Devolve income tax to Scotland, says review

21 Jan 13
More than £20bn of the revenues raised in Scotland, including income tax, should be devolved to the Scottish Parliament to provide a ‘clear alternative’ to independence, the Institute for Public Policy Research said today.
By Richard Johnstone | 21 January 2013

More than £20bn of the revenues raised in Scotland, including income tax, should be devolved to the Scottish Parliament to provide a ‘clear alternative’ to independence, the Institute for Public Policy Research said today.

The think-tank’s Devo more report, written by constitutional academic Alan Trench, concluded that the recent extension to Holyrood’s tax powers had not gone far enough. Responsibility for Stamp Duty Land Tax and Landfill Tax will be devolved from April 2015 but Trench recommended that revenues from four other taxes be localised. This would provide stable revenues for public services and ‘put the Scottish Government in a position to make its own policy choices’.

As well as the devolution of all income tax revenues, which was worth around £10.6bn in 2010/11, Trench proposed a proportion of VAT revenues be given to Holyrood, as well as excise duty on alcohol and tobacco, and air passenger duty.

When these are combined with those already being devolved, the Scottish Parliament would control around £22bn of revenues, worth around 60% of spending on devolved services in Scotland. The remaining portion of devolved spending would continue to be funded by a block grant from Westminster.

The report said Revenue & Customs would continue to collect income taxes in Scotland. However, it should be reformed to make it accountable to the Scottish Parliament, including changes to the membership of its board. This recommendation contradicts Scottish Government plans for a new Revenue Scotland tax collection agency to be created.

Trench said it was clear that ‘fiscal devolution’ needed to go a lot further to ‘meet the aspirations of the people of Scotland’.

He added: ‘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.’

IPPR associate director Guy Lodge added that political parties committed to the UK needed to set out ‘a clear alternative’ before the planned referendum on Scottish independence in the autumn of 2014.

He added: ‘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.’

• A report by the Joseph Rowntree Foundation has found that child poverty is now lower in Scotland than in England and Wales.

Today’s Monitoring poverty and social exclusion in Scotland 2013 report said that in the ten years to 2010/11, the child poverty rate in Scotland fell from 31% to 21%, excluding housing costs. The latest rate in the rest of Great Britain is 28%.

However, the report concluded that health inequalities in Scotland were both ‘stark and growing’. A boy born in the poorest tenth of Scotland can expect to live 14 years less than one born in the least deprived tenth. For girls, the difference is eight years.

Julia Unwin, chief executive of the Joseph Rowntree Foundation, urged the Scottish Government to address this inequality. ‘Not to act upon these findings risks condemning this and future generations to a cycle of poor health and no wealth,’ she said.
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