• Text size      
  • Send this article to a friend
  • Print this article

Agenda:

There are more than 2,000 political scientists from all over the world in Glasgow this week, attending the European Consortium for Political Research's annual conference at the University of Glasgow.

These experts specialise in a wide variety of different subfields of political science and studies, but they will not be able to escape the topic on which most Scots are now focusing: the independence referendum.

Yesterday's keynote lecture, delivered by Professor Iain McLean of Oxford University after a welcome address by Education Secretary Michael Russell, focused on a key issue relevant to this historic event that has not been properly addressed by either side of the debate.

Titled Spending too much, Taxing too little? Parliaments in Fiscal Federalism, the lecture addressed a crucial problem for decentralised countries: how to promote fiscal responsibility? Sub-state governments established by devolution or federalism - typically charged with providing many public services - usually want to spend lots of money, yet are normally less endowed than the central government with tax-raising powers and reluctant to use what taxation powers they do have.

Although many political scientists will be able to relate to this problem, the situation of vertical fiscal imbalance has particular relevance to Scotland and the UK now, as Professor McLean points out.

Unfortunately for Scottish voters, both the Yes and No campaigns have failed to address fiscal matters in forthcoming ways. Most of the money spent by the Scottish Parliament comes from a block grant sent by the UK Government raised from taxation across the UK.

Critics, particularly from the right, argue this system works against fiscal responsibility at Holyrood, and left-wing critics might add that the Barnett Formula, which currently favours Scotland with higher per capita spending than in the UK as a whole, is unfair to Wales and the poorer regions of England.

Change is coming regardless of the outcome of the referendum, with the introduction of a Scottish rate of personal income tax to be introduced soon after a No vote, and, for political reasons, a discussion about changes to or the scrapping of the Barnett Formula in favour of needs-based system for entire UK appears likely.

Both campaigns fail when it comes to dealing honestly with the harsh realities of Scotland's finances. The SNP, the largest component of the Yes campaign, promises to keep the "free" things enjoyed by Scots (but not their English neighbours), adding childcare to the list.

Somehow this Nordic aspiration would be funded through relatively light taxation that would include Irish-style levels of corporation tax.

This is despite the fact the extensive Nordic welfare states are financed by high levels of broadly based taxation and contributions: regressive value-added taxes, hefty "sin" taxes on alcohol and tobacco, and co-payments when you see the doctor. Even in Norway, the vast majority of oil revenue is reinvested in a sovereign wealth fund for future generations, with only about four per cent going on current spending.

The No side talks about "greater powers" for the Scottish Parliament, but this consists mainly of forcing that body to raise in Scotland more of the money spent in Scotland without allowing much in the way of innovation in taxation policy overall.

There is nothing about allowing Scotland to keep oil revenue derived from its territory, a policy seen in decentralised countries like the US.

Furthermore, any increase in tax powers would be accompanied by a corresponding reduction in the block grant, meaning that if Barnett is scrapped, tax rises in Scotland will be inevitable if Scots want to retain services that are currently free.

Professor McLean's lecture, along with many other panels and discussions taking place at the conference, should help to illuminate areas where both campaigns are failing to delve into the implications of this month's independence referendum.

Contextual targeting label: 
Local government

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

259333