Leader: Growth requires more than just fiscal powers

There are powerful arguments for greater fiscal autonomy. But the notion that more of it would somehow of itself bring about higher economic growth was always suspect.

Yesterday, Professor Lars Feld of Freiburg University - the source on which professors Andrew Hughes Hallett and Drew Scott had lent heavily for their paper calling for full fiscal devolution - intervened with a submission to MSPs saying it would not automatically lead to higher growth and that other factors such as the quality of the working population were more important.

The controversy may seem an arcane spat in the footnotes of an academic paper. But as the SNP administration had lent heavily on the work of Hughes Hallett and Scott in its submission to the Westminster government on the Scotland Bill, this is a defining issue between the SNP and the unionist parties. The intervention cannot but be an embarrassment for those who have been arguing for full fiscal autonomy on economic growth grounds and would appear to back the scepticism of CBI Scotland chief Iain McMillan and others.

It is how fiscal levers are used, not the fiscal power itself, that influences growth. After all, Scotland has had the power to vary income tax for 11 years, with no discernible benefit. There are other benefits that may be cited, such as greater accountability of civil servants and greater awareness among MSPs of the effects of tax changes on business and the economy. But higher growth will require much more than the simple transfer of powers.

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