Taxing questions
The Scottish Parliament is on course to have sweeping/far-reaching/dramatic changes to its powers under plans to be published this morning by and his constitutional commission.
It'll be a revolution in relations between Westminster and Holyrood.
That's how it looks if you believe the Sunday papers.
And why wouldn't you? They had been briefed ahead of the event, and added the familiar journalistic topspin with which I was once plying their trade.
Great is the sense of anticipation about Holyrood being able to set stamp duty, and target those buying big houses. Half of income tax revenue could come to Holyrood.
MSPs could decide on air passenger tax, landfill tax and aggregate tax. And they would be able to set the legal limit of alcohol in drivers' blood.
Well, let's not get ahead of ourselves.
These are suggestions from a commission that has found, as others did before, that tinkering with constitutional powers, and tax powers in particular, is mighty tricky.
Given that they are intended to preserve the integrity of the United Kingdom, you could assume that they would have to find favour at Westminster.
And the appetite for some of these changes has been very limited on the banks of the Thames, especially among those who see powers heading out of their Parliament.
What gives the Calman proposals, much more potent is the new-found appetite across parties at Westminster to be leading a revolution of some sort, in response to the political catastrophe that is their expenses.
Sweeping constitutional change is being welcomed, even where it has nothing whatsoever to do with "flipping" second homes, duck houses or excessive furniture requirements.
That's what makes today's proposals interesting from a political point of view.
And as one whose job it is to follow the money, I offer one starting observation about taxation powers.
In focussing on the political and constitutional issue of tax accountability, there is a danger of repeating the mistake of the original "tartan tax" 3 pence in the pound, as approved in the 1997 referendum.
It was a blunt instrument then, and quickly became obsolete, as the Labour Chancellor, one Gordon Brown, tinkered with tax thresholds and credits.
The lesson is not to treat the tax system as static.
It is dynamic, changing every year and sometimes within fiscal years, and it is not only the Treasury that makes it so.
Particularly with the recession, there are reminders that the tax base keeps changing, sometimes alarmingly.
The dependence of the UK Treasury on corporation tax from the financial sector has been exposed. So too its reliance on income from the property bubble.
With a much less profitable finance sector, and property unlikely to return to runaway inflation (let's hope), one task for the Treasury is to move to a tax base that is more reliable in the circumstances Britain faces now and in the future.
Other parts of the tax base come and go. Alcohol tax had to be lowered, because of leakage from the system resulting from cross-border traffic, or booze cruises.
Gambling tax has had to be reformed to take on the challenge of international online betting. Environmental concerns have opened up new streams of revenue.
This is far from being only a British concern.
In Ireland, with even more acute tax revenue problems, the dependence on property tax has left it badly exposed.
And while the days of buoyant tax revenues allowed finance ministers in Dublin to raise the threshold for income tax in a progressive way, it now looks as if the net will have to return to a broader (lower) range of earnings.
So beware the simple calculations for Holyrood of taking a population share of recent tax take.
Keep the buoyancy of tax revenue in mind - that is, the extent to which part of the tax base can increase, decrease, or even disappear.
And if a government faces uncertainty in its tax take, it has to have the capacity to plug unexpected revenue deficits, with borrowing powers.
The SNP, of course, would like Holyrood to have the full range of tax powers.
It points out that you don't have to invent a new tax system from scratch, when there are plenty other systems around the world with lessons to teach the UK and Scotland - and many of them are within the federal structures of a stable nation state.
So let the battle begin once more, between the different fiscal options on offer; autonomy, freedom, devolution, responsibility, federalism or, less likely, the procurator variety - so named, I've been told, because Scotland's prosecuting authorities long ago funded meagre public services by collecting criminal fines.
Hullo, I'm Douglas Fraser, and I'm business and economy editor at ´óÏó´«Ã½ Scotland. Welcome to my blog, where you can read my take on money matters, viewed from a Scottish perspective.
Comment number 1.
At 15th Jun 2009, lvtlvt wrote:Probably the only sensible comment we'll hear about this story for the next week.
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Comment number 2.
At 15th Jun 2009, Gary Hay wrote:"What gives the Calman proposals, much more potent is the new-found appetite across parties at Westminster to be leading a revolution of some sort, in response to the political catastrophe that is their expenses.
Sweeping constitutional change is being welcomed, even where it has nothing whatsoever to do with "flipping" second homes, duck houses or excessive furniture requirements." - Douglas Fraser
Funnily enough Douglas, I don't savour the idea of letting the current bunch of Westminster MP's decide on the constitutional future of Scotland. Call me a cynic, but are we quite sure we want the expense system rabble dictating what Holyrood can and can't do with public money?
The old saying, "Teaching your granny to suck eggs" comes to mind.
If any of these proposals are going to be offered up as amendments to the Scotland Act - it should first be presented to the Scottish electorate in the form of a referendum that coincidentally - wait for it - should also include an option of investigating the possibilities of a financially independent Scottish state.
If the UK government expects these proposed reforms to be taken seriously in Holyrood - they should follow the motion passed in the Scottish Parliament last week - that the UK parliament should be dissolved and fresh elections called.
Only then will I have any faith in Westmonster amending the Scotland Act.
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Comment number 3.
At 15th Jun 2009, Douglas Daniel wrote:I agree with #1, this is a well balanced, unpartisan comment on the commission's findings. One suspects Brian Taylor's reaction will be considerably less so.
Having just had a very brief glance at the report, it's reassuring to see the report full of pre-emptive arguments against independence for lazy journalists to take at face value. I say reassuring, because if a Unionist report wasn't full of Unionist propaganda, I'd have to spend the whole day watching out for reports of the temperature in hell dropping considerably. Lines such as "Public spending in Scotland is higher per head than in most other parts of the UK, but taxes collected are not, so that Scotland benefits from sharing in wider UK taxes. These UK taxes include those from North Sea oil and gas which go up and down very markedly from year to year, because of the volatility of world oil prices, and are likely to decline in future as production continues to fall" sound like scaremongering from an anti-independence pamphlet, rather than the non-partisan analysis the report claims to be.
"the tidy solutions that work where every part of a larger country can be governed in the same way cannot simply be applied here." - erm, I can think of two very simple ways: English regional assemblies combined with a much smaller UK parliament; or independence for the four UK nations. It's easy when your analysis doesn't have to be shaped to reach a pre-determined outcome.
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Comment number 4.
At 15th Jun 2009, Alfred the OK wrote:Oh I do so look forward to 'The English Parliament being on course to have sweeping/far-reaching/dramatic changes to its powers'..... or any powers at all for that matter....
But then again, who is thinking of national devolution for the English? Certainly not Gordon Brown, Call me Dave or Nick Clegg....
It all makes their recent bleatings for constitutional reform within the UK to be nothing more than yet another rearrangement of the deck chairs... If this power-mad triumphvirate had any democratic beliefs in their rotten body-politic then there would be EQUAL devolution for EVERYONE in the UK right now. That means our own national parliament in England - it's called democracy, folks!!!
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Comment number 5.
At 15th Jun 2009, minceandmealie wrote:Douglas Fraser reasonably points out thaqt all tax revenue streams are variable, and the conclusion is that a prudent government needs to be more than 'one-club golfer'. That is clearly an argument for giving Holyrood full control over all taxation measures, responsibility for expenditure, and the power to borrow to make up revenue shortfalls. You don't even have to be a nationalist to support this sensible approach, as it describes the regime in Catalonia, where the Catalan administration remits money to Madrid for shared services (such as defence) rather than the other way round.
Why did the Calman Commission not follow this established and sensible example? The answer is three letters long, and the first one is O....the UK government has fought a thirty year defensive action to try to keep the oil revenues in London. Going down the road of full fiscal autonomy would have blown the commission's Unionist remit...
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Comment number 6.
At 15th Jun 2009, themightyshed wrote:So, the Calman Commission suggests that we Scots just might be deemed sensible enough to determine our own land fill taxes, air passenger taxes, and stamp duty??
Hold me back. The excitement is almost too much.
This report is the perfect illustration of why devolution is an illogical half-way house. Contradictory, compromised, and unsustainable.
Either Scots are capable of running our own affairs or we're not. There's no rational argument why we should be allowed some, but not all, of our income tax, or North Sea Oil revenues. There's no rational argument why we ARE capable of running the health service, but NOT our benefits services. Or why we ARE capable of legislating on Climate Change, but NOT capable of having our own foreign policy.
So this commission's own political background becomes obvious. It was set up - quite explicitly - to keep the Union together. Its recommendations are therefore not based on what's best for Scotland, they're based on what's manageable within the Union.
What a missed opportunity.
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Comment number 7.
At 15th Jun 2009, Gary Hay wrote:I've just finished reading through the Calman report and I feel dirty afterwards.
How can people who supposedly represent us get the very aspect of devolution this wrong?
I couldn't find a single positive thing to say about that entire report quite frankly - the ambitions for Scotland expressed by the incumbent Scottish government dwarf these pitiful meanderings and leave the entire Calman process looking like the sorry unionist PR exercise it was.
In my heart of hearts I knew this would be a complete waste of time and money - in fact - the Calman report looks like it's been manufactured with the express intent to trip up the SNP government on it's spending choices while paying lip service those who want Scotland to be better than it is.
It is pathetic, unionist drivel and it will not satisfy the needs or wants of Scotland or her people.
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Comment number 8.
At 15th Jun 2009, Gary Hay wrote:And More;
In essence - this report seeks to stifle Scottish Governance than anything else.
I completely agree with the premise of the electorate holding the Scottish government to account for it's spending and borrowing - but not when the financial arrangement of the taxation and borrowing is dictated by another government - one that just so happens to be hostile towards the current administrations aspirations of independence.
Would you sign up to a financiers agreement riddled with things they say you can't do? Will the UK treasury stump up the true figures relating to the Domestic output of Scotland? Figures that even sitting Lords like the Lady Saltoun of Abernethy has asked for but never been privvy to?
Alex Salmond says that if Scotland were independent, she would be one of the richest small countries in the worldI think he said that she would be richer than Luxembourg. I do not believe that, but neither do I believe that she would be as dirt poor as Labour and the Conservatives say. Probably the truth lies somewhere in between. As no one has access to all the figures, I do not see how anyone can know. A great deal would depend on what kind of settlement was made between England and Scotland, particularly in regard to oil and where the boundaries were drawn in the North Sea. As things are, there is room for endless bitterness and acrimony on both sides, which could endure for generations and even, should we happen to have another trigger-happy Prime Minister, lead to war, which was almost the normal state of relations before the Union. Equally, there is room for the generosity and understanding which would result in a long-lasting friendship and prosperity for both. I can only implore politicians on all sides to think very seriously about this, because I am afraid that I believe independence will come sooner or laterand sooner, if we go on as we are.
- Lady Saltoun of Abernethy Monday, 12 November 2007
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