Reform Scotland

Calman takes a step backwards- Holyrood Magazine

This article by James Aitken appeared in Holyrood Magazine.

Calman was supposed to be trying to solve the problem of the Scottish Parliament’s lack of financial accountability.

The Scottish Parliament is responsible for 60 per cent of government spending in Scotland (£32bn) with 40 per cent spent by the UK Government (£21bn). However, the Scottish Parliament currently has control over taxes (council tax and business rates) which raise less than £4bn, only 7 per cent of the total tax raised from Scotland.

The Calman proposals do not solve the problem of financial accountability. Under Calman the Scottish Parliament would have responsibility for raising less than a third of the Scottish budget and would still be dependent on a block grant from Westminster for the other two-thirds. The Scottish Parliament is either financially accountable or it is not.

The proposals contained in the Queen’s speech do not even go as far as Calman. Only three taxes are supposedly being devolved instead of four under Calman and the borrowing powers do not make any sense.

In short, even less financial accountability.

Not enough taxes are being devolved. The proposals do not even attempt to devolve taxes that are closely associated with devolved responsibilities such as alcohol and tobacco duty, inheritance tax or all of the environmental taxes. The advantage of this approach would be the possibility of improved policy making and a greater number of economic levers.

It is not even clear that Stamp Duty Land Tax, Aggregates Levy and Landfill Tax are actually being devolved. To be properly devolved the Scottish Parliament needs to be in control of the underlying legislation and the collection of these taxes. That is not what is being proposed.

It is particularly disappointing that Stamp Duty Land Tax is not being devolved given the complete shambles of its introduction into Scotland.

The proposal is also too reliant on income tax. During a recession income tax receipts tend to fall.

The borrowing powers will also need to be looked at again. They are not the same as were proposed by Calman.

I also cannot imagine the UK Government or a local authority agreeing to have to raise taxes every time they borrowed so why should this condition apply to the Scottish Parliament?

The role of the Treasury is also all too obvious here.

As Wendy Alexander said this week: “… the Treasury could never be relied upon to advocate further financial powers.” Further evidence of Treasury intransigence was given in the statement last week that the cost of collecting taxes in a fiscally autonomous Scotland would be the same as for all of the UK. Another reason why Scotland needs its own Exchequer and not just a Finance Department.

There is a way to address the problem of financial accountability, within the current devolution arrangements, as set out in two Reform Scotland papers.

Our proposals are to devolve a wider range of taxes so that the Scottish Parliament has to raise all of the money it spends. This approach would also be more efficient and cost effective since it would mean the establishment of a Scottish Exchequer, removing the current duplication of a separate HM Treasury and HMRC.

The Calman proposals would not make the Scottish Parliament fiscally accountable.

The proposals contained in the Queen’s speech, disappointingly, do not even go as far as Calman. That said, at least all of the main parties agree that fiscal powers are to be devolved to the Scottish Parliament.

For those of us arguing for a fiscally autonomous Scottish Parliament we must ensure that this debate continues.