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'Academic ping pong'

Brian Taylor | 14:27 UK time, Tuesday, 18 January 2011

"Academic ping pong": thus Brian Adam of the SNP on the exchanges at the Scotland Bill committee last week with Professors Drew Scott and Andrew Hughes Hallett.

Mr Adam apologised for what he believed was aggressive questioning directed at the profs by committee members from other parties.

No such apology from the presiding officer who has just replied to a complaint from Prof Scott. Indeed, from Alex Fergusson, notable caution on all fronts.

He notes that conduct in committee is the responsibility of conveners, he notes that "robust conclusions" require the testing of all evidence and he expresses a hope that relations with the academic world will not be damaged.

Which offers a little of something for everyone - as was presumably the intention - without cutting across the committee or suggesting that the questioning was inappropriate.

So what was the row all about? Fiscal autonomy / independence / responsibility.

Wherein lay the complaint from the academics who said they had prepared to answer questions on the Scotland Bill: the subject of the investitation.

Fiscal autonomy

It might have been better, perhaps, had the questioning at the committee started with the bill itself - which suggests further devolution of income tax - rather than instantly pouncing on the two professors' adherence to broader fiscal autonomy.

However, it was entirely legitimate to pursue the issue of fiscal autonomy, given that it is the suggested alternative to the measures in the Scotland Bill and has been advocated by the Scottish Government, drawing upon work by the two profs.

More to the point, there is now a substantial argument about the evidence offered - and the Scottish government interpretation.

In an academic paper in March, Prof Hughes Hallett and Prof Scott noted that "a 1% point increase in fiscal devolution {share of local expenditures in total government spending for that region} . . . might be expected to raise GDP by 1.3% after 5 years above what would otherwise have been the case."

However, in quoting this point, the Scottish government would appear to have altered the wording slightly, saying that "a 1% increase in fiscal devolution {the proportion of revenue and expenditure devolved} might be expected to raise GDP by 1.3% after five years above what would otherwise have been the case."

Version one talks of spending. Version two talks of spending and revenue. Labour has now asked the permanent secretary at the SG to explain the difference.

We will await that answer but it probably lies in a clarification offered to the committee by the profs themselves who argued it was implicit that the new devolution involved both spending and tax-varying; that is the broad panoply of government financial control.

Footnote controversy

Prof Hughes Hallett offered to revise his terminology with a new footnote in the original document.

Enter controversy number two. The evidence cited by the two profs is drawn from work by Professor Lars Feld of the University of Freiburg.

Labour and the Tories are now drawing attention to evidence Prof Feld has himself submitted to the Bill committee.

This notes that that he has been unable to discern "any robust significant effect of decentralisation on economic growth."

Which means, say the SNP's opponents, that the evidence presented to the committee was not well-founded and was further damaged by the change of wording.

However, Prof Feld is not against economic decentralisation per se.

He argues rather that it must be balanced between expenditure and tax (as in Switzerland) rather than weighted towards expenditure (as in Germany.)

Economic performance

Here is his summary conclusion in full: "Decentralised taxing powers are advantageous because financial responsibility is enhanced, political accountability regarding the relation between voters (taxpayers) and parliaments/governments in-creases.

"Decentralisation of taxes and spending leads to a more efficient public sector and it enhances economic performance.

"Fiscal decentralisation does not lead to higher economic growth because economic growth is much more driven by factors other than taxes and spending, e.g., by increases in technological progress and improved human capital. "

In committee, Prof Hughes Hallett insisted there was evidence of a growth bounce from decentralisation in comparable OECD countries (that is, taking out developing countries.)

Prof Scott noted that it was not his contention that devolving tax would automatically boost GDP. David McLetchie of the Conservatives said that was precisely the suggestion made repeatedly by the first minister and others.

Which leaves us where? In dispute, that's where.

Prof Feld says of the Scotland Bill that "the goal of financial accountability of the Parliament and Government in Scotland will be enhanced by the proposals in the Bill and the White paper.

Tax control

"A decentralisation of taxing powers will meet an already existing decentralisation of spending."

Professors Scott and Hughes Hallett argue that enhancement of accountability will be more limited than is suggested by the UK government and that the proclaimed advantages are outweighed by the relative risk of devolving further control of a single tax, on income.

This afternoon the committee will be taking evidence from, among others, .

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