Leaders: SCDI challenge SNP fiscal freedom claim

Ahead of the publication tomorrow of the UK government’s analysis of the implications of an independent Scotland adopting the pound, it is clear a major battle is looming with rival interpretations as to its efficacy for Scotland.

That the centuries-long tradition of distinctive Scottish banknote issuance could come under question in the Treasury’s flagship report would be of concern to many and could act as an accelerator for a fire that has already no shortage of combustible materials.

Agreement on the continuance of Scottish banknote issuance would only be one of a number of complex and contentious issues that would need to be negotiated between the Scottish and Westminster governments in the event of a Yes vote.

Today, one of Scotland’s most consensus-seeking and enduring institutions, the Scottish Council for Development and Industry, concludes in a paper that the Westminster government may seek to limit an independent Scottish government’s flexibility in fiscal policy, particularly if it was concerned about the fiscal stability of a sterling zone.

Specifically, it is likely to raise concerns about SNP plans to cut corporation tax below that in the rest of the UK. And it challenges First Minister Alex Salmond on his assertion that an independent Scotland’s borrowing costs would be no higher than the UK’s. The SCDI says that Scotland’s debt inheritance, lack of track record, volatile revenues and large banks may result initially in a higher borrowing rate and extra outlays.

There is nothing particularly new in the concerns it raises, nor is there fresh evidence produced to underpin them. They have been well aired by leading economists such as Professor John Kay, a former member of the Council of Economic Advisers. The degree of benefit Scotland would enjoy in fiscal policy, he has warned, “might differ very little from the modest amount Scotland currently enjoys under the allocation of a block grant within the UK”.

But that the issues have been publicly raised by such a long- established cross-party body sends a signal to Scottish Government ministers that they have yet to convince that an independent Scotland would enjoy all the fiscal freedom they proclaim.

Indeed, it is a direct challenge to the assertion of Deputy First Minister Nicola Sturgeon last week that an independent Scotland using the pound would still enjoy the huge advantages of full fiscal freedom. “We will be free,” she declared, “to make our own tax and spending choices here in Scotland, to suit our own needs and priorities.” “Not necessarily” is the SCDI’s considered view.

Tomorrow’s paper will be crucial in setting the framework for further discussion – and that is set to be intense. At the very least, voters will need a clear understanding of the implications of currency union with sterling on the aspirations of the SNP for a free hand in tax and fiscal policy.

Ofgem must heed comparison concerns

Energy market regulator Ofgem would do well to take note of the warning from Which? on the proposed new tariff comparison rate (TCR) designed to simplify energy tariffs and allow consumers to make informed choices across the market. The consumer watchdog provides compelling evidence that the reform would not cut through the uncertainty and bafflement faced by many customers and that the reforms could result in higher costs for more than 3.4 million households.

The Ofgem illustrations are based on medium gas and electricity usage. However, barely a quarter of consumers use this level of energy, with the result that almost three-quarters of customers could find themselves directed to tariffs inappropriate to their circumstances and which could result in them paying more. Some 500,000 low-energy users could be advised on the wrong tariffs.

A better idea, says Which?, is to introduce a single unit price for energy tariffs, to enable consumers to compare rival deals more easily. In a survey of 1,029 adults last year, it found that only one in ten could spot the cheapest energy deal from a range of standard tariffs, but this climbed to nine out of ten when the deals were presented with a single unit price.

Which? is not alone in this criticism. Adam Scorer, director of policy at Consumer Focus, has said that the Ofgem proposals carried “a risk of unintended

consequences and in particular a general levelling up of prices”.

The energy regulator should consider the evidence presented and do everything to ensure that changes will genuinely help guide consumers to a clearer method of comparison and a tariff appropriate to their circumstances.