Short comings of devolved tax powers will be worse than anticipated

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FRASER Grant (Letters, 12 November) highlights the opprobrium coming the way of the unionist parties following the passage of the Scotland Bill through the House of Commons, but that is nothing compared with what will occur when the shortcomings of the so-called tax powers become apparent.

It sounds great: we will have all these tax powers, and the opportunity to hike up the rates, with all of that extra money to spend on public services, and on offsetting the welfare anomalies inflicted upon us by Westminster, whatever unionist party is in power there.

We await the second stage of the process – that is euphemistically referred to as the Fiscal Framework.

Effectively, it is a reworking of the Barnett formula, and it will emerge from inter-national discussions, with the UK Treasury firmly in the driving seat.

It is outwith the bill and not subject to due parliamentary diligence.

The significance of Barnett, and of its modification, cannot be understated, yet there is a vow of silence on its implications.

There are two factors at work: paragraph 78 of the Smith Report states that our income tax proceeds would be offset by a corresponding reduction in the block grant, and the 
nearest admission about that lies in the phrasing of ministerial pronouncements. As tax proceeds assume greater significance in Scotland’s funding, the significance of Barnett will reduce.

The assignment of VAT receipts, too, is bogus: our block grant already reflects an element of VAT we have paid – we cannot receive these back twice over, so a consequential reduction from the grant is inevitable.

Let’s look at it this way: the English maintain that we are not self-sufficient, so their tax-payers are subsidising us.

So, what would justify us, in that situation, being able to sustain increasing income tax and keeping the proceeds?

There is no option but to recover the proceeds from the block grant. That means the prospects are not as rosy as they are being presented – there will be no extra money!

In any event, tax rises are the last thing the Scottish economy needs. Incidentally, these powers will not come in until 2017, so there is plenty of time for all parties, not just the SNP, to tell us how they propose to use them.

And we should get a flavour of that when the almost-forgotten Calman proposals in the Scotland Act 2012 are implemented in 2016.

Douglas R Mayer

Thomson Crescent, Currie