Fiscal devolution is about more than just transferring powers from one parliament to another. It has to be part of a strategy to reduce inequality in Scotland.
That was the key message in my Sunday Times (£) column yesterday. I set out the options for fiscal devolution and my own preferred option as described in the Red Paper on Scotland and UNISON Scotland’s ‘Fairer Scotland – Devolution’ paper. This approach devolves all property-based and income taxes, including the power to vary the rate in each band. Business and consumption taxes are retained at UK level, because business tax competition simply leads to a race to the bottom.
I also took the opportunity to rebut some of the recent criticisms of fiscal devolution, including the impact on the Barnett formula and the risk that further devolution will lead to independence. Both in my view miss the point completely.
However, the main thrust of my column was that powers, including fiscal devolution, have to be for a purpose. That purpose is a fairer and more equal Scotland because more equal societies perform better on every measure.
The Yes campaign and the White Paper makes much of the OECD 2011 paper that appears to show the UK as the fourth most unequal society in the developed world. However, this selective use of the paper only deals with income inequality. The OECD paper actually emphasises the role of public services in reducing inequality. The paper says:
This is why the strongest argument for fiscal devolution is that Scotland is suffering from the financial consequences of English public service reform as the Tories shrink the state. Having the power to develop our own public service model is weakened if the financial rug is pulled from under it. University privatisation and NHS cuts are two recent examples. The IPPR ‘Devo More’ paper makes a similar point.
The OECD key policy recommendations are also noting:
The Yes campaign would of course argue that we could do all of this with independence. There is a certain irony that the SNP’s currency union could actually result in greater financial control from ‘London’ than fiscal devolution. The SNP (Stewart Hosie’s line in the last BBC debate) would still have us believe that Scandinavian levels of public services are possible on current tax rates. Scandamerica is simply not a credible proposition for anyone who is serious about tackling inequality.
All the polls make it clear that the majority of Scots want to see greater devolution short of outright independence. Scottish Labour has to go with that majority by arguing for the fiscal powers that can help deliver a vision of the fairer and more equal society. Anything short of that really would encourage a drift to independence.