Calman Will Deepen Scots Economic Misery

In May, the new coalition in Westminster pledged to implement the long-delayed Calman Commission recommendations for the Scottish Government. The Calman report, originally published in June 2009, was sat on by New Labour, but now its recommendations for Holyrood seem certain to be introduced within the coming months.

The most eye-catching feature of Calman’s proposals is in the area of fiscal policy. Since 1998, Holyrood’s budget has doubled and many in the Parliament, particularly within the SNP, have long complained about the inability to raise (or lower) taxes in Scotland. Not anymore.

However, the tax raising powers agreed under Calman are a mess.  As a pair of academics from the Campaign for Fiscal Responsibility argue, under Calman the Scottish Government will see a substantial reduction in its budget. This income reduction will come on top of a significant reduction in its block grant from London (currently in the region of £30 billion).

Writing on The Caledonian Mercury website, Professor Andrew Hughes Hallett and Professor Drew Scott say:

Under Calman, Scotland is bound to experience even deeper cuts in public spending than those already in the pipeline. Under Calman, part of Scotland’s budget would be dependent on income tax revenues raised in Scotland, with the Holyrood Parliament having the power to raise or lower a Scottish element of income tax should it wish to increase or decrease its spending.

If we look at the recently published national accounts for Scotland – the Government Expenditure and Revenues Scotland report [GERS]– then the budgetary implications of Calman’s proposals become alarmingly clear. In the year 2008-2009 (the latest data available) income tax revenue raised in Scotland fell by £549 million on the previous year meaning that – under the Calman’s model – the total revenue accruing to Scotland’s budget would have been approximately £275 million lower than it actually was if departmental spending were untouched. That is the entire budget for employment policy. Preliminary UK data shows that income tax receipts in year 2009-2010 fell a further 8%, implying a Calman-shortfall of approximately £400 million that year.

Scottish Secretary Michael Moore has said that Holyrood will be ’empowered’ by Calman, but in its current form the proposals could significantly hinder Scotland’s economic recovery.

Opposed by the SNP government in Holyrood, Calman is being imposed by a Tory-led government that has little support in Scotland – the Conservatives did nothing in the 2010 general election and still have only one Scottish MP, David Mundell, currently subject of a police investigation into his election expenses.

Calman was designed to copper-fasten the union but if his fiscal proposals prove as deleterious to Scotland’s economy as its opponents (and many experts) suggest, in the long-run he might end up doing the very opposite.