Scottish independence: Warning over tax powers

More tax powers in Scotland may lead to 'very awkward tax and spending decisions'. Picture: TSPL

Politicians arguing for greater tax and spending powers for the Scottish Parliament should be careful what they wish for, according to Institute for Government director Peter Riddell. He expects the overall governance of the UK and the relations of the nations and regions to remain “murky and unstable” until after next year’s general election.

Mr Riddell, a former journalist and Privy Counsellor, will address the David Hume Institute in Edinburgh on Wednesday. He is expected to say: “Scotland will get a firm and detailed commitment to legislation immediately after the May 2015 UK general election to devolve considerably more tax powers to Holyrood and more limited control over welfare spending.

“However, far from meaning a larger net financial transfer from London to Edinburgh, the effect is likely to be some very awkward tax and spending decisions for the new Scottish government elected in May 2016. More powers could mean more pain, or be careful what you wish for.

“The outcome of the 18 September referendum is much clearer for Scotland than for the rest of the United Kingdom.

“While there are strong political and electoral incentives for all the unionist parties to honour the pledges made towards the end of the referendum campaign, there is no such common interest on other questions, notably those affecting England and the Westminster parliament.

“The debate on these matters in England is still in its infancy and is tied up with calculations of advantage ahead of a UK general election in little more than six months’ time.

“There may also be early action to take forward the ‘Silk’ process of fiscal devolution in Wales and, less certainly, in Northern Ireland.

“The probability is that these arguments will not be resolved over the coming months but will get pulled into the general election campaign.

“So, the overall governance of the UK and the relations of the nations and regions will probably remain both murky and unstable.”