Scottish Fiscal and Economic Studies (ScotFES) - Submission to Smith Commission

Published: 6 November 2014
Author: David Eiser

The ScotFes submission to the Smith Commission

Desire to increase the tax and spending powers of the Scottish Parliament is often driven by an aim to improve the accountability of the parliament to the electorate. The submission discusses what might be meant by accountability in this context, and the extent to which different powers – and the way they are exercised – can be said to improve the accountability of the parliament. It also discusses the inevitable trade-offs between accountability and budgetary risks and uncertainty.

The submission argues that in a first best world, the Scottish Parliament’s revenue control would match its spending responsibilities, but that this is unlikely to be achievable because many taxes are not appropriate for devolution for practical, legal or institutional reasons. Therefore the advantages of tax devolution for Scotland (greater accountability) have to be weighed against the disadvantage for Scotland (the risk of a potentially less generous or more volatile budget in the longer-term) and the risk to the UK and Scotland that tax devolution might lead to tax competition that is in the interests of neither.

There may also be a case for devolving aspects of welfare spending to the Scottish Parliament, but this should be underpinned by a set of clear principles, consistently applied.The submission also argues that control over minimum wages would also increase the accountability of the Scottish Parliament.

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