Top economists add voice to claims Calman tax plan could hit economy

Published on Sunday 6 June 2010 23:08

A GROUP of leading economists and academics has claimed that proposals from a body set up to look at more powers for Holyrood are "dangerously flawed" because of what they claim is a failure to back a greater say over tax and borrowing for the Scottish Parliament.

• Sir Kenneth Calman: commission findings under fire

Scottish Government consultants Professors Andrew Hughes-Hallett, Sheila Dow and Rod Cross and economists Dr Jim and Margaret Cuthbert and Marc Coleman have claimed that the proposals from the commission would be harmful to the Scottish economy.

The comments were made in a consultation on the SNP government's plans for a referendum on independence.

The demand for greater fiscal powers for Holyrood follows a similar call by Dan Macdonald of Macdonald Estates, Ben Thomson – the financier who set up the Reform think-tank – and Jim McColl of the industrial company Clyde Blowers.

The Cuthberts claimed a lack of tax and borrowing powers could lead to Scotland's economy going into decline.

The economists said in their response: "Our view is that the Calman proposals on income tax powers are seriously flawed, and pose a major danger to the Scottish economy.

"Implementation of the Calman proposals on income tax would be extremely dangerous, with a real risk that the perverse incentives implicit in the proposals would push Scotland into a worsening cycle of increasing Scottish income tax rates and relative economic decline."

Professor Rod Cross, emeritus professor at the University of Strathclyde, also claimed the Calman proposals would harm the Scottish economy and "would involve the costs of collecting some income tax specifically for Scotland without generating any clear benefits in terms of enhanced accountability of the Scottish Government for its expenditure, let alone stimulating growth in the Scottish economy."

Finance minister John Swinney welcomed the comments, which he said had "reinforced my view that the Calman Commission's financial proposals would be damaging to the Scottish economy".

He went on: "There is now wide agreement that Scotland needs more financial responsibility than proposed by the Calman Commission.

"On 27 May, the Scottish Parliament rejected the full package of the commission's recommendations, acknowledged the limitations of its financial proposals, and recognised the need to consider greater fiscal powers, including full fiscal responsibility.

"This week, a Campaign for Fiscal Responsibility was launched by leading figures from business, finance and academia with support from trade union figures and the voluntary sector in Scotland.

"A serious debate is therefore going on in Scotland about extending the financial responsibilities of the Scottish Government and Parliament."

However, Lib Dem Finance spokesman Jeremy Purvis said the SNP's claims over the consultation were "utterly pathetic" as the party in government at Holyrood had failed to use the powers it already had to protect services and the economy.

Conservative MSP Alex Johnstone accused the SNP of "perpetual posturing" and of putting its support for independence above what is best for Scotland.