Initial reaction to the Holtham Commission’s final report

I hope most readers of this blog are aware that the Holtham Commission’s final report has now been published.  It’s a thorough and impressive piece of work which is well worth reading, and does much credit to the distinguished members of the Commission.  (For those who haven’t already found it, the report is available here, and there’s news coverage from BBC News here and the Western Mail here.

I’ll be writing more shortly about the substantive contents of the report, which merit very serious consideration.  But one point is immediately evident.  This a hugely impressive and argued piece of work, in many ways much more so than the Calman Commission’s final report of a year ago.  (As examples, look at the discussion of how to calculate reductions in the block grant in chapter 5, of the implications of partial devolution of income tax in chapter 6).

It’s worth asking why this is so.  Is it because the remit of the Commission was more limited, confined to economic and financial issues, and not extending (as Calman’s did) to the whole structure of devolution?  Is it because of the composition of the Commission, consisting simply of a small number of distinguished experts who were seeking to avoid political issues, rather than encompassing a wide range of political interests and broader society, like the Calman Commission?  Both factors seem to have been pretty important in their work, to judge from my own dealings with them as well as the papers and reports they’ve produced.  The overall composition of party politics may be a factor as well, but only to a limited extent – the report is of a piece with the way the Commission has approached its task since it was set up.

How the UK Government responds to such a careful report will be very interesting to watch.  The big issue for the white paper on Scottish devolution finance due in the autumn will now be as much whether it applies to the other devolved administrations as well, not just what it says about Scotland.

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1 Comment

Filed under Calman Commission/Scotland bill, Devolution finance, Wales, Whitehall

One response to “Initial reaction to the Holtham Commission’s final report

  1. Drew Scott

    You are entirely correct that the Holtham Report is considerably more impressive piece of work from an economics perspective than was the Calman report. Presumably we can all speculate why that should be the case, but that it is the case there is no doubt. As a long-time critic of the financial recommendations of Calman, I am genuinely relieved that mostof our (myself and Andrew Hughes Hallet’s) criticisms of Calman’s proposals have been articulated – and illustrated convincingly – by the Holtham Report. This is true with regard to (a) the vulnerability of devolved tax revenues to cyclical disturbances (b) varying the devolved tax rate in each tax band (c) the inadequacy of the overdraft facility of £500M which could be enough for Wales but not for Scotland whose economy is 2.5 times bigger than Scotland (d) the need for sensible borrowing powers to fund capital spending (e) the significance of devolving corporation tax. And much else.

    Most impressive perhaps is the quality of the economic analysis that Holtham brings to his report. None of which is rocket science, and I’m sure he doesn’t claim it is, but most of which was simply absent from the expert group’s report to Calman. It was indeed interesting – and to be honest slightly galling – to hear David Bell, one of the Calman expert group, concede on TV that the Holtham Report (helpfully) addresses some of the technical shortcomings of the Calman report. One cannot help but comment that some of us have spent the past year pointing out these same shortcomings in Calman using identical economic analysis to that used by Holtham.

    Of course none of what is in Holtham shakes my conviction that for Scotland at least the economic case for moving to a much greater degree of fiscal autonomy is, in economic terms, both necessary and justified. Arguably this case is not as compelling for Wales which both has a smaller economy than Scotland and which is, in economic terms, more closely aligned to the rest of the UK than is Scotland (using the coefficient of correlation of the economic cycle as a crude proxy). But from an economics perspective Holtham is greatly to be welcomed as a step-wise change in the quality of the debate on the future funding arrangements of the devolved administrations.

    Two final thoughts. First the needs assessment exercise undertaken by the Holtham Commission is, of course, controversial – both politically and from an economic perspective. But that is for another day! Second, while it grieves me to say so the Holtham Report seems to have led to a greater awareness in Scotland (especially among the press) of the defects in Calman than any of us “local” critics have managed to achieve over the past 12 months despite our best efforts. It seems that academic insight and objectivity – like much else in Scotland these days – is another product which we used to produce to a high quality that many now deem has to be produced elsewhere if it is to be any good!

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