Press Story

The Scottish Parliament (and the other devolved legislatures in Wales and Northern Ireland) should be given much stronger tax raising powers to spend on devolved policy, according to a new report published in Edinburgh this week by the IPPR think tank.

The Scottish Parliament has recently been handed new revenue raising powers under the Scotland Act 2012 but the new report says Westminster should go further and devolve more control of taxes collected in Scotland by Holyrood.

The report argues that all personal income tax and a range of smaller taxes could be devolved, and that a large proportion of VAT revenues could be assigned to Holyrood. This package would produce more stable revenues than devolving volatile taxes like corporation tax or North Sea oil and gas revenues.

The report says that Her Majesty's Revenue & Customs (HMRC) should continue to collect income taxes in Scotland but that HMRC needs major changes to ensure it is properly accountable to the Scottish Parliament when it collects devolved taxes, including changes to the membership of its board.

The report suggests the Scottish Government should control:
100% of personal income tax - worth around £10.6 billion in 2010-11
10 'points' of VAT- worth around £4.7 billion in 2010-11
Taxes or excise duties on alcohol and tobacco - worth around £1.9 billion in 2010-11?
Air passenger duty - worth around £183 million in 2010-11

When combined with the tax powers it already has and those that are due to be devolved under the Scotland Act 2012 this will give the Scottish Parliament control over £22billion (based on 2010-11 revenues).

This amounts to 60 per cent of devolved Scottish spending in 2010-11, with 42 per cent of that spending being met from taxes wholly under the control of the Scottish Government (the rest coming from those assigned). This contrasts with the Scotland Act 2012, under which devolved tax powers would account for around 30 per cent of devolved spending. The remaining part of devolved spending would continue to be funded by a grant from the UK government. This grant should be based on a principle of relative need, phased in over time. If devolved governments wanted to spend more generously, they would be able to raise the revenue for that from their own resources.

Alan Trench, author of the report, said:

"Devolution is about making the UK work better as a whole. It's clear that fiscal devolution needs to go a lot further than the Scotland Act 2012 does if it is to meet the aspirations of the people of Scotland, or put the Scottish Government in a position to make its own policy choices. This model is intended to do that, in a way that is workable in practical terms and that minimises the adverse effects on other parts of the United Kingdom."

Guy Lodge, Associate Director at IPPR said:

"It is essential that those political parties that want to keep Scotland in the United Kingdom provide voters in Scotland with a clear alternative to independence before the referendum in 2014. Scots strongly support devolution and want more of it. The challenge for supporters of the Union is to work out how to deliver a package of enhanced powers. This important paper contributes to this debate by setting out potential options for significantly strengthening the taxation powers of the Scottish Parliament while also preserving the integrity of the UK."

Notes to Editors

IPPR's report on tax devolution by Alan Trench will be available to download from www.IPPR.org later this week.

The report marks the start of a major new IPPR programme of work that looks at how the powers of the UK's devolved institutions should be enhanced. IPPR's 'DevoMore' project will explore options for welfare devolution and other ways in which devolution should be enhanced as well as the financing and economics of greater fiscal responsibility, in a way that is designed to work across the UK as a whole, thereby strengthening the Union.

Contact

Richard Darlington, 07525 481 602, r.darlington@ippr.org

Tim Finch, 07595 920899, t.finch@ippr.org