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Report backs more tax power – Courier

Courier & Advertiser, 21.11.08

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The Scottish Parliament should have the power to raise all the money it spends, a think tank said yesterday.

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Reform Scotland said an Edinburgh Treasury headed by a Scottish Chancellor of the Exchequer should be created to make Holyrood more financially accountable.

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The Barnett Formula, which allocates Scotland’s share of public spending, should also be scrapped according to a report entitled “Fiscal Powers”.

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Economist Graeme Blackett, the reports co-author, said yesterday, “We recommend that a Scottish Exchequer – and that would require a Chancellor- is established as part of a new financial agreement.

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“The greater fiscal powers of the Scottish Parliament would make this necessary and a Scottish Exchequer would be responsible for collecting revenue from all taxes levied north of the border on behalf of the UK and Scottish governments.”

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The report sets out how certain taxes could be retained by Westminster to meet the approximate £20 Billion it spends in Scotland.

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These include all National Insurance contributions, 40% of income tax revenues from Scotland, 40% of Scotland’s geographical share of North Sea Oil revenues, together with TV licenses and Passport fees and the National Lottery levy.

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The Scottish Government would set all other taxes to the Holyrood budget of around £30 billion, except for VAT.

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This would be set at UK level, with 40% of the revenue from Scotland going to Westminster and the remainder assigned to the Scottish Parliament.

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Mr Blackett and leading tax lawyer James Aitken, his co-author, constructed a scheme in which the Scottish Parliament would be more financially accountable within the framework of the UK.

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They established that Holyrood controls taxes which raise only 13% of the money spent at a Scottish level.

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The bulk of the Scottish Parliament’s revenue comes in a block grant from Westminster under the Barnett Formula.

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Reform Scotland Chairman Ben Thomson said, “The Scottish Parliament’s almost total reliance on the Block grant limits its accountability.

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“Equally, it provides no incentive for politicians in Scotland to come up with innovative ideas to boost economic growth or improve public services because, however poorly the economy performs, the money still rolls in via the block grant.

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“If the economy did grow faster the benefits would accrue to the Chancellor at Westminster and not to the Scottish Government”.
\r\nThe report concludes that the fundamental defect of the devolution settlement is its lack of financial accountability and looks at how this can be achieved within the UK.

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It said “It requires the UK Government to put in place new financial arrangements which are fair to the governments of both Scotland and the UK.

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“This requires us to address the position in England because it is the lack of a body to represent English interests that is the Achilles’ heel of the current devolution settlement.

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“Such a body would enable a clear and transparent system, which sets out clearly the responsibilities of the different levels of government, to be put in place.

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“This is the best way to achieve greater financial accountability in both Scotland and the United Kingdom.”

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The report will be submitted to the Calman commission into devolution and the Scottish Government’s National Conversation on the future constitution.
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