on assets and liabilities.

The precise apportionment of national debt will be a matter for agreement. Under any realistic scenario, Scotland's projected share of the UK debt as a percentage of Scotland's GDP will be less than the debt of the rest of the UK expressed in the same terms.

The national debt could be apportioned by reference to the historical contribution made to the UK's public finances by Scotland. Using 1980 as the base year, Scotland's historical share of the UK national debt in 2016/17 is projected to be approximately £100 billion. This is equivalent to 55 per cent of Scottish GDP, compared to UK public sector net debt of £1.6 trillion (86 per cent of GDP) in 2016/17 (see Chapter 2).

Other methods for dividing responsibility for the national debts would produce different results. For example the Fiscal Commission's first report looked at an apportionment based on population. On this basis, Scotland's notional share of UK debt in 2016/17 is projected to be around £130 billion, equivalent to 75 per cent of GDP - still less than that of the UK total of £1.6 trillion (86 per cent of GDP).

The Scottish Government will service the share of the national debt allocated to Scotland. Scotland currently contributes to the servicing of the national debt through the taxes paid to the Treasury from people and businesses in Scotland. Scotland's overall fiscal position is currently healthier than the UK's, enabling us to meet the cost of debt servicing.

The Fiscal Commission looked in detail at options for transferring debt to Scotland^[376]. Following that consideration, the Scottish Government does not envisage that a proportion of UK debt would be legally transferred to Scotland on independence, since this is likely to require the agreement of lenders and would introduce unnecessary complexity.

Instead, the Scottish Government envisages that the two governments, once Scotland's share of the UK debt has been set, will establish arrangements under which the servicing costs of this share is met by the Scottish Government.

The average maturity of UK debt at present is about 15 years. The longest dated UK debt is for 60 years. It will be for the governments to agree the maturity profile of UK debt so that the Scottish Government refinances our agreed share of the UK debt as it matures, based on the overall maturity profile of UK debt, as part of a planned programme of borrowing. Over time, therefore, the full amount of UK debt apportioned to Scotland will become the responsibility of the Scottish Government. At that point, Scotland will cease financing UK debt.

During this transitional period, the debt servicing costs payable by Scotland to the rest of the UK will reduce until the full amount of inherited debt is refinanced. From that point, Scotland will be responsible for managing all debt servicing costs directly, through interest payments to lenders.

Such a transitional process will provide continuity and certainty for lenders, and keep borrowing costs down for both governments. The process, including the amount of debt refinancing and associated timescales, will be planned and agreed in advance, allowing markets to satisfy themselves that it is transparent, predictable, well-ordered and low-risk.

Management of debt

To manage future debt and borrowing, Scotland will establish a debt management function. This will be an early priority following a vote for independence and Scotland will be operationally ready to borrow from the markets from independence day.

The debt management function will plan and undertake the management of the debt stock, refinancing of inherited debt, and the placing of new debt. This function is carried out at present for the UK as a whole by the UK Treasury's Debt Management Office (DMO). The Scottish Government will seek to establish links with the UK DMO, and also with other DMOs in the EU and among Commonwealth countries to assist in the set-up phase.

We will recruit skilled and experienced staff to ensure credibility in the sovereign bond markets. We will also develop an institutional framework for sovereign borrowing and establish relationships with market makers.

The Scottish debt management service will also operate a sub-lending function. At present, Scottish local authorities borrow from the Westminster Government's public works loan board. Following independence, borrowing facilities would instead be provided from within the Scottish debt management service.

Independent Scottish governments, like those of other countries, would have the option of borrowing from Scottish citizens and others through a Scottish national savings and investment function. However, with low rates of interest prevailing in the sovereign markets, this is unlikely to be an early priority. The government will be able to meet all of our borrowing requirements from sovereign debt markets.

Interest rates paid on new Scottish bonds will be determined by the markets, based on an assessment of risk, and the demand in the market for sovereign bonds. This assessment takes into account fundamental factors such as the degree of control that the borrowing government has habitually demonstrated over its borrowing, accuracy of economic and fiscal forecasts, liquidity, transparency and credibility of economic and fiscal plans, as well as key ratios such as that of debt stock to GDP and the annual deficit-to-GDP ratio and their future outlook. Markets also take account of credit agencies' ratings. The agencies themselves use the same broad indicators of credit-worthiness.

The Scottish Government is determined to sustain and build on Scotland's existing reputation for fiscal prudence so that Scottish bonds are seen as high quality, safe investments. The Scottish Government expects Scottish bonds to become firmly established as a low risk, gilt-edged investment backed by Scotland's substantial oil reserves and a stable, high-skilled economy trading successfully within the EU with few uncertainties. Borrowing costs should match the very low levels enjoyed by other comparable states such as Norway, Finland and Sweden.

Constitution, government and citizens

The choices open to us

Independence will enable Scotland to be a modern, democratic European country with independent government institutions that build on the existing Scottish Parliament, Scottish Government, autonomous legal system and independent judiciary. The Scottish Parliament and Government will be democratically accountable to the people of Scotland for the full range of government activity, removing the continuing democratic deficit which affects Scotland in areas currently the responsibility of Westminster.

Central to this will be a written constitution setting out and protecting the rights of the people of Scotland. The constitution of a country defines who makes decisions on behalf of its people and how the people choose those decision-makers and influence their decisions. A constitution is the basis of everyday life, not separate from it. It sets out the rights of citizens and the role of government. It defines how decisions are made about spending on health and welfare, about the laws of the land and about peace and war.

A written constitution should also set out the aspirations we have for our country and our vision for the future.

One of the first and most fundamental tasks of the parliament of an independent Scotland will be to establish the process for preparing Scotland's first written constitution through an open, participative and inclusive constitutional convention. A written constitution should be designed by the people of Scotland, for the people of Scotland.

The process by which Scotland adopts a written constitution is as important as its content. The process will ensure that it reflects the fundamental constitutional truth - that the people, rather than politicians or state institutions, are the sovereign authority in Scotland.

The pre-independence legislation will place on the Scottish Parliament a duty to convene an independent constitutional convention to debate and draft the written constitution. A constitutional convention will ensure a participative and inclusive process where the people of Scotland, as well as politicians, civic society organisations, business interests, trade unions, local authorities and others, will have a direct role in shaping the constitution.

In taking this path, Scotland will be following in the footsteps of many other countries, not least the United States of America, whose constitutional convention in 1787 drafted the Constitution of the United States.

International best practice and the practical experience of other countries and territories should be considered and taken into account in advance of the determination of the process for the constitutional convention. In the last decade, citizen-led assemblies and constitutional conventions have been convened in British Columbia (2004), the Netherlands (2006), Ontario (2007) and Iceland (2010). Since 2012, Ireland has been holding a citizen-led constitutional convention to review various constitutional issues.

Our priorities for action

Many voices will contribute to the debate and help shape the content of Scotland's written constitution. Key equality and human rights principles, including the requirements of the European Convention on Human Rights (ECHR), would be embedded in the written constitution. Beyond those there are certain provisions that the present Scottish Government will propose for consideration by the constitutional convention:

• equality of opportunity and entitlement to live free of discrimination and prejudice
• entitlement to public services and to a standard of living that, as a minimum, secures dignity and self-respect and provides the opportunity for people to realise their full potential both as individuals and as members of wider society
• protection of the environment and the sustainable use of Scotland's natural resources to embed Scotland's commitment to sustainable development and tackling climate change
• a ban on nuclear weapons being based in Scotland
• controls on the use of military force and a role for an independent Scottish Parliament in approving and monitoring its use
• the existence and status of local government
• rights in relation to healthcare, welfare and pensions
• children's rights
• rights concerning other social and economic matters, such as the right to education and a Youth Guarantee on employment, education or training

The Monarchy and the Crown

On independence Scotland will be a constitutional monarchy, continuing the Union of the Crowns that dates back to 1603, pre-dating the Union of the Parliaments by over one hundred years. The position of Her Majesty The Queen and head of state will form an intrinsic part of the constitutional platform in place for independence in 2016.

For two independent states to share the same monarch is not a novel or unique situation. Indeed amongst the 53 member States of the Commonwealth (including Australia, Canada, New Zealand and Jamaica) have the Queen as their Head of State - an independent Scotland will become the 17th member of that family of nations.

Earlier this year the rules on succession to the Crown were amended (for Scotland and elsewhere) to remove outdated gender discrimination^[377]. An independent Scottish Government will promote, and support amongst the Commonwealth States with the Queen as Head of State, a similar measure to remove religious discrimination from the succession rules.

Parliament and Government

Scotland already has many of the institutions that a modern independent state requires: a parliament elected by the people, a government accountable to that parliament, an impartial civil service, an independent judiciary and an autonomous legal system. These institutions will continue on independence, underpinned by new constitutional arrangements reflecting Scotland's new constitutional status. They will be based on the sovereignty of the Scottish people, rather than the sovereignty of Westminster.

The existing Scottish Parliament and Scottish Government provide a robust framework for the governmental arrangements of an independent Scotland. The parliament and government structures have demonstrated since devolution in 1999 their competence in managing and delivering the necessary executive and legislative functions for Scotland in important devolved areas, such as health, education and justice.

On independence, the Scottish Government will acquire new responsibilities in currently reserved areas, especially the economy, welfare, defence and international relations. The Government has already developed the capacity to formulate policy in these areas, and this will continue in preparation for independence.

The Scottish Parliament

Scotland already has a modern, accessible parliament, elected on a proportional representation system. It will remain the parliament of an independent Scotland.

The Scottish Parliament has set an example within the UK on how a modern legislature should operate. In line with its founding principles of power sharing, accountability, access and participation, and equal opportunity, the Parliament has successfully put into practice the principles on which it was founded:

• the petitions system makes the Parliament accessible and improves accountability
• the legislative process gives civil society and individuals significant opportunities to participate before and during the formal Parliamentary processes
• parliamentary committees and, since 2008, the Scottish Cabinet take the process of government to all parts of the country - during the summer of 2013 alone, for example, the Cabinet has convened in Lerwick, Hawick, Campbeltown and Fraserburgh
• participation and engagement is built into the work of government, parliament, local government and the wider public sector

Equality and human rights

The choices open to us

An independent Scotland will have at its heart the respect, protection and promotion of equality and human rights.

This will be enshrined in a written constitution to bind the institutions of the state and protect individuals and communities from abuses of power.

As a modern independent state, Scotland will play a full role by living up to our international obligations on equality and human rights and framing these through the constitution, legislation and policy as a basis for protecting rights, and securing fairness and equality for our people. It has been common in modern democratic states for equality and human rights to be treated as distinct and different spheres of concern by national governments, international institutions and civil society. While we recognise this, we also see the right to equality and protection from discrimination as integral parts of human rights in a modern society, and human rights as a fundamental part of a truly democratic state.

Scotland has a strong history in protecting the rights and freedoms of everyone living in our country and has used our limited powers to their maximum extent to promote a fair and more equal society. The European Convention on Human Rights is an intrinsic part of the Scotland Act 1998 and, since devolution, the promotion of equality has also framed the work of the Scottish Parliament, evident in the establishment of an Equal Opportunities Committee and across Scottish legislation.

While Scotland's current equality and human rights framework is strong, that framework's future cannot be guaranteed under current constitutional arrangements^[378].

Our priorities for action

Safeguarding equality and human rights in a written constitution

On independence, all the rights and protections which people currently have under existing equality and human rights legislation will continue. In addition, we will seek to secure equality and human rights for everyone in society by embedding them in a written constitution.

As well as allowing us to ensure that the rights in the European Convention on Human Rights are enshrined in a written constitution, independence gives Scotland the ability to consider whether other rights, such as those in the United Nations Convention on the Rights of the Child, should also be enshrined.

The principles written into the constitution will form an integral part of the structure of the country and will shape the development of future Scottish policy and systems - including those areas Scotland will inherit under independence such as welfare, employment and taxation - to deliver greater equality and social justice. This could, for example, create new ways to help families strike the right balance between paid work and care for older or younger people and potentially encourage more women into the workforce.

Strengthening legislation, support and enforcement

From day one of an independent Scotland, equality and human rights legislation and infrastructure will continue to protect and promote equality and human rights for the benefit of Scotland's people.

Following independence, full powers also offer Scotland scope to consider strengthening or extending equality and human rights legislation and to develop an enforcement and promotion infrastructure which considers the appropriate alignment of equality and human rights. As a government we would develop any future changes in full consultation with the people of Scotland, including with the Third Sector, public authorities, businesses, trade unions and equality communities. Our approach would be designed to reflect internationally recognised principles which guarantee independence from government and provide the power and resources to operate effectively. Scotland has, and will continue to have, our own UN-accredited national human rights body.

Strengthening Scotland's influence on the international stage

This Government believes that human rights and protection from discrimination should not be restricted to those fortunate enough to live in Scotland or other progressive modern states.

Scotland currently meets the requirements of a range of international equality and human rights treaties^[379]. On independence, Scotland will sign up as an independent country to these treaties and strengthen our international voice to shape the legislation and frameworks that flow from them, contributing to the wider goals of promoting international stability and democracy in other world regions.

An independent Scotland, as a full member of the international community of nations, could lead by example by demonstrating our own commitment to best practice in the fields of equality and human rights. In doing so, Scotland will be building on the strong foundations of work already being undertaken in fields such as international development and climate justice.

Equality in public life

Scotland has made significant advances in increasing the diversity of representation in public life, but many groups - such as women, disabled people and ethnic minorities - are still not participating fully in the decision making of our country. We are missing talent and perspectives across our institutions and businesses. Increased diversity is good for business and good for the quality of decision-making.

The Scottish Government's ambition is that appointments for which we are responsible should broadly reflect the wider population. We will continue our work to improve representation for all groups, and maintain our focus on improving the gender balance of public boards within current legislation.

If in government in an independent Scotland we will ensure that Scotland's institutions have equality and diversity at the heart of their governance. We will expect public and private institutions to improve the diversity and gender balance of their governance. We will also consult on a target for women's representation on company and public boards and, if necessary, we will legislate as appropriate.

Better government - Scotland's public services

As a country, we place a high value on our public services. We recognise the power that they hold in transforming lives and communities, supporting economic development and well being, and opening up opportunities for us all to participate in the benefits that Scotland has to offer. However, there are currently pressures on our public services from economic circumstances, and there will be future pressures from the changing shape of our society.

Scotland has already adopted a distinctive approach in our public services, focused on improving outcomes and building the assets and resilience of people and communities, through prevention and early intervention. It values collaboration by those involved - by people and communities, Third Sector, public providers and businesses. Our approach crucially recognises the importance of designing services with, and for, the people they are there to serve, and of building on our strengths.

With independence, we can go further by joining together those services that are currently under UK control with those currently delivered by Scottish organisations. We can build on our strong record of valuing the public service workforce by creating good employment opportunities. We can explore new ways of working across public services that mean people get what they need in the way that best suits them - being creative and innovative and being shaped by the rights and principles we have placed at the heart of our constitution.

The present Scottish Government has made major reforms to public services in Scotland to protect front-line delivery in the face of Westminster cuts. For example, we have reduced the number of police forces while maintaining 1,000 extra officers. We have reduced bureaucracy by cutting the number of public bodies from 199 to 113, a reduction of 43 per cent^[380]. Our proposals for UK public bodies on independence show how we can further streamline the public sector by integrating the functions of a large number of UK bodies into the public sector in Scotland.

The choices open to us

Independence will ensure that decisions about policies and services will be made in Scotland in line with the views and needs of the people of Scotland.

Scotland's scale is an advantage. The UK tax and welfare system is so big it has proven difficult to reform. The National Audit Office has found that there were significant problems in managing the implementation of Universal Credit. We can do things on a more manageable scale in Scotland. Stakeholders in Scotland tell us of the benefits of being able to get all the key decision-makers in one room. We will be able to do that in currently reserved areas too and improve policy and delivery through better engagement with service users and interest groups.

Existing devolved public services are spread broadly across Scotland. The largest public sector employers like the NHS, local authorities and Police Scotland already have a major presence in communities across Scotland - NHS Scotland employs 156,600 people; Scottish Local Government employs 247,900; and the Scottish police and fire and rescue services employ 30,200^[381].

The Scottish Government has policy functions concentrated in Edinburgh and Glasgow, but delivery functions and public bodies have a much wider geographical footprint. Under independence Scotland can continue to spread the benefits of public sector employment as we take on new functions from Westminster Government bodies. We can improve services by joining up those that are currently under UK control with those delivered by the Scottish Government.

This will enable us to:

• focus the entire public sector in Scotland more clearly on delivering outcomes that matter for the people of Scotland
• further integrate public services and rationalise the complex public body landscape, ensuring that public services are delivered in a way that supports our overall approach to improving outcomes for people and communities in Scotland
• streamline the cluttered UK public sector landscape by incorporating the functions of a number of UK public bodies into existing Scottish bodies
• create high quality jobs in the Scottish Government and the wider public sector in Scotland that drive service improvement
• make faster progress in preventing problems arising rather than just treating them when they do occur

Public services on independence

On independence, the Scottish Government will take on responsibility for making decisions for Scotland across the full range of policy issues that affect people in Scotland. This means that the Scottish Parliament will control all areas of policy that are currently reserved to the Westminster.

In preparing for independence, the Scottish Government will build on Scotland's existing devolved public services. Scotland already has, as well as our own judicial system, an independent National Health Service, the Scottish police and fire and rescue services and local authorities with responsibilities for schools, transport, housing, leisure and social work services amongst others. There are also many Scottish public bodies such as Scottish Enterprise, the Scottish Environment Protection Agency and Scottish Natural Heritage.

On independence, the Scottish Government will maintain our current, unified structure and not create different, fragmented departments like those of the Westminster Government. This structure has been successful in delivering joined-up thinking and co-operation and provides a firm basis for taking on the full range of policy and functions of an independent national government.

On independence, Scotland will have:

• an independent fiscal policy function, making decisions on taxes and spending in Scotland
• an external affairs capability supporting an independent foreign policy, including distinct overseas representation and a Scottish international development function
• a welfare policy capability, meaning decisions about welfare and pensions can start to be made in Scotland
• a debt management function to support an independent fiscal regime
• a new security and intelligence agency, working closely with Police Scotland, focused on threats to Scotland like cyber crime
• an expanded Revenue Scotland, ready to progressively take on additional responsibilities for tax and excise collection/credits
• Scottish representation at the EU, NATO, the UN and a range of other international organisations
• a Scottish Defence Headquarters and an initial independent armed forces capability
• a new single economic regulator, the functions of which will be progressively expanded
• a shared service agreement with HM Passport Office
• a new Scottish Civil Service Commission

We will also move swiftly to begin the process of establishing a Scottish postal service in public ownership.

Around 300 public bodies currently act for Scotland at the UK level. As well as proposing new public bodies, we have developed proposals for sharing arrangements with the Westminster Government. In summary, our proposals on public bodies mean:

• around 60 per cent will transfer their functions to a new or existing body in Scotland either for independence day or after a transitional period
• around 30 per cent are proposed to continue to be based on a shared services approach, but with shared accountability to Scotland and the rest of the UK. Around 40 per cent of such bodies are small advisory or technical committees in highly specialised areas
• the remainder, almost 10 per cent of UK bodies with functions relating to Scotland, do not need to be replicated in Scotland (for a variety of reasons)

Development of public services after independence

The structure of public services under independence will be for future Scottish governments and parliaments to decide. The current Scottish Government's plans for the Parliamentary term beginning in May 2016 would be to:

• take on responsibility for administering benefits and the state pension, with staff transferring from the Westminster Government to the Scottish Government
• establish a citizen-focused personal tax system, with staff transferring from HMRC to provide the necessary skills and capacity within Revenue Scotland
• set up a Scottish Border and Migration Service
• establish a Scottish Passport Agency
• develop the Scottish Tribunal Service to include tribunals dealing with employment and other matters previously reserved to Westminster
• establish a new industrial relations body (similar to ACAS) and a Scottish Health and Safety body

We plan to maintain shared services in areas where it makes sense to do so, and where it is in the interests of both Scotland and the rest of the UK, such as:

• NHS Blood and Transplant
• the Royal Mint
• the Research Councils
• Air and Maritime Accidents Investigation
• some expert and technical advisory groups, for example the Committee on Radioactive Waste Management
• the Green Investment Bank
• the Hydrographic Office

Where functions continue on a shared services basis, there will need to be adjustments to the governance of these bodies to ensure there is appropriate accountability to the Scottish Government and Scottish Parliament. These can build on arrangements already in place for cross-border bodies dealing with devolved matters.

Workforce

Good quality public services require well-motivated and fairly rewarded workforces with a genuine sense of service to their community. Public sector employment brings economic benefits to Scotland, as well as providing the vital public services on which we all depend. The Scottish Government is therefore proud of our partnership working across public services which, in a period of sustained fiscal consolidation by the Westminster Government, has seen the employment of 1,000 extra police officers^[382], 1,000 extra qualified nurses and midwives and over 1,500 additional doctors^[383]. The Scottish Government has, in addition, opposed the Westminster Government's damaging reductions to pensions and conditions of service, and sustained a policy of no compulsory redundancies in central government and across the NHS in Scotland.

Under independence, responsibility for a wide range of currently reserved services and functions will be transferred to the Scottish Government. The Westminster Government employs nearly 30,000 civil servants in Scotland at present and many will transfer to the employment of the Scottish Government and its agencies^[384]. An independent Scottish Government will also employ additional staff to deliver our new functions on matters such as taxation, defence and employment. Where it makes sense for Scotland, some services will continue to be delivered jointly with the rest of the UK, for either a time-limited period of transition or on a continuing basis.

The detail of these arrangements, including those for staff transfers, will be negotiated with the Westminster Government. We will work with the Westminster Government to preserve continuity of employment for all staff, either by transfer to the Scottish Government or through continued employment by the Westminster Government, where it continues to require their skills. We will seek to ensure that all staff who wish to continue in service are able to do so. The pension entitlements and other terms and conditions of employment of civil servants transferring from the Westminster Government will be fully honoured. They will join a skilled and diverse workforce in the civil service in Scotland, based on the principles of honesty, integrity, objectivity and impartiality, committed to good employment practice and with a continued commitment to no compulsory redundancies.

Local government

The choices open to us

Independence gives us an opportunity to renew democracy at all levels in Scotland. Independence is about people and communities as much as it is about parliaments or governments. The extension of the powers of the Scottish Parliament through independence creates a new opportunity to consider the right level for decisions to be made across Scottish society and gives us the powers we need to deliver necessary reforms.

Local government is an integral and essential element of the overall good governance of Scotland. It assesses and responds to local circumstances and aspirations to deliver a range of services, from education and care to transport and planning, that form the bedrock of our society.

Scottish local government has benefited under devolution from a closer working relationship with central government. Local government has been equipped with stronger powers, adopted a new, more proportionate electoral system, has spearheaded the vital move towards community planning of local services and embraced an improved and performance-focused audit regime.

The Scottish Government and local government have worked in partnership to deal with and mitigate the actions of successive Westminster administrations - exemplified currently by the joint response to replacing Council Tax Benefit and wider welfare reforms. This sends a very powerful signal of the sort of partnership approach that we can develop as new powers come to Scotland after independence.

The Scottish Government and local authorities are now implementing and building on the legacy of the Christie Commission^[385], to reform and improve Scotland's public services. This shared journey towards a vision of strengthened community planning, involvement and empowerment has been set out in the Government's response to the Christie Commission, in the joint Statement of Ambition with local government, and in our consultation on the forthcoming Community Empowerment Bill. This shared purpose will continue beyond the referendum and into an independent Scotland, capitalising on the benefits that independence brings.

Our priorities for action

On independence, the responsibilities and services of local government will continue as normal, as councils' statutory basis, funding, contracts and workforce will remain in place.

The Scottish Government will consider in partnership the appropriate responsibilities for local government and local communities, to realise strong local democracy, in line with the Lerwick Declaration^[386] made by the First Minister on 25 July 2013:

We believe that the people who live and work in Scotland are best placed to make decisions about our future - the essence of self-determination. Therefore we support subsidiarity and local decision making.

For example, Scotland's island communities have challenges and opportunities that differ from those in other parts of the country. That is why the Scottish Government has established the Islands Areas Ministerial Working Group, to engage in discussions with Orkney, Shetland and Comhairle nan Eilean Siar about the opportunities that are important for our island communities in the context of the referendum and independence. We have committed to separate discussions for any issues of interest to mainland councils with islands. The Group is covering issues such as energy, the Crown Estate and transport. With independence, an Islands Bill to implement conclusions of this work will be one of the current Scottish Government's priorities for the Scottish Parliament elected in 2016. Similarly, we are working as part of the Scottish Cities Alliance, comprising the seven local authorities with cities within their boundaries, to consider how issues specific to Scotland's cities can be best tackled in the future.

Independence will also provide the platform to embed the role of Scottish local authorities in a written constitution. The Scottish Government will embed the position of local government in the constitutional platform and argue for Scotland's written constitution, post-independence, to recognise the status and rights of elected local government. Such constitutional recognition is normal in developed democracies such as Germany, Denmark and Sweden, and this should also be the case in a modern, independent Scotland.

A constitutional provision such as this would enable Scotland to fully implement an important aspect of the European Charter of Local Self-Government. That Charter commits states to applying basic rules guaranteeing political, administrative and financial independence of local authorities. In particular it provides that: "The principle of local self-government shall be recognised in domestic legislation, and, where practicable, in the constitution"^[387].

Given the lack of a written constitution, the UK - or a devolved Scotland within the UK - would find it impossible to provide this degree of constitutional recognition to local government. However, in the context of independence this new opportunity for local government will open up.

Civic society and Third Sector

The choices open to us

At the heart of any modern democracy should be the strong voice of its people, influencing the decisions that affect them.

Scotland's civic society has always helped define who we are as a nation. Business philanthropists, churches, co-operatives and mutuals, trade unions, charities and many other organisations and individuals have contributed significantly to the Scotland we know today. Scotland's Third Sector and civic institutions are a valued and essential part of Scotland's distinctive infrastructure. They inform and shape our public life and contribute to the development of the Government's policies. Crucially, they bring the voices of communities into the public and political arena, providing diversity, richness and perspective to debates on the big issues facing Scotland. Civic groups and voluntary groups have been particularly important in shaping Scotland's approach to major issues such as violence against women, community ownership and shifting attitudes on matters such as same sex marriage and independent living for disabled people.

The current Scottish Government is committed to supporting the development of a capable, sustainable and enterprising Third Sector. The sector plays a key role in achieving the Government's purpose by supporting Scotland's communities and in the delivery of public services. The sector has specialist expertise, the ability to engage with vulnerable groups and individuals, and a flexible and innovative approach. With independence, the current Scottish Government's vision for the sector will not change - we want to continue to work with our Third Sector partners, ensuring that everyone in Scotland has a successful and fairer future.

Our priorities for action

The regulation of charities operating and/or registered in Scotland is already devolved. There are arrangements in place between the Office of the Scottish Charity Regulator (OSCR) and the Charity Commission to regulate and monitor charities registered in England and Wales but operating in Scotland. There is a memorandum of understanding that sets out the current operational arrangements for OSCR and the Charity Commission to work together to provide better regulation and guidance for charities that operate across England, Scotland and Wales. It will be in everyone's interests for this process to continue following independence.

Many charities currently operate cross-border in the UK and Ireland. Although responsibility for the legal framework surrounding charities is already devolved, income tax and corporation tax exemptions and reliefs for charities are reserved, along with legislation covering tax relief on Gift Aid, investment income, trading profits and Capital Gains Tax.

The Scottish Parliament in an independent Scotland will control both charity law and tax matters. This will enable future Scottish governments and parliaments to consider taxation policy that would enhance opportunities for charitable giving.

Civic society, and within that the Third Sector, also represent groups across our society, giving them special perspectives about the needs of our people. These perspectives will allow them to play a key part in developing Scotland's written constitution and the legislative and policy frameworks that will shape an independent Scotland.

The Third Sector must remain a key partner, playing a major role in our economy and in the design and delivery of public services. This Government will foster the creativity and innovation that exists within Scotland's communities to enable a thriving Third Sector, a positive environment for social enterprise and to value the work of volunteers, charities and community organisations.

Scotland leads internationally in our approach to social enterprise and is recognised for the strength of our Third Sector. With the responsibilities of independence - over welfare, taxation and the economy - we can do more to assist the sector's growth, effectiveness and sustainability.