Leader: Time to make far better use of the fiscal powers we have

Published on Wednesday 14 July 2010 15:29

Is Scotland's problem that it has too little powers, or not making good use of those it already has?

In the arguments over more fiscal powers for Scotland, assumptions have been made that the powers already granted under devolution have been used to the maximum and that more powers are needed to achieve even better outcomes. Both assumptions are testable.

This is the searching argument of a new paper by the policy analyst Tom Miers for the Centre Right Policy Exchange. In sharp contrast to Ben Thomson's Reform Scotland and its bouncing caravan-in-tow, the Campaign for Fiscal Responsibility (Calman Extra Plus), Mr Miers represents that wing of Centre Right opinion concerned with the reality of political economy in Scotland rather than constitutional change.

Our problem, he argues, is not a lack of money - the Scottish budget has doubled since devolution and Scottish public spending is 12 per cent higher as a share of GDP than the UK average. Nor is it lack of fiscal powers: the Scottish Parliament already controls 61 per cent of public spending here. Indeed, it has real leeway to reform health and education. But while there are more NHS staff and more teachers, Scotland still has massive health problems, and in education international studies show a relative decline over the last decade. Too many are still leaving our schools functionally illiterate.

The two main parties, SNP and Labour, share an unshakeable belief that there is no problem to which ever higher levels of public spending are not the answer, save for the resulting problem of unsustainable deficits and debt interest to which neither has an answer at all.

The political elite is dominated by public sector special interests that have seen no reason to change. This has been allied to a near pathological dismissal of all and any reform initiated south of the border. The result has been a huge inbuilt resistance to reform - in Mr Miers' words, a "conspiracy of inaction".

Yet to date this has been the affirmed preference of voters who believe, or who have been encouraged to believe, that a status quo dependent on ever higher public spending was preferable to reform. But we are now at the end of the spending road. The need to rein in the massive debt accumulated by this spending must be the catalyst for change. Mr Miers calls for a new ambition and radicalism, with novel approaches to tax.

The critique from the SNP and others is that there is no financial means to do this. But even within its existing powers, the administration could freeze or abolish council tax, lower property taxes on business and vary income tax by up to 3p in the pound. Indeed, these three taxes together raised 4.8 billion in 2008-09, or 12 per cent of Scottish ministers' spending.

Cutting just some of these taxes would give a big boost to business at this critical time. Many vested interests will not care much for Mr Miers' analysis or for the searching questions that it poses. But it is a critique that deserves to be heard and taken seriously..