Andrew Wilson: Black hole if fiscal autonomy fails?

ELEVATION is what we need most in the conduct of the debate on Scotland’s public finances and economy. The repetitive loop of the spurious, the contradictory and plainly hypocritical doublespeak bores the pants straight off my hurdies.

By ANDREW WILSON Sunday, 14th June 2015, 12:40 am

John Swinney is reported to be considering whether to use the tax powers he gets to plug the gap. Picture: TSPL

We face challenges of inter-generational importance around how we order our public services and pay for them. Colossal debts and deficits run up by successive London governments risk beggaring the next generation to unforgiveable levels.

Yet the parties who got us there suggest the outcome of their own disastrous economic model and strategy means the model should stay the same and they should stay in charge.

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Snigger and snort “a low oil price is a disaster for the SNP as it proves Scotland can’t, can’t, can’t”. Neither strategic nor tactical political lessons appear to be being learned in any of the London parties when it comes to Scotland. Just look at their poll ­ratings. Risible.

The UK economic model flies on the one engine of London and the south-east while the other regions lag behind. Ten of its 11 regions and nations run deficits that are relatively worse than the UK average. Fixing the UK public finances means fixing them. Think about it.

Scotland, incidentally, is economically the best performing of them. So what we are hearing is that ten out of 11 UK regions are dependent on drip feed from one, and that this is as good as it gets. Hardly a ringing endorsement for the model, is it?

The idea that Scotland is hamstrung from ordering its own finances and economic policy coherently because of the starting position delivered by a failing model is the ultimate counsel of irresponsible despair.

A low oil price is no more a case for keeping things as they are now than a high one is for the opposite. To truly and sustainably fund the democratic choices we take regarding public services requires us to have a comprehensive and coherent strategy to ensure we have a healthy economy and tax base. This means a range of taxation policies that encourage sustainable growth while delivering reliable revenues fairly without hurting incentives for success.

The whole idea of devolution is that Scotland ought to be able to tailor its own policies and approach to suit its own conditions and choices, while sharing with the UK on reserved matters. The snag everyone now accepts in the 1999 model was that policy was devolved while financial control was made ever more centralised.

Various piecemeal attempts have been made to improve things and the current Scotland Bill is another. The Tories seem happy to devolve partial control of income tax while committing never to raise it in the current parliament and calling for the same in Scotland. That tells you something.

In the face of cuts to the Scottish budget, Scottish Finance Secretary John Swinney is reported to be considering whether to use the tax powers he gets to plug the gap. It would be irresponsible of him not to consider it all, in the round.

Tax powers are most usable when you have control of all of a power, comprehensively and can make policy positions that are coherent across a range of levers. So, for example, if “making work pay” to incentivise growth and employment is a policy objective, a mix of income tax rates, bands and allowances, welfare policies, employment policies and the minimum wage should be deployed. Only, most of those levers will remain reserved.

What is very dangerous is being driven by the desperation of the moment to use what limited powers you are given to place a sticking plaster over a Westminster-imposed wound.

There is a crying need for well- informed modelling of the impact of potential tax changes on the base and on the economy and therefore sustainable revenues. There would be little value in raising taxes if it led to lower revenues. What we need is sustainably funded revenues.

About 2.1 million Scots pay the basic rate of tax, 370,000 pay the higher rate, while barely 18,000 pay the top rate. Putting 5p on the top rate may sound a politically easy gain but it would take only 1,000 of those 18,000 to establish tax residence outside Scotland for that gain to disappear.

The Holyrood parties must get over their partisan entrenchment and rediscover ambition for the parliament they serve in and the people they serve. If the only way to determine our choices is framed against whatever George Osborne first decides, we will never deliver what people deserve.

Talk of black holes with fiscal autonomy fails to recognise that the “black hole” exists right now as a result of how we do government now.

The case for keeping the status quo in the funding of UK public services seems to me to be that things are so bad, that the Tories fixing the debt and deficit their way is always better than Scotland fixing it our way.