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The Progressive Policy Think Tank

Devolving power simply to abdicate it?

The Scottish Conservatives’ Independent Tax Commission report offers an interesting opening salvo in Scotland’s debate around taxes – but its proposal to tether Scotland’s tax take to that of the UK is problematic.

This week saw the publication of the Scottish Conservatives’ Independent Tax Commission. The report is pretty much the first insight that any of Scotland’s political parties have given us into their thinking on how Scotland should use its new tax and spending powers – and it is an interesting first contribution to that debate.

The report is thoughtful in many parts, and the word ‘progressive’ is used throughout. However, at least one of its recommendations is problematic.

The main recommendations from the report are that the Scottish parliament should look to implement a new 30 per cent income tax band in order to make the income tax system more progressive; that it should avoid a significantly higher personal allowance; and that Scotland should look at some potential reform to council tax, freeze business rates, and consider the replacement of air passenger duty with a new 'departure tax'.

However, for me the most significant recommendation is that the overall tax burden in Scotland should be no higher than the overall tax burden in the rest of the UK – and should, when affordable, be lower.

There are a number of potentially sound reasons for this: for example, ensuring that higher taxes in Scotland do not cause businesses or more mobile workers to relocate across the border, thereby harming the Scottish economy. It may well be that a smaller economy on the edge of a larger one does need to track the tax decisions of its neighbour to some extent; there are also respectable arguments against allowing the tax burden to rise too high in any economy (I won’t try to debate them here).

On the other hand, though, at a time when the UK government is pursuing deep spending cuts – including cutting benefits in Scotland, real-term cuts to the Scottish block grant and to many Scottish departments’ budgets – matching (let alone surpassing) UK government tax cuts would only add to the already enormous public spending challenge facing Scotland. It also shows a lack of faith or confidence in the ability of the state, or public spending, to be a force for good.

But most of all for me, there is something inherently problematic about simply outsourcing one of the biggest questions facing Scotland: does Scotland wish to be a higher-tax, higher-spend country, following a Nordic route? Or does Scotland wish to be a lower-tax, lower-spend country like the US?

The key distinction between the new tax and benefit powers coming to Scotland and the powers it has had previously is that the UK government’s decisions will no longer be the default position for all of the decisions the Scottish parliament makes. On income tax, for example, it will no longer be a case of Scotland varying tax rates and thresholds set in the rest of the UK: rather, the default in Scotland will be previous decisions made by the Scottish parliament. This means that responsibility rests with politicians and government in Scotland in a way that has not always been the case in the past.

Devolving power simply to abdicate it runs counter to the core purpose of having more powers rest with the Scottish parliament.

Nevertheless, the Commission’s work is a well-considered and valuable contribution to the debate – what I hope is the first of many. We are beginning to see the potential for big questions over tax and spend to dominate Scottish politics, in advance of May’s elections and beyond, in a way that important domestic policy questions have not always done over the first 17 years of the Scottish parliament. This to me this is very welcome indeed.

Many of IPPR Scotland’s first interventions have focussed on the effect of tax and spend decisions, and we are planning to launch a major report this March about the new tax and benefits powers coming to the Scottish parliament over the coming years: how they could be used, and what the effects of doing so could be in budgetary and social justice terms.

IPPR Scotland has called for an extensive debate over the new powers coming to Scotland: one that matches the scale of the powers being devolved. The Commission’s report certainly begins to do that, and I hope, together with our own forthcoming work, it will begin to stimulate and shape that debate in advance of the Scottish parliament elections in May and over the years to come.