Economists condemn proposed reforms as 'recipe for instability'

Published on Tuesday 16 June 2009 22:44

THE financial reforms proposed by the Calman Commission have been condemned by a group of leading economists.

In an article for The Scotsman today, eight internationally renowned economists call proposals for limited tax reform "at best an opportunity missed and at worst a recipe for economic instability in the future".

They attack the proposals, which include giving Holyrood limited borrowing powers along with control of almost half the income tax raised in Scotland and several smaller taxes including stamp duty.

These tax powers would give the Scottish Parliament control over 9 billion of the 31bn Scottish budget, but the economists say this is not nearly enough.

They are highly critical of the Calman Commission's expert group of economists, led by Professor Anton Muscatelli.

And they accuse Calman of "side-stepping" the real solution of fiscal autonomy.

They added: "We believe this to be a fundamental mistake.

" Only under fiscal autonomy can the accountability of the Scottish Parliament properly be entrenched, and it is surprising that there seems to have been very little consideration of this option by the independent expert group advising the commission."

They said the proposals could leave Scotland short of money without the ability to properly cope with a revenue short- fall.

"It is unclear if sufficient borrowing powers are built into the Calman proposal to facilitate any shortfall in revenue," they note.

They also point out that there was room for confusion because "receipts from income tax cannot be forecast reliably in advance and public accounts data often are being reviewed two or more years later".

They note a "lack of detail" in the proposals, but acknowledge that the commission, chaired by the Chancellor of Glasgow University, Sir Kenneth Calman, did not have a proper remit to consider fiscal autonomy.

The eight include two professors from Sir Kenneth's university – Ronald MacDonald and Farhad Noorbakhsh. Another signatory is one of First Minister Alex Salmond's council of economic advisers – Andrew Hughes Hallett, of George Mason University in Washington DC.

The others are professors Drew Scott of Edinburgh University; Paul Hallwood of University of Connecticut; Neil Kay and Rod Cross of Strathclyde University, and David Simpson, former economic adviser to Standard Life.