07 July 2006
Scotland would lose many of the benefits of economic and financial integration with the rest of the UK if the Holyrood Parliament had powers to raise and spend its own taxes, the authors of a report for an influential think-tank have warned.
In an analysis carried out for the Fraser of Allander Institute at Strathclyde University, Brian Ashcroft, Alex Christie and Kim Swales seek to expose the 'flaws and myths' of fiscal autonomy for Scotland.
They argue in their report, published this week, that such a reform in taxation would lead to an unstable economy, lower public expenditure and tax increases.
'In adopting fiscal autonomy, Scotland would lose many of the benefits of economic and fiscal integration with the rest of the UK for little or no gain, compared with even the present system of financing Scottish devolution,' the authors conclude.
As the report explains, fiscal autonomy would result in the Scottish Parliament being fully responsible for raising and spending its tax revenues. Part of these revenues, an amount agreed to cover Scotland's share of centrally provided functions such as defence and foreign affairs, would go to Westminster.
The remaining tax revenues would be retained in Scotland and there would be no subvention from the rest of the UK to ensure that service levels met a UK standard.
Ashcroft, Christie and Swales contend that, under fiscal autonomy, the current budget deficit, as identified in successive government expenditure and revenue reports, would no longer be financed by the UK government.
They add: 'Current levels of benefit from public expenditure in Scotland could be only met by higher taxes or would fail to be met through public expenditure having to be lower.
'Stabilisation benefits following an economic downturn, such as increased social protection payments and reduced income tax and corporation tax outlays, would be lost.
'The Scottish economy would become more cyclically unstable under fiscal autonomy, with all the implications that would have for investment intentions and growth.'
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