Fiscal framework has the potential to make or break the new devolution settlement

November 17th 2015

Deputy First Minister should refuse to sign up to Fiscal Framework unless the right block grant adjustment can be agreed.

STUC General Secretary Grahame Smith today warned that key new powers enshrined in the Scotland Act could become a poisoned chalice if the Fiscal Framework currently being negotiated between the Scottish and UK Governments fails to meet the ‘no detriment’ principle as agreed by the Smith Commission.

He said:

“The STUC has been an advocate for strong additional powers for the Scottish Parliament, particularly in the area of taxation.

“However, we have always been absolutely clear that the value of the new powers, particularly those relating to new welfare spending and tax raising, were dependent on an appropriate Fiscal Framework. We recognise that negotiations between the two governments are sensitive and ongoing, but there has been far too little public debate on this issue.

“Over the next couple of weeks we will be assessing three key elements of the Fiscal Framework all of which will impact on the calculation of the Scottish Block Grant in years to come: a) How will the Scottish block grant be adjusted to take account of additional spending flowing from the devolution of new powers - primarily welfare b) What mechanisms will be put in place to allow the block grant to be adjusted to reflect specific UK and Scottish Parliament spending decisions where they have a direct impact on the finances of the other body. c) Following the initial adjustment of the block grant to compensate for the devolution of taxes to the Scottish Parliament, what method of will be used for block grant adjustment in future years. How will this impact in Scotland?

“Today we make comment on the impact of the devolution of new taxes, primarily income tax and raise serious concerns that if the method applied for year on year adjustments to the block grant is not right, very severe detriment could result. This would call into severe question whether the Scottish Parliament should accept the new tax powers.

“We have reviewed some of the relevant literature on this subject and conclude that Scotland could find itself disadvantaged to the tune hundreds of millions in a relatively short space of time if the wrong method is applied and that this figure could reach the billions over a longer time period.

“In this context, it would be completely wrong for the Deputy First Minister to sign up to a mechanism for block grant adjustment which would structurally disadvantage Scotland. It would also be entirely wrong for the Scottish Government’s political opponents to characterise an appropriately firm bargaining position as the Government ‘dragging of feet’ on new powers. The Fiscal Framework is absolutely central to the impact of further devolution and it would be entirely wrong to sleepwalk into a bad deal.”


For further details: Dave Moxham or Kevin Buchanan 0141 337 8100

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