Let’s start with “GERS”. No not the blue half of Glasgow but the: “Government and Expenditure Revenue Scotland 2010-11”, or GERS for short.
The latest GERS report was published this week and shows that Scotland contributed 9.6% of UK public sector revenue and received 9.3% of total UK public sector expenditure. These figures include a per capita share of UK debt interest payments. Scotland’s population is 8.4% of the UK total. Scotland’s estimated current budget balance in 2010-11, which is primarily day to day expenditure, was a deficit of £6.4 billion, or 4.4% of GDP. These figures include a geographical share of North Sea revenues. The corresponding UK figures were a deficit of £97.8 billion or 6.6% of GDP for the same year. That includes 100% of North Sea revenues.
As is usually the case with statistics, and probably even more so with those which are used as ammunition in the fiscal powers debate, economists and other commentators will argue back and forth on what these facts and figures tell us. That is why I agree with Reform Scotland’s call for the Office for Budget Responsibility to provide forecasts for all taxes raised in Scotland and not just those that might be devolved by the Scotland Bill. Reform Scotland’s press release can be found here. More on GERS can be found here.
Now to the fiscal powers debate. This week it was Labour’s turn to announce a “commission that will look at how devolution should change and what further powers should be devolved to the Scottish Parliament.” This means that none of the main political parties are arguing for the status quo or even just the Scotland Bill. The Liberal Democrats have already announced their own commission and the Conservatives, or rather the UK Conservatives by way off the Prime Minister, have said that they will consider devolving further powers if Scotland votes no in 2014.
The announcement of yet another commission received quite a lot of media of coverage. The fact that Labour think a second referendum will be required if Scotland votes “no” in 2014 was less commented upon. I suspect that this will also be the view of both the Liberals and the Conservatives. That clearly conflicts with the argument that Scotland needs an early referendum to stop “uncertainty”. An article on this from the STV news website can be found here.
Aberdeen City Council is expected to apply for more than £90m of tax incremental funding (TIF) following a ‘yes’ vote in the Union Terrace Gardens referendum. A report on this from the STV news website can be found here. I have written before on why I support TIF and the type of thinking behind this type of idea. The one caveat I have concerns the number of these projects. As was found in the United States, if too many projects are approved the ability to fund both old and future projects gets harder. The Scottish Futures Trust is though well aware of what happened in places such as Illinois, where I worked as an attorney, and first came across TIF. More on TIF can be found here.
I was not surprised to read that a last minute bid to stop the Scottish Government’s plan to levy a tax on supermarkets and large shops has been defeated. The “Tesco tax”, as this proposal has been termed, will see retailers which sell alcohol and tobacco pay an extra £95m in business rates over the next three years. A BBC news website piece on this can be found here.
Sometimes when you read a story about the workings of government, local or national, you just sigh. This is one such story. Whitehall departments have been criticised for overspending by £500m on schemes that were actually intended to save money. The National Audit Office found that UK ministers failed to offer clear management for the setting up of pooled resource centres. The aim was to stop costs being duplicated. The ever excellent Labour MP Margaret Hodge, who chairs the House of Commons Public Accounts Committee, said that the overall figures provided: “a shockingly familiar story of spiralling costs and poor value for money”. Will anyone be brought to account? Will a gong have to be returned or a bonus forfeited? I suspect not. A BBC news website piece on this can be found here.
Now to the Budget debate. For “debate” read “battle between and briefing against your coalition partners.” There are a number of fronts in this battle. These include how quickly to increase the personal allowance limit, whether to reduce higher rate pension tax relief, the possible introduction of a “Mansion” tax and whether to retain the 50p top rate of income tax. Is it worth speculating as to the outcome of these battles? Not really. Fun though that would be this is a political game pure and simple. The “winner” will be the side who at that moment has the most power not necessarily who has the best ideas. It was ever thus.
The more interesting debate, and this has just really begun, concerns whether and to what extent wealth as opposed to income should be taxed. That is where the debate is going. I will come back to this issue after the UK Budget.
One final point on the so called “Mansion tax”. I do find the lack of commentary on the fact that local taxation is devolved to the Scottish Parliament amusing. Can you imagine the Scottish Parliament’s reaction to the UK Government interfering with one of the few tax powers it has? Let’s call that a rhetorical question. We do know how the UK Government reacts if the Scottish Parliament or the Scottish Government dares to do something that touches on a reserved matter. Here are a few examples: free personal and nursing care, local income tax and minimum pricing for alcohol.
As with last week’s blog I will end with the French presidential election and news that Francois Hollande, the Socialist candidate, has announced plans to raise the top rate of income tax to 75 per cent on “indecent” annual incomes above €1 million. The use of the word “indecent” says it all.
Good luck to all our teams in action in Ireland this weekend.
