Full fiscal autonomy for Scotland

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Full fiscal autonomy (FFA) – also known as devolution max,^[1] devo-max,^[2] or fiscal federalism^[3] – is a particular form of far-reaching devolution proposed for Scotland. The term has come to describe a constitutional arrangement in which instead of receiving a block grant from the UK Exchequer as at present, the Scottish Parliament would receive all taxation levied in Scotland; it would be responsible for most spending in Scotland but make payments to the UK government to cover Scotland's share of the cost of providing certain UK-wide services, including at least defence and the conduct of foreign relations. Scottish fiscal autonomy – stopping short of full political independence – is usually promoted by advocates of a federal or confederal constitution for the United Kingdom.

It was once proposed that a greater % of those who support further moves towards Scottish independence support a move to greater fiscal autonomy while a greater percentage of those who wish to retain the Union between Scotland and the rest of the UK would be opposed. However, as the debate unfolds a move towards FFA could be considered as a compromise by advocates of both sides. As early as July 2001, former Conservative Party chancellor Kenneth Clarke, said he believed that it would be "disastrous for the Scottish economy".^[4] On the other hand, Robert Crawford, the former head of Scottish Enterprise, said in February 2004 that the Scottish economy "could be improved" by fiscal autonomy.^[5]

David Cameron, the then leader of the Conservative Party and Prime Minister, stated in 2005 that he would not stand in the way of handing full taxation powers to the Scottish Parliament if the idea was supported by the Scottish Conservative Party.^[6]

The 2011 Scottish Social Attitudes Survey core finding was that while 32% of respondents supported Scottish independence,^[7] 43% supported greater autonomy within the UK. 29% of respondents supported devo-max, but only 21% supported the status quo.^[8]

Since the 2011 election of a SNP majority government

The election of a majority Scottish National Party government in May 2011, committed to holding an independence referendum, also brought the possibility that FFA could be an extra option in the vote.^[9] Some senior Scottish Labour Party figures have also suggested that they would support devo max, including Malcolm Chisholm MSP,^[10] Mark Lazarowicz MP,^[11] and former First Minister Henry McLeish.^[1]

The "devo-max" option was not included in the 2014 independence referendum, however, as the Edinburgh Agreement stipulated that the referendum had to be a clear binary choice between independence or the existing devolution arrangements.^[12]

A public opinion poll carried out at the end of October 2011 for the BBC Politics Show indicated that devo-max was the most popular option with Scottish voters: 33% backed devo-max, 28% supported independence and 29% backed no further constitutional change.^[13] A public opinion poll carried out in March 2013 for the SNP, however, indicated that 52% of respondents believed the Scottish Government should be responsible for all tax and spending decisions in Scotland. Also, 53% of respondents believed that the Scottish government would be best suited to decide welfare and pensions policy for Scotland.^[14]

Economic effects of full fiscal autonomy

The economic effects of full fiscal autonomy have been the subject of debate. The Institute for Fiscal Studies published a report in March 2015 that calculated that for the year 2015–16 there would be a gap of £7.6 billion in Scotland's budget under FFA, in comparison with the current system for distributing spending.^[15]

This analysis has been criticised by the SNP's deputy leader, Stewart Hosie, on the basis that it represents figures for only one year and that it overlooks the extra growth the SNP says it can generate with more powers.^[16]

The Institute for Fiscal Studies responded to some of these criticisms in a later report. It argued:

"Delaying a move to full responsibility for a few years would not on its own deal with the fiscal gap.... Indeed, if anything, given current spending and revenue forecasts, the gap would likely grow rather than shrink over the next few years. It would remain the case that full fiscal responsibility would likely entail substantial spending cuts or tax rises in Scotland. While a big and sustained rebound in oil revenues or significantly higher growth in Scotland could mitigate this, there can be no presumption that either would occur.

"There are a number of aspects of fiscal autonomy which are unclear; the level of payments to the UK government (for debt interest and Trident renewal), the ability of the oil sector to redeploy into other areas filling the productivity gap, and whether economic growth in Scotland is better supported by an Edinburgh or London government".^[17]

See also

• Taxation in Scotland
• Scottish budget
• Fiscal federalism
• Economy of Scotland
• Government Expenditure and Revenue Scotland
• Government spending in the United Kingdom
• List of Scotland-related topics
• Politics of Scotland
• Scottish independence
• Scottish Parliament
• Union dividend

References

External links

• Fiscal Autonomy in Scotland: The case for change and options for reform
• Scotland: A New Fiscal Settlement
• Institute for Fiscal Studies
• Herald Scotland article
• Tax revenue in England, Scotland, Wales and Northern Ireland
• A disaggregation of HMRC tax receipts between England, Wales, Scotland & Northern Ireland methodology
• Telegraph reports Nicola Sturgeon on fiscal autonomy
• FT reports on Nicola Sturgeon's SNP general proposal for fiscal autonomy
• Reported view of corporate sector
• UK Income Tax statistics and distributions
• Scotland's Future – Scottish Government 'White Paper' November 2013
• Fiscal Sustainability of an Independent Scotland
• Scottish Independence: the fiscal context
• Policies for an independent Scotland? Putting the Independence White Paper in its fiscal context
• Scotland’s fiscal position: an update in light of the OBR’s March Forecasts