More Powers: What Powers? - David Bell, University of Stirling
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What next for Scotland? Future of UK and Scotland & Scottish Centre on Constitutional Change event at Dynamic Earth on Monday 6 October 2014 http://www.futureukandscotland.ac.uk/events/what-next-scotland The referendum result has raised questions for both the immediate and longer term future of Scotland and the rest of the UK. At this event, experts from the Scottish Centre on Constitutional Change offered some answers, looking at what happened on 18 September and what might happen in the weeks, months, and years ahead. As the nations of the UK enter what looks to be an unprecedented period of constitutional reconfiguration, this public event highlighted the most recent research by some of the UK's most respected academics, providing a framework for understanding the process and proposals put forth by the parties.
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More Powers: What Powers? - David Bell, University of Stirling
- 1. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 More Powers: What Powers? Professor David Bell University of Stirling
- 2. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 Scotland Act 2012 – Landfill Tax – Land and Buildings Transaction Tax –Scottish Rate of Income Tax (SRIT) –2015-16 estimated receipts: •Landfill tax £107m •Land and Buildings Transaction Tax £413m •SRIT £4668m •Total £5188m
- 3. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 Scottish Rate of Income Tax Income Income Tax Rate £10k £32k £100k 20p 40p 45p 10p Scottish Government HM Government = £4.7bn Vertical tax competition within shared tax base? Horizontal tax competition over mobile tax base? 15p Labour Proposal
- 4. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 The Block Grant Adjustment (under the Scotland Act 2012) Year 1 £30bn? SRIT Reduced Block Grant Year 2 £30bn Size of reduction determined by growth in UK tax base Shortfall if Scottish income tax not growing as fast as UK income tax Indexed Deduction Method
- 5. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 Proposals for tax devolution (1) £m (2012/13) Index of revenues per capita relative to UK Devo-More Devo-Plus Scottish Conservatives Scottish Liberal Democrats Income tax 10,865 -12% (personal allowance reserved) VAT 9,347 0% Shared Potentially shared National insurance contributions 8,521 -2% Devolved longer term North Sea revenue (geographic share 5,581 909% Devolved longer term Corporation tax (excl North Sea) 2,872 0% (thresholds reserved) Shared Fuel duties 2,258 2% Devolved longer term Council tax 2,006 -5% Already devolved Non-domestic rates 1,981 -8% Already devolved Tobacco duties 1,128 41% Devolved longer term Other taxes, royalties and adjustments 1,082
- 6. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 International comparisons of sub-central revenue and spending autonomy
- 7. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2008-09 2009-10 2010-11 2011-12 2012-13 Revenue/Spending (£m) North Sea Oil Corporation Tax Other taxes VAT National Insurance Income Tax Total Managed Expenditure Tax Revenues in Scotland Fiscal deficit Borrowing required 1p on basic rate income tax raises between £208m and £395m
- 8. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 The Quota • What if the Devo-Max solution applied? • As in Basque country, would imply payment for central services – foreign affairs, foreign aid, debt interest, defence – which is known as the Quota • Our estimates, based on Scottish Government and OBR forecasts of oil revenues and central OBR growth, suggest a Scottish deficit of between £9.3bn and £5.1bn in 2015-16 • This is a negative Quota – requires either funding from UK or new borrowing powers • Explicit Quota to replace (somewhat) implicit Barnett Formula? • The Treasury would likely insist on a no bail-out clause on such borrowing – otherwise would be added to UK debt
- 9. Scottish Centre on Constitutional Change ESRC Grant: ES/L003325/1 Issues for the Devolution Commission • What additional taxes? • How extensive will control be? – tax base/allowances – rates • What are the constraints on the exercise of these powers? – vertical/horizontal tax competition – factor mobility • Are the expectations of economic growth consequent on the acquisition of these tax powers unrealistic? • Should the unionist parties be more prepared to cede control over welfare to refocus expectations on social justice?