UNFINISHED BUSINESS – SCOTTISH TAXPAYERS NEED CLARITY

Ahead of ‘more powers’ on taxing and spending for the Scottish government, the pressure group Taxpayer Scotland has called on Holyrood to come forward with “specific robust proposals” for independent fiscal institutions to help guard on runaway tax and spend policies.

It supports the UK Command Paper call for a set of robust institutional rules based on international best practice; proposals on how to enhance existing arrangements for independent fiscal scrutiny; and an enhanced Scottish Fiscal Commission for a new fiscal framework for Scotland.

Eben Wilson, Director of TaxpayerScotland says:

Lessons from across the developed world show us that social democratic governments with large entitlement programmes end up with large deficits. Taxpayers then pay a higher and higher proportion of their income to service long-term debts.

“Scotland’s own GERS report shows that we spend £4.2 billion on debt interest payments today already.

“Taxpayers need protection from this amount increasing under further devolved powers.”

Recent Land and Building Tax measures and the continual emphasis on the need to spend; along with voluble criticism of the welfare cap, austerity measures and other UK attempts to close the deficit and deal with the UK’s huge debt obligations, do not inspire confidence in Scottish individual taxpayers and businesses that the Scottish government is able to control its finances well.

TaxpayerScotland also picks up on the latest Audit Scotland report on the hitherto unreported growth in local government debt.

Says Eben Wilson:

While the Scottish Government has a Fiscal Capability programme, led by a Fiscal Responsibility Steering Group, this is an internal administrative arrangement and lacks the real credibility that an independent statutory Office of Budget Responsibility would have.

“It is time this situation was resolved – and quickly; the Smith Commission report stressed the need for a proper fiscal framework, where is it?”

“We note that Audit Scotland stress the importance of transparency in their report along with the importance of accountability and confidence. But they pull their punches on what is really needed.

“They recognise that ‘qualified auditors’ opinions on the accounts of other public bodies in Scotland are rare’, and that ‘In the absence of easily accessible, aggregate information in one place on what the Scottish public sector owns (assets acquired from taxes) and owes (liabilities due in the short or long term that will have to be met from future taxes) overall, it is difficult for the Scottish Parliament, taxpayers and others to get a full picture and understanding about where money is spent and the longer-term implications for public finances’.

“It is time that situation was resolved – and quickly. Under present arrangements, transparency is not guaranteed nor is accountability strong enough.”

Concern over the veracity and reliability of Scottish government revenue projections has also grown with the dramatic plunge in the oil price and the resulting fall in oil tax revenues.

In the course of the independence referendum campaign, the Scottish government projected oil revenues in future years running at more than £10 billion. But the latest forecasts from the UK Office of Budget Responsibility show oil revenues falling to below £800 million in the years ahead.

It forecasts North Sea revenues to average around £0.7 billion a year between 2015–16 and 2019–20, rather than the £2.6 billion a year the OBR itself forecast just a few months ago.

Under its earlier projections based on the OBR’s December 2014 forecasts, Scotland’s North Sea revenues were projected to fall from around £4.0 billion in 2013–14 to around £1.8 billion in 2015–16.

This would have given Scotland a deficit of around 8.0% of GDP in that year.

Using the same methodology, the OBR’s latest March 2015 forecasts imply Scotland’s North Sea revenues will fall to around £0.6 billion in 2015–16. This would mean Scotland’s budget deficit would be 8.6 per cent of GDP in that year, up from a previous estimate of 8.0 per cent.

 

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