Scotland should have its own treasury

Friday, November 21, 2008

Scotland should be given powers to raise all the money it spends and have its own Chancellor of the Exchequer, a think tank has recommended.
In its submission to the Calman Commission Reform Scotland says an Edinburgh-based Treasury would make the Scottish Parliament more financially accountable and provide a platform for the country to become a major world economy.

The independent, right-of-centre think tank also calls for the Barnett Formula to be scrapped.

In it submission Fiscal Powers, Reform Scotland concludes that effective government is best achieved where the responsibility and accountability for spending taxes is matched by the ability to set and raise them.

It sets out how certain taxes could be retained by Westminster to meet the approximate £20 billion it currently spends north of the Border. The Scottish Government would set all other taxes to fund the Holyrood budget of around £30 billion, with the exception of VAT. This would be set at UK level, with 40% of the revenue from Scotland going to Westminster and the remainder assigned to the Scottish Parliament.

Reform Scotland says that giving Holyrood greater responsibility for revenue-raising, including borrowing powers, will help achieve two goals vital to the country’s future prosperity – a lower overall tax burden and a major reduction in public spending as a share of Gross Domestic Product.

In an earlier paper, ‘Local Power’, Reform Scotland identified lack of fiscal power as ‘the fundamental weakness of the local government finance system because it undermines councils’ autonomy and accountability’.

The new report says that the same arguments apply to the Scottish Parliament which, arguably, has control over even less of its own revenue raising than do local councils in Scotland.

The report concludes that the fundamental defect of the current devolution settlement is its lack of financial accountability. It says that one remedy for Scotland would be ‘outright independence’. However, Fiscal Powers examined the question of how greater financial control could be achieved within the current UK framework.

The report finds: ‘It requires the UK Government to put in place new financial arrangements which are fair to the governments of both Scotland and the UK. This requires us to address the position in England because it is the lack of a body to represent English interests that is the Achilles’ heel of the current devolution settlement.

‘Such a body would enable a clear and transparent system, which sets out clearly the responsibilities of the different levels of government, to be put in place. This is the best way to achieve greater financial accountability in both Scotland and the United Kingdom.’