An Economics Professor from Stirling University, Prof. David Bell, has co-authored a report warning new powers coming to Scotland may be unworkable – and in the long run, could cost the Scottish budget billions.
The University of Stirling, the Institute for Fiscal Studies (IFS) and the Centre for Constitutional Change issued the warning in a joint report concerning the so-called “fiscal framework” which underpins the new Scotland Bill.
The report also called for a “fundamental reassessment” of the Barnett formula, used by the UK government to allocate a block grant to the Scottish Government for its budget.
Professor Bell said:
The options available for calculating the block grant adjustments and other elements of the fiscal framework will have major effects on the Scottish government’s budget and the fiscal risks and incentives it faces.
“These issues should be part of the public and parliamentary debate, as much as the tax and welfare powers set out in the Scotland Bill itself have been.”
The report suggests that without a major overhaul of how these new powers are funded, within a decade Scotland could be set to lose £1 billion a year.
The Smith Commission – charged with exploring options for further Scottish devolution by David Cameron in the wake of last year’s No vote – called in its recommendations for there to be no financial detriment to Scotland in any transference of powers.
But the report said it would be impossible for the Scotland Bill as currently mooted to satisfy Smith’s “no detriment” principle.
Earlier this month, Professor Bell urged caution over the use of new income tax powers in evidence to the Scottish Parliament’s Finance Committee.
by Dan Vevers