Use devolved powers to boost Scottish competitiveness, says tax review

25 Jan 16

Scotland’s new devolved tax powers should be used to boost competitiveness, incentivise growth and stimulate enterprise, according to the report today from a commission set up by the Conservatives.

The Independent Commission for Competitive and Fair Taxation, chaired by former CBI Scotland director Sir Iain McMillan, stated the overall tax burden in Scotland should be no higher than that of the rest of the UK, and lower when affordable. This is expected to be taken up by the Tories as a central campaign theme at May’s Scottish Parliament election.

It follows last month’s report of the Commission on Local Tax Reform, co-chaired by the Scottish Government and the Convention of Scottish Local Authorities, in which all the main Scottish political parties were represented apart from the Conservatives, who had instead formed McMillan’s commission with a broader fiscal review remit.

Where the cross-party report canvassed several options for replacing the council tax, McMillan’s group want it retained, but with reforms to relieve the burden on lower-income households.

But their more striking proposals lie among national taxes. Key recommendations include a freeze on the top rate of income tax, coupled with a new “tax band for aspiration” set at around 30p in the pound and aimed at middle-earners. It also called for a freeze on business rates for the duration of the next Scottish Parliament as well as abolition of the Land and Buildings Transaction Tax, introduced last year by the Scottish Government to replace stamp duty.

It also called for a new “competitive” Departure Tax in place of Air Passenger Duty, which is set to be devolved to Scotland under the current Scotland Bill.

In his foreword, McMillan thanked Scottish Tory leader Ruth Davidson for setting up his group. “From now on the debate in Scotland needs to include tax as well as matters concerned with spending,” he stated.

“I hope very much that this report will stimulate a rigorous debate on Scotland’s international competitiveness and the contribution that competitive and fair taxes can make in improving Scotland’s economy.”

Meanwhile, Scottish finance minister John Swinney was today facing questions from the Commons Scottish Affairs Committee on the progress of negotiations with the UK Treasury over the fiscal framework to underpin the new tax powers in place of the Barnett Formula, which has determined Scotland’s block grant share of UK spending since the 1970s.

Both Swinney, who is leading the Scottish Government’s team in the talks, and first minister Nicola Sturgeon have made it clear that they will not bring the necessary consent motion for the new tax powers before Holyrood unless and until they are satisfied that the framework is fair to Scotland.

The declared common aim has been to reach agreement next month, so that the issue can be settled before the Holyrood Parliament rises for May’s election.  But Sturgeon admitted in a weekend BBC interview that, in the wake of the latest round of talks last week, there remained “some distance to travel” before a deal could be agreed.

  • 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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