I was in Dundee yesterday, for the annual conference of CIPFA Scotland, at which I chaired a session on ‘The Fiscal Future of Scotland’ with Jim Murphy MP, UK Secretary of State for Scotland. Murphy was clearly in pre-election mode, and gave a wide-ranging speech covering everything from globalisation, the impact of the recession on the economy generally and on public spending (and why Labour made the right choices during it), how Labour would bring down the budget deficit, and the embarrassment caused by leading the House of Commons football team which even manages to lose to the House of Lords. He didn’t talk much fiscal issues and devolution finance, though he did say that the Calman report was more revolutionary than anyone in Labour had expected, and implementing its changes would constitute the most dramatic change in the architecture of devolution there has been. I’d agree with the latter, if only because of the absence of any substantial change since 1999, but if the former is true it says much about the narrowness of the conception of devolution that UK-level politicians have.
I tried to press Murphy about the use of estimates of tax revenue generated by the enhanced measure of fiscal autonomy endorsed by the white paper Scotland’s Place in the United Kingdom, and the fact that no time limit on this is foreseen. that turns the recommendations from being a real if limited form of fiscal autonomy into a substituted mechanism for maintaining Treasury control. It deprives the Scottish Government of both means and incentive to develop the Scottish tax base, and does nothing to create real financial responsibility for the Scottish Government. A virtual system run on Treasury projections simply isn’t the same as real decisions affecting real revenues. If there needs to be a transition period during which estimates are used (and it would be very hard to do otherwise), that needs to be clearly signalled as such, rather than being left to run indefinitely. (See further my post on ‘Implementing Calman’, HERE as well as earlier posts HERE and HERE.)
Murphy didn’t give much away about this. He stressed administrative issues – the complexity, in particular, of tax credits (an issue not mentioned in the white paper). He also said that the Labour government had ‘enthusiasm’ to make these changes happen (so why no firm timescale in the white paper?), and the importance of getting the proposals right. Even when I pressed about the role of HM Revenue & Customs (who must have this information, even if it’s not in the most accessible of forms, and who could surely supply it in an aggregated form that would ensure that there is no risk of compromising the privacy of individual taxpayers), I didn’t get much.
It looks to me rather as if the problems with getting the Treasury to cede a measure of control, and HMRC to think about how this could actually be delivered, are just overwhelming. At this rate, the UK Government runs a very serious risk of sacrificing its long-term interests because of short-term problems; a new way of being penny wise and pound-foolish.