Daily Archives: June 2, 2014

The Scottish Conservative plans for tax are about as good as you can do under devolution, but that’s not saying much

The Scottish Conservatives have produced a fascinating report on the future of Scottish devolution after a ‘no’ to independence vote. The headline grabber is the recommendation that the UK devolves income tax to the Scottish Parliament, to further a commitment to ‘a greater degree of fiscal autonomy’.  My concern is that its aim will be shortened in most reports to describe ‘fiscal autonomy’ (see Under ‘Devo-Max’, ‘Fiscal Autonomy’ is an illusion). Yet, it is nothing of the sort.

Fiscal autonomy is about the power to make important choices about how to balance taxation: on income, employer contributions, as a contribution to social security, on sales (VAT), on corporations, on energy and pollution, and so on (in some cases, it is about using taxation to encourage or discourage behaviour – as with fags and booze). It is about working out how much to raise and from whom, and to combine that decision with how to provide social security. It is about the power to decide who pays and who benefits. So, if people say that this new power would give the Scottish Parliament something like 40% of its tax raising power (see here on the politics of such calculations), it would be misleading to think that it’s 40% of the power to decide who pays and who benefits.

Rather, it is one, disproportionately limited, tax. Crucially, it is a tax that gains disproportionate public and media attention: ‘Elections can be won or lost on the basis of what political parties say about income tax’ (p13). It has never been raised or lowered in the short history of Scottish devolution, and it is difficult to foresee a Scottish Government of any party (likely to be elected) changing it.

So, this report does not deliver the ‘strong Conservative principles of responsibility, transparency and accountability’. It would not affect Scottish Parliament accountability in any meaningful way. All the report does is demonstrate the Scottish Conservatives are going further than Scottish Labour, which is not very far at all. It’s a classic case of good politics, bad policy.

See also: Robert Peston Could Scotland compete on tax with Westminster?

 

 

 

 

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