Sunday, 20 June 2010

Fiscal responsibility - be careful what we wish for?

Ben Thomson should be applauded for his role in the Campaign for Fiscal Responsibility, but what is interesting about the ongoing debate is that the impetus for greater financial powers for Scotland seems to be coming from two largely incompatible strands.

The first seems based on the familiar tax, borrow and spend model, which relies on the Brown-esque delusion that unending economic growth means the bills can be deferred effectively indefinitely.

The second strand seems to assume full fiscal powers will somehow magically transform Scotland into a low-tax economy with greatly reduced public spending, with even talk of a tax haven and a strictly limited public sector.

However, the prevailing Holyrood mindset seems to centre around bragging rights over which of the two main parties can outspend the other, while at the same time seeking to blame others when the bills inevitably come in and the spending spree has to give way to a degree of restraint.

Which in turn undermines the hypothetical argument in relation to greater fiscal responsibility, and economies as diverse as the triple-A rated UK and the more obviously dubious Greece demonstrate that, even before the global economic meltdown, theories regarding accountability don't necessarily work in practice.

Indeed, in promoting the devolution of more fiscal powers, Mr Thomson states that Scotland's share of the public spending deficit has been no worse than the UK's as a whole, which to me seems to detract from his argument rather than reassure.

Perhaps Mr Thomson should be careful what he wishes for.

(Published as a letter in today's Scotland on Sunday.)


The Aberdonian said...

Hmmm, remember the Channel Islands and the Isle of Man.

Your assumption seems to be that the economic consensus in Scotland will ever be thus on free spending.

I am not for a "big bang" in fiscal autonomy. But it should be rolled out gradually.

Full fiscal autonomy is not achievable within the UK - the apparent EU rule about uniform VAT in a member state puts paid to that. And of course NI pays for social security (in theory) and customs dues naturally would remain in the control of the UK government for collection within the terms of the EU.

However control over income tax, possibly corporation tax, duties etc could be carried in Scotland. With a grant system for topping up funds when needed from London from the revenues from VAT etc.

This of course operates in Canada, the USA (you are telling me that some US states the size of France and the population of Edinburgh are economically efficient!? - particularly in some cases service duplication - in most states there are two levels of prison - ones administered by the state government and short-term and remand facilities controlled by local government) Or nearer to home Switzerland.

Stuart Winton said...

Thanks for that Aberdonian, some interesting food for thought.

However, I can't really see how a *more* - ignoring the minutiae of where it begins and ends - fiscally autonomous Scotland would necessarily be more responsible and accountable, which seems to be the presumption behind the CfFR - where's the evidence, as opposed to the rhetoric.

And I think people like Ben Thomson essentially mean lower taxes and spending when they talk about responsibility, but I suspect the average denizen of Holyrood construes the term as perhaps synonomous with autonomy.

Sorry for delay in replying, but I forgot to look for a couple of days!!