THE fiscal framework. Many readers will be well up on the additional powers that are coming to our Scottish Parliament and how they compare with what we actually need, but maybe not too many of us have really paid attention to what this fiscal framework argument is all about – and why it matters.
Of course we may well have read what the First Minister has said about its importance and what our Deputy FM John Swinney has said about why he won’t recommend acceptance of the UK Scotland Bill unless the fiscal framework on offer is fair. We’ll also probably have caught the assurances from the UK Government and their acolytes that all will be fine and we should be duly impressed, and grateful, that they have been true to their promises. Aye right.
We’ve still to see what actually is on offer in this fiscal framework, but before we do and to help each one of us decide if the offer is fair, maybe now is the time to find out a bit more.
During the referendum campaign, folks across Scotland became very familiar with the Barnett Formula, the mechanism the UK Government uses to decide how much money Scottish Government is to be ‘given’ through ‘the block grant’. It is based on an assumption that all tax powers would rest at Westminster, so with some of those powers coming north and with the commitment to continue to use the Barnett formula to determine the size of the block grant, a means of taking the tax revenues raised by the Scottish Government into account has to be arrived at. They call that the ‘block grant adjustment’.
The size of that adjustment needs to be determined each year and the way of reaching that is a critical part of the fiscal framework. A key principle of this, agreed by the Smith Commission, was the principle of ‘no detriment’, that is that neither the Scottish nor the UK Governments should suffer financially just because tax powers have been transferred from Westminster to Edinburgh. So, the basis of calculating this adjustment formula is critical.
AS we might expect, things now get complicated. Like everything else, there’s many a way to calculate the formula and it is not about small sums. Leading economists such as Professor Anton Muscatelli have already highlighted how some formulas can penalize us and others can produce a fairer result. Others are bothered by this too, with Graham Smith of the STUC who has warned of a ‘poisoned chalice’ if the shape of the fiscal framework is unfair. So, the upshot of all of this is that we need to be bothered not only by the inadequacy of the additional powers coming north, but also by the integrity and fairness of the fiscal framework on offer. The two go hand in hand.
Get it wrong and it could be a bit like being offered the chance to earn more money by doing extra hours, only to have the additional money you’ve earned deducted from your basic wage. Or being told to get a job, only to find that even a low income job with uncertain hours means you lose vital benefit support and you end up worse off.
Why does this all matter? With the current block grant to Scotland already cut by almost 20 per cent and the think tank Fiscal Affairs Scotland telling us that we are only about halfway through the Tory Government’s ideologically-driven austerity measures, losing millions, far less billions through an unfair adjustment formula is not an option. The Scotland Bill contains very few powers over economic growth or job creation so our capacity to improve our fiscal position is seriously restricted. The stakes are high on this one. Because every pound lost through an unfair formula will be a pound less that we have to use to encourage economic growth through increased childcare provision, or tackle education inequality or continue to improve health services.
Debate and discussion on the fiscal framework are complex and can be technical. So it is easy for us to switch off because it seems all too difficult and anyway, it doesn’t matter so much. It does. Because right at the core, this is about politics and the additional powers coming to Scotland, much vaunted by Unionist parties as the ‘final word’ to still our constitution grumping will be of even less worth if we don’t win a truly fair settlement. Less than two years ago, we got our collective heads round the Barnett Formula and the ins and outs of monetary policy. We can do the same with this. And to think we were told that independence would be the more complicated and risky route. I have a feeling the fiscal framework argument will not quieten a growing recognition that independence really is our best bet.
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here