Proposal to devolve all tax-raising and spending authority to the Scottish Parliament (submission to the Smith Commission)

1. The principles underpinning this proposal
This proposal is informed by two main considerations. First, it is consistent with the goal of reinforcing democratic accountability for the governance of Scotland. It is only when decisions around taxation and economic policy are made close to the people of Scotland, and in consultation with groups and organisations in Scotland, that the creative and productive potential of the Scottish population will be fully released, in ways that reflect national values and collective choices. Second, this proposal is intended as a means of ensuring the coherence of decision-making in Scotland. At the present time, some powers within this category are devolved, while others are retained to the London parliament.
2. Assessment of the current situation
At the present time, some of these decisions are made in London, while other decisions are made in Edinburgh. The Scottish government, over the past few years, has shown itself to be able to make budgetary decisions in a mature and considered manner, that has received broad support from across the population. The clear preferences of the majority of the Scottish people, in relation to taxation and spending, are different from those expressed in other parts of the UK. The current situation is therefore unstable and likely to inhibit the kind of consensual long-term planning that is necessary for the achievement of equality and prosperity.
3. The potential advantages to Scotland and the UK as a whole (and/or its constituent nations) of devolving these powers to the Scottish Parliament
There are many constructive ideas circulating within Scottish society at the present time, regarding tangible ways in which the tax system, and spending patterns, could be altered in order to achieve equality and prosperity. Devolving these powers would therefore have considerable benefits to Scotland. The proposal would also enhance collaboration and harmony and other parts of the UK, because it would become clear to citizens in other parts of the UK that Scotland was not receiving hidden subsidies. The proposal would enable other parts of the UK to pursue micro-economic policies that were suitable to their local conditions.
4. The potential disadvantages to Scotland and the UK as a whole (and/or its constituent nations) of devolving these powers to the Scottish Parliament
There main risk would be if Scotland and the rest of the UK were to develop divergent policies that resulted in destructive competition or possibilities for fraud. Effective means of cross-legislature co-ordination would need to be in place (see paragraph 7 below).
5. The extent to which the advantages outweigh the disadvantages
The short-term transition costs of these changes would be outweighed by longer-term gains, as each part of the UK developed policies that were appropriate to their particular goals and values, and enabled their specific areas of growth potential to be fulfilled.
6. The interdependencies between this proposal and other key issues
This proposal refers to the widest possible range of powers – only foreign and defence policy, and macro-economic policy would be excluded. The Scottish Parliament would have control of welfare and social services provision, oil and other energy revenues, and broadcasting.
7. Practical or legal barriers or difficulties to implementing the proposal
There would not be any legal barriers, since these powers are all currently under the control of the UK parliament, who can pass new laws as necessary. There would need to be a sufficient level of alignment between the taxation and spending policies of Scotland and the rest of the UK. This would require the establishment of a formal mechanism, perhaps similar in some respects to the inter-governmental mechanisms within the Eurozone, which involve regular meetings at Finance Minister and senior civil service level, and peer review of budgets. There would also need to be some Scottish representation on the Bank of England monetary policy committee. Each of these measures would have the advantage of increasing transparency and public engagement in relation to policy-making in the UK as a whole.
8. The financial advantages or costs involved in implementing the proposal
There would be transition costs. At the present time it is not possible to determine what these costs would be. However, the question of the level of transition costs did not emerge during the 2014 referendum as a major issue.

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