‘Fair fiscal framework’ crucial to success of Smith devolution deal, says Swinney

26 Mar 15

Holyrood will insist on a fair fiscal framework to reconcile Scotland’s new tax powers with its block grant as part of the implementation of proposals on further devolution, Deputy First Minister John Swinney has told the opening day of CIPFA Scotland’s conference.

The Smith Commission, which proposed devolution of a host of powers over tax and benefits, acknowledges the need to establish a robust framework ahead of introducing further tax powers, but offers little guidance on how to achieve it. Swinney said that the process of introducing two new taxes – on property sales and landfill – transferred to Holyrood from April 1 under the 2012 Scotland Act had shown how hard it was to achieve political agreement.

He said the Scottish Government’s own Fiscal Commission, set up to provide independent appraisal of ministerial tax assumptions, had put the value of the new taxes at £461m, and recommended reducing Scotland’s block grant accordingly.

But the UK Treasury had valued the effect at £524m. Eventually, Swinney told delegates at the event in Clydebank, he and Treasury Chief Secretary Danny Alexander ‘split the difference’ at £494m. 

Swinney noted that implementing the Smith proposals would require the Holyrood Parliament to pass a legislative consent motion, sometimes called a Sewel Motion, to allow Westminster to process the legislation on behalf of both parliaments.

‘There is no way that the Scottish Parliament will pass that legislative consent motion until there is an agreed fiscal framework in place,’ Swinney said.

He also announced that he had decided to put the Fiscal Commission on a statutory basis to reflect its ‘independence and permanence’. The commission is chaired by the banker Lady Susan Rice.

The UK coalition’s austerity strategy, Swinney claimed, was both hampering the recovery and failing to meet its stated objectives on deficit reduction or borrowing.

He said that the Scottish National Party’s alternative economic strategy of raising spending by 0.5% a year to stimulate investment would be ‘material’ to any cross-party negotiations the SNP found itself in after May 7.

But Swinney acknowledged that the need for innovation and change in the delivery of public services in Scotland would continue regardless of the election outcome, and he appealed to finance professionals as represented by CIPFA Scotland to take ownership over the process of reform.

The conference opened with Swinney, who has been in charge of finance in the Scottish Parliament since 2007, accepting honorary CIPFA membership from the institute’s president, Mike Owen. Swinney praised the quality of professional advice he had received from CIPFA members in his ministerial role.

 

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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