Report claims Scotland needs tax and welfare powers to address inequality

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  Leading economists have made clear that without full powers over tax and welfare, Scotland will be unable to address the growing inequality people face as part of the UK.

The Fiscal Commission Working Group’s report which was published earlier this week makes clear that since 1975 income inequality in the UK has increased at a faster rate than any other OECD country, damaging economic growth and limiting the potential of people in Scotland.

The report states that “Scotland is also currently part of a UK economic model and society which is one of the most unequal in the OECD.  Inequality within the UK has increased in recent decades.  Such patterns of inequality will continue to have a negative impact on growth and prosperity over the long-term.”

According to the UK’s Gini coefficient – the most widely used measure of inequality in household incomes – the UK now languishes 28th out of 34 OECD countries.  In comparison, Denmark and Norway are ranked 2nd and 3rd respectively.

The paper concludes that “without access to the relevant policy levers – particularly taxation and welfare policy – there is little that the Scottish Government can do to address these trends.”

Nobel Prize winning economist Professor Joseph Stiglitz, who is a member of the Working group, has previously conducted a study which concludes that countries which are more unequal do not grow as well and are less stable.  Professor Stiglitz’s analysis suggests that a concentration of income restricts economic growth by limiting the potential of people to contribute in a productive way; whilst inequality may also restrict government investment in infrastructure, education, and technology that is required by a modern economy.

The Fiscal Commission is an offshoot of the First Ministers Council of Economic advisers.  Earlier this week it claimed that an independent Scotland keeping the pound would be in the best interests of the remainder of the UK.

Commenting, SNP MSP Kevin Stewart who sits on the Welfare Reform Committee said:

“As this report makes clear, we need the full powers of an independent country if we are to untie the Scottish Government’s hands and start to make a real difference to poverty and inequality in Scotland.

“Inequality in the UK is rising at a faster rate than any other OECD country and it is simply not acceptable to expect people in Scotland to sit idly by while Westminster fails to act.

“Economic growth and prosperity are undermined by high rates of income inequality, leaving us all worse off as a result. Addressing this growing and worrying trend should be a priority for any Government, not an afterthought as it seems to be at Westminster.

“With measures such as Westminster’s bedroom tax and other extremely damaging changes to the welfare system poised to hit thousands of people across Scotland, the problem is likely only to get worse.

“A Yes vote in next year’s referendum is the only way we will get the opportunity to shape a tax and welfare system that genuinely reflects the priorities of people in Scotland and starts to get a grip on the spiralling rates of inequality that are growing and growing on Westminster’s watch.”

Meanwhile, Head of Better Together Alistair Darling is reported to have launched yet another attack on independence by claiming that Scots who vote yes will “turn family into foreigners”. 

In a speech in front of the Foreign Press Association in London, the leader of the anti-independence Labour, Conservative, Lib Dem alliance claimed that suggestions by the Fiscal Commission that an independent Scotland could keep the pound meant independence supporters wanted to “keep the strength and security of the United Kingdom while leaving the United Kingdom”.

Labour MP Darling claimed that independence would turn English co-operation into competition that would mean Scotland would “face turmoil, expense and risk”.

Mr Darling’s attack is a return to what many have described as negative scaremongering from the No campaign and follows a UK government report published this week, intended to bolster the No campaign but that backfired spectacularly. 

UK government Minister’s were left red-faced when one of the reports authors, Professor James Crawford of the University of Cambridge, backed the Scottish government’s claim that a newly independent Scotland would be able to negotiate its EU membership from within.

There was further embarrassment when it was pointed out that UK government claims that an independent Scotland would inherit none of the UK’s current treaties or obligations, meant that Scotland would not have to take on any of the UK’s current massive debt burden.

The details of the Fiscal Commission Working Group’s recommendations can be viewed at: http://www.scotland.gov.uk/Resource/0041/00414291.pdf (page 55-59)