It was reported this week that David Cameron, or sources close to him, had commented that a unified tax and benefits system across the UK was at the heart of a single country.
It was further reported that the Prime Minister believed that if Scotland wanted any further devolution of powers it would have to back independence.
As a unionist reading such comments, I wondered whether the Prime Minister wasn’t playing a role in the nationalists’ campaign. Not only are the Conservatives in danger of being out of step with the majority of Scots, opinion polls continually indicate growing support for a middle option which would substantially extend devolution, while stopping short of independence, but comments suggesting a unified tax and benefits system are essential to a single country are just plain wrong.
Reform Scotland has in the past highlighted the case of Spain, which is not a federal country, but like the UK has undergone asymmetric devolution whereby different areas have varying degrees of autonomy.
The Basque Country and Navarre have complete responsibility for agreed taxes and pay a subsidy to the central government for services it provides. However, the other autonomous communities in Spain also have a far greater level of autonomy than Scotland does.
There are also numerous examples of federal countries such as Switzerland, Canada and America, where no-one doubts the unity of the country, yet sub-national tiers of government are trusted to make the best decisions for their local area, including with regard to tax.
In Canada provincial income tax operates alongside federal income tax. The federal income tax applies to four income brackets, whilst there are a range of different approaches taken to income tax by the provinces; there is a flat rate tax in Alberta, whereas there are five income brackets in British Columbia and Nova Scotia.
In Switzerland cantons and communes have considerable discretion over tax and there is no federal harmonisation at all with regard to some taxes, such as inheritance tax.
Even at a very local level in America where many cities can tax impose any tax not otherwise prohibited by state law.
If so many other countries can stay united with different tax systems, often at a far lower level of government, why can’t we?
Turning to benefits, Reform Scotland has called for about £7bn of benefits to be devolved to the Scottish Parliament. This wasn’t calling for powers for powers sake, but recognition that policy areas aimed at tackling poverty, such as housing and social inclusion had been devolved to Holyrood, but the real tools to address these problems, namely welfare benefits, had been left at Westminster. We felt that this was inconsistent and made it harder for problems to be addressed.
Equally, we left benefits such as state pensions, maternity pay and sickness pay at a Westminster level because the broader policy areas relating to these issues remained at Westminster.
As long as the money needed to fund the relevant area of expenditure is raised by the tier of government spending it, there is no reason to think this undermines the union.
Indeed, it is the current situation that could be argued presents a greater threat to the union. It is important to remember that, at present, there is already a different approach to what could be perceived as benefits, with free personal care for the elderly, free eye & dental checkups and free university provision in Scotland, but not in England.
The result of these policies has led to some south of the border claiming that the rest of the UK is subsidising us Scots. The only way to dispel such notions is to make the Scottish Parliament responsible for raising the money it spends. As a result, even if accusations of extravagance were thrown at Scottish politicians from south of the border, it would quite clearly only be Scottish taxpayers paying for them.
There is so much more that unites these isles than simply taxes and benefits and I hope the Prime Minister recognises that the best way to preserve the union is to make devolution work better, not to make ill-advised threats.
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