Bill Jamieson: Scots Fiscal Commission lacking independence

President Kim Jong-un enjoys a military parade in the North Korean capital Pyongyang. Picture: AFP

In international athletics we see big swings on the gymnasium bars, breath-taking bounces on the trampoline and backward leaps over the wooden horse. But for sheer acrobatics, nothing could beat the double somersaults of the Scottish Parliament’s finance committee yesterday.

For months, the committee has been deliberating on the structure and function of Scotland’s proposed Independent Fiscal Commission.

This is the body being set up to provide independent scrutiny and appraisal of the administration’s budget and to provide assessments and forecasts of the state of Scotland’s economy.

It’s a critical part of the architecture that needs to be in place as substantial extra tax and fiscal powers are devolved to the Scottish parliament.

But the administration’s bill to set up the Commission stopped short of this remit. In particular it declined to give the Commission the role of providing independent assessment and forecasts for Scotland’s economy.

Holyrood’s finance committee has been charged with scrutinising the Bill. For months the committee, chaired by SNP MSP Kenny Gibson, has argued that independent forecasting was a vital part of the Commission’s remit and that this should be made clear in the legislation.

Indeed, barely two weeks ago it voted unanimously on this point. And Kenny Gibson left no doubt over his own views on the issue: “We are strongly of the view that not only should the Scottish Fiscal Commission be independent, but it is vital that it is perceived to be independent. That is why we are calling for the Bill to be amended to strengthen the Commission’s role and to give it responsibility for producing the official forecasts.”

Clear? It could hardly be more so… until the issue came to a vote yesterday.

Not only did the unanimity vanish like a haar over Holyrood, but the committee proceeded to vote down a motion that put its views in writing – by four votes to three.

What, we might well ask, is the point of having a committee system in the Scottish parliament to scrutinise legislation when it turns round at the last minute and votes in favour of the administration and against its own declared objections?

And what, we might also ask, is the point of setting up an Office of Budget Responsibility style Independent Fiscal Commission and then deny it the power and authority to undertake independent scrutiny?

We are now left with a situation under which the administration will both set economic policy and then produce its own appraisal and forecasts on how things are going.

It smacks of the SNP’s obsessive determination to control everything, to eliminate any sign of dissent and reduce the parliament’s committees to a set of nodding donkeys.

North Korea’s Kim Jong-un could hardly have ordered it better.

This double somersault may be magnificent spectacle to behold. But it has reduced both the committee and the Commission to the level of farce.

Little wonder that Gavin Brown MSP, the committee member who drafted the amendment in confident expectation of full backing, is up in arms.

“Today,” he declared, “is a poor day for the Parliament, a disastrous day for the Finance Committee and bad news for the scrutiny of Scotland’s finances.

“Several committee members reversed their position from an agreed Finance Committee Report just a few weeks ago.

“Last month they agreed it should produce the official tax forecasts and report on the long term sustainability of the public finances. Today, they rejected amendments designed to achieve those ends.

“The stark contrast between what the finance committee agreed in its report and what certain members argued today is staggering.”

The result, he says, is that we are now left with a Bill that creates an advisory body instead of an independent scrutiny body.

Now it may be argued that all this is a storm in a forecasting tea cup. What does it matter that the administration carries on with the system that exists at present? John Swinney is doing a reasonable job. And the economy is chugging along as best it can. What would an independent Fiscal Commission add to the expertise already available to the cabinet from the experts at St Andrews House?

Here are three reasons why it matters greatly.

First, with the Scottish government soon to have enhanced powers over personal and business taxes amounting to £15 billion (rising, with assigned VAT, to £20.6bn) it is more than ever critical that households and businesses alike have confidence in financial decisions being made, the rationale behind them and the likely impacts on the budget and the wider economy.

The whole purpose of independent scrutiny is to help provide robust, evidence-based decision-making in which all can have confidence.

Second, there is growing questioning over the accuracy of Scottish government statistics. The latest official GDP reading has come under fire. The official estimates of service sector performance and that of the construction sector in particular have been challenged.

And third, other measures suggest our economy may be performing even worse than the official figures. And this matters, because it is the performance of the economy in Scotland - its growth rate and dynamics - that will critically determine the strength of tax revenues flowing to the Scottish Exchequer.

Scrutiny by the economist John McLaren of the latest Scottish National Accounts figures published yesterday shows that Scotland’s third quarter GDP including a geographic share of the offshore oil sector fell by 0.8 per cent.

“This latest fall,” he writes, “means that Scottish GDP per head of population (including the North Sea) is now one per cent lower than that of the UK as a whole. Only two years ago this figure was 6 per cent in Scotland’s favour and in 2008 it was over 15 per cent in Scotland’s favour.”

Now this, he admits, may give an exaggerated picture of Scotland’s relative decline. The use of Gross National Income would be a better measure - but is currently not available for Scotland. Why not?

Meanwhile, Scotland’s (onshore) net trade deficit in the third quarter hit £4.25bn, the highest figure on record, and we look on course for a deficit of more than £15bn in 2015, well above the previous record annual deficit level in 2008 of just under £12bn.

And as for overall Scottish Public Service Revenues, these fell £95 million in the third quarter of 2015 due to declining North Sea receipts. Scotland’s geographical share of North Sea revenues amounted to only £21m in the quarter, against £2,700m in the same quarter of 2011 and £4,300m in 2008.

“Scotland’s economy,” says McLaren, “continues to show worrying signs of distress. The fall in GDP per capita to below the level of the UK is clearly connected to the on-going decline in North Sea activity and output.

“The worsening trade position, largely with respect to the UK, is a bigger worry as it has real implications for Scottish prosperity and jobs.”

What better than an independent Commission to provide objective appraisal and forecasts? But that disappeared yesterday as the Flying Flamingos of the finance committee took to the trampoline.