Calman evidence 'was tampered with'

THE expert group examining new powers for Holyrood has "tampered with the evidence" to suit the Labour Party, one of its own economic advisers suggested last night.

Professor Andrew Hughes Hallett, one of 11 economics experts tasked with examining tax powers north of the border, said its final report did not have "much legitimacy" because it was skewed towards preserving the status quo.

Hughes Hallett said he had wanted the expert group to look at whether the Scottish Government should be given the power to borrow money but claims this was glossed over in the final report.

He told Scotland on Sunday: "Had it been a criminal issue, you would call it tampering with the evidence by not considering all the options."

The Calman Commission, which was set up to look at all aspects of constitutional reform, itself appointed an expert group of economists to specifically study the case for extending the tax powers of the Scottish Parliament. Hughes Hallett was a member of that group, which published its report earlier this month, laying out options for giving Holyrood greater financial powers.

In the final version of the report, compiled by the experts under the leadership of Professor Anton Muscatelli, the principal of Heriot-Watt university, Hughes Hallett said debt was hardly mentioned.

He said: "There is a very brief note that debt and borrowing may be necessary, but there is no discussion of any of the consequences or consideration of how much debt a Scottish Government can issue. The issue is how we can manage debt and how it can be issued. It would be helpful to know what that was."

Hughes Hallett added that he could understand why the Labour Government might not want such issues fully explored if ministers were not keen on handing over more powers to Holyrood.

He said: "You can see from the London end why they might not want to get into some of these issues. I can understand the political view from London that you don't want to go into it.

"I could imagine that if you're a sitting government, you probably have vested interest in keeping things more or less as they are. There may be all sorts of political reasons for keeping things as they are and they are legitimate. But they are not reasons to keep options out of the discussions."

Hughes Hallett explained that the ability to issue debt was essential if Scotland were to replace the current Barnett Formula funding mechanism with an assigned taxation system, which would see the Scottish Government's funds being calculated on the basis of the tax revenues paid by Scots to the UK Treasury.

He said the ability to issue debt was essential because tax revenue adjusts quickly to variations in income, but public expenditure for projects such as new schools and hospitals adjust at a slower pace.

Therefore the ability to raise money by going into debt is essential to keep projects going when tax revenue diminishes during economic downturns.

"You can't just close hospitals and schools every time the economy slows down," Hughes Hallett said.

He also argued that the report had omitted to explore fully the merits of other economic models that could form the basis for a new constitutional settlement for Scotland.

"If you have to decide what you want and if people can't find that laid out, it (the report] doesn't have much legitimacy.

"What's missing here is any consideration of how these sorts of schemes might work."

Hughes Hallett said the report failed to examine the "trade-offs" between various systems. The economist claimed the report did not properly analyse the advantages and disadvantages of the Barnett Formula, assigned taxes and fiscal autonomy.

A Scottish National Party spokesman said: "From what we know about the Calman Commission, it doesn't meet the challenges of the times in that Scotland needs to build a lion economy, but it appears that all it has produced is a constitutional mouse. Certainly what was intended to be a an entirely independent review has become far too closely connected and controlled by the UK Government."

A Calman Commission spokesman said: "This was an independent report, which was handed to the commission and it would be inappropriate for Sir Kenneth Calman to make any comment."

A UK Government source last night said: "It is utter nonsense to suggest that the UK Government has in any way influenced the report by Professor Muscatelli. His group is an independent advisory group to the Calman Commission and he (Muscatelli] is renowned across the world for his independence of thinking.

"It is unfortunate if a row amongst members of a group erupts publicly in this way, but it is a matter for Professor Muscatelli's group and him alone."

Muscatelli was unavailable for comment.