Tuesday, 11 May 2010

Little justification for fiscal autonomy

Barry White of the Scottish Futures Trust replied to my recent letter to the Herald on the subject of fiscal autonomy for Scotland, and my response is published today:

I thank Barry White of the Scottish Futures Trust for his informative reply to my letter about fiscal autonomy for Scotland.

If, as he alludes, his organisation is responsible for raising significant finance for capital investment in public infrastructure using non-traditional financing methods, then that certainly undermines the rationale for fiscal autonomy.

However, if the extent of public borrowing in the UK and other mature democracies detracts from the theoretical argument that making politicians more directly responsible for taxation and public spending leads to greater transparency and accountability, then surely handing a degree of de facto Scottish fiscal autonomy to a quango such as the Scottish Futures Trust must raise concerns, despite the fact that the organisation’s initial remit was to rectify various such shortcomings in relation to the PFI/PPP disasters.

Scotland’s economy already benefits from the fiscal stimulus provided by UK-wide measures such as last year’s VAT cut, and any divergence from the wider UK economy is, to an extent, addressed by the “automatic stabilisers” of a reduced taxation burden and increased benefit payments during an economic slowdown, which self-evidently confer most benefit on the worst suffering regions.

This, together with the SFT’s claimed ability to finance infrastructure investment, must mean that the justification for fiscal autonomy to address any divergence of the Scottish economy from the UK as a whole must be thin indeed.

6 comments:

The Aberdonian said...

Do you think that the Isle of Man and the Channel Islands should be stripped of their fiscal autonomy and integrated into the UK?

Scottish Unionist said...

Stuart I might do an editorial on you and your attack on wee woman.

See Ya!

Stuart Winton said...

Per The Aberdonian:

"Do you think that the Isle of Man and the Channel Islands should be stripped of their fiscal autonomy and integrated into the UK?"

Can't say it's a matter I've ever given much thought to, Mr A, but of course to justify change rather than defend the status quo there has to be some kind of compelling rationale, and I'm not aware of any in the case of the two you mention.

By the same token, the point I was trying to make vis-a-vis Scotland is that the accountability/economic levers rationale isn't perhaps quite as compelling as it first appears. On the other hand, I daresay that relatively wealthy semi-autonomous mini-states like the IoM and the Channel Islands perhaps have healthier public finances than a hypothetical fiscally autonomous Scotland would very probably have, not to mention perhaps a less fiscally incontinent political class.

But if it's the issue of size you're alluding to then of course the current example of Greece perhaps underlines that small isn't necessarily beautiful, but personally I think size isn't really a big issue, but of course it's an easy soundbite for politicians who need to quote selectively to justify their position.

Of course, the eurozone issue also underlines a central paradox of the Nationalist economic case - where does this stand with the eurozone membership objective and ceding monetary and to an extent fiscal sovereignty to Frankfurt?

Stuart Winton said...

Per someone posing as Scottish Unionist AND journalist:

"Stuart I might do an editorial on you and your attack on wee woman."

Not entirely sure what you're on about, but if it's what I think it is then if the real Euan McColm did an editorial then there's a 'wee woman' who wouldn't come out of it too well, but being a compassionate sort it's the sort of thing that I'd avoid doing unless absolutely necessary, but in that regard you're certainly not doing yourself any favours.

I'd be careful what you wish for!

The Aberdonian said...

One pointer on your reply:

Sark (population circa 500) -

The Barclay Twins famously put a quarter of the island's working population out of work about 18 months ago.

The island has no social security system (unlike the other three Channel Island territories and the IoM). And like the rest of the Channel Islands there is no statutory redundancy payments.

The island had to keep these people going through a whip round organised by the island Chamber of Commerce.

Are the population of Sark asking to have their fiscal autonomy revoked?

Stuart Winton said...

Hi Aberdonian

You're being a bit opaque for me, but I suspect the answer is 'no', or is your question merely rhetorical?