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Scottish Chancellor plan to boost Holyrood tax powers – Evening News

Ian Swanson
Evening news, 20.11.08

Scotland should be given sweeping new tax powers and its own Chancellor of the Exchequer, a right-of-centre think-tank recommended today.

A report by Reform Scotland claimed an Edinburgh-based Treasury would make the Scottish Parliament more financially accountable and provide a platform for the country to become a major world economy.
It also called for the scrapping of the "outdatADVERTISEMENTed" Barnett formula, which guarantees Scotland a set share of UK spending.

It proposed the UK constitution should be "re-balanced" with a new body established to represent English interests.

The authors argue the fundamental defect of the devolution system is a lack of financial accountability. They say one remedy would be "outright independence", but their focus is on how greater financial control could be achieved within the current UK framework. The report said the Scottish Parliament should have complete control of corporation tax.

It would also receive 60 per cent of VAT and income tax revenues from Scotland and 60 per cent of Scotland\’s geographical share of North Sea oil revenues.

The rest of the money raised by these three taxes would be retained by Westminster, along with all National Insurance contributions, TV licence and passport fees and the National Lottery levy, to fund the £20 billion which the UK Government currently spends north of the Border.

The report argued that effective government is best achieved where responsibility and accountability for spending taxes is matched by an ability to set and raise them.

It concluded that giving Holyrood greater responsibility for raising revenue, including borrowing powers, would help achieve two goals which it said were vital to future prosperity – a lower overall tax burden and a major reduction in public spending as a share of gross domestic product. Ben Thomson, chairman of Reform Scotland and chairman of Noble Group, said:

"If the economy did grow faster the benefits would accrue to the Chancellor at Westminster and not the Scottish Government."

Economist Graeme Blackett, one of the report\’s authors, said: "We recommend that a Scottish Exchequer – and that would require a Scottish Chancellor – is established as part of a new financial settlement."

The report said financial arrangements had to be fair to the governments of both Scotland and the UK. It did not specify what kind of body it had in mind, but said it would create a "clear and transparent system" with well-defined responsibilities.