Holyrood new powers ‘would boost UK Treasury’

PROPOSALS to hand Holyrood more powers would still mean the UK Treasury would benefit from Scotland’s economic success, the Deputy First Minister has said.

John Swinney believes the new proposals would still benefit the Westminster government. Picture: Greg Macvean
John Swinney believes the new proposals would still benefit the Westminster government. Picture: Greg Macvean

John Swinney said that under the current Smith Commission proposals, a 0.1 per cent increase in total factor productivity would increase employment by 11,000 over ten years and boost tax revenues north of the border by £400 million.

But he argued if Scotland was allowed to retain and invest all the proceeds of an improved economy, tax revenues would grow by £700 million while employment could increase by 29,000 over the same period

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The Deputy First Minister spoke ahead of new analysis being published by the Scottish Government showing the impact on GDP, jobs and tax revenues from giving Scotland greater fiscal powers.

Westminster Bridge and the Houses of Parliament. Picture: PA

The paper will also show how achieving the Scottish Government’s goal of increasing exports by 50 per cent could boost GDP by 3 per cent, increase employment by 81 per cent and result in a £1.8 billion rise in the tax take.

Mr Swinney said: “What this paper shows is that relatively small changes in productivity, investment and exports together with the ability to retain and reinvest additional tax revenues generated by increased economic activity can have a huge impact on our economy.

“The limited powers proposed by the Smith Commission mean that a large part of this additional tax revenue would be retained by the UK Government instead of being directly reinvested back into the Scottish economy.

“Once more this means that the fruits of our economic success would be reaped by the Treasury in London instead of being ploughed back into Scotland’s public services and economy.”

He added: “Last week we published Scotland’ economic strategy and set out how we plan to achieve a more productive, cohesive and fairer country.

“Our anti-austerity and progressive economic approach is in stark contrast to the path adopted by Westminster.

“If we can increase productivity by an additional 0.1 per cent a year over ten years and retain and reinvest the additional tax revenue, we could boost GDP by 1.8 per cent, boost jobs by 29,000 and raise tax revenue by £700 million - all benefits that should stay in Scotland.

“Under the Smith Commission funding framework the positive impact to the Scottish economy is smaller, with GDP being boosted by 1.3 per cent, jobs by 11,000 and tax revenue by £400 million as much of the benefit flows back to the Treasury in London.

“It is clear to me that the impacts of improving levels of productivity, investment and exports should be felt most keenly by those living and working here in Scotland - the people who are growing our economy.”

Mr Swinney made his comments at the same time as a new leaflet, explaining the new powers that will be transferred to Holyrood, is being sent out by the UK Government.

The eight-page Scotland’s Changing booklet will be sent to all 2.5 million homes across the country.

It sets out how powers over income tax, some welfare provision and control over air passenger duty are being devolved as a result of the Smith Commission.

Scottish Secretary Alistair Carmichael said: “Scotland’s is changing for the better, with new powers coming to the Scottish Parliament.

“These powers will have an impact on every person living in Scotland and it is important that we all know what they are and what they mean for us.

“From Monday, households across Scotland will receive a leaflet, direct to their door - and that leaflet will spell out the facts.

“The Scottish Parliament will soon be given power over the rates of income tax, welfare provision with a starting budget of more than £2.5 billion and the ability to give the vote to 16 and 17-year-olds in Holyrood and local government elections.

“Alongside borrowing powers, and continued control over health, education, housing, public transport and so much more, the Scottish Parliament is set to become one of the most powerful devolved parliaments not just in Europe, but in the entire world.

“At the same time, Scotland will keep the many benefits which come as part of the UK. We’ll keep our UK pound, our UK passport and our UK pensions.

“We’ll also continue to benefit from a single jobs market, a single defence system and a single, strong and fast-growing UK economy.

“This is good news for Scotland. A united future, built to last.”