Scotland’s “Best Chance” is Economic Independence claims Council of Economic Advisors

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by Alex Porter{jcomments on}
Economy Editor

In its Third Annual Report, Scotland’s prestigious Council of Economic Advisors (CEA) has concluded that the Calman Commission proposals “do not go nearly far enough” and that “full financial responsibility” with “control of the major tax levers” is Scotland’s “best chance” to maximise its economic potential.

Scotland’s CEA which is chaired by Sir George Mathewson includes world-renowned economists and academics such as Andrew Hughes-Hallet (Professor of Economics and Public Policy) of George Mason University, Washington DC. Given that the CEA members are of such international calibre, its scathing analysis of the Calman Commission’s proposals will concern Scotland’s business community, public institutions and the general public.

It is the latest in a succession of criticism faced by the increasingly controversial Calman proposals which form the basis of the Scotland Bill. Figures such as Professors Andrew Hughes-Hallett, Sheila Dow and Rod Cross and economists Dr Jim and Margaret Cuthbert have described the Calman proposals as “dangerously flawed” and “unworkable”. Marc Coleman, former economist at the European Central Bank, recently commented that ‘Scotland requires immediate fiscal autonomy and Calman falls well short of fiscal autonomy.’

The Calman Commission was set up by the Labour, Tory and LibDem parties and its apparent flaws are viewed by many economists as emanating from a political rather than economic agenda. Calculations show that had these proposals already been in place, Scottish government budgets would have faced cuts to the tune of £8 billion since 1999.

Referring to the challenges Scotland faces owing to the parlous state of Britain’s public finances Sir George said: “What happens in Scotland in the near future depends very much on the strength of the global economy as well as the impact of austerity measures imposed by the Westminster Government.”

As Scotland’s national accounts currently show a surplus, the Scottish electorate would be justified in asking why its government’s grant from London should be cut at all. With economic independence it needn’t be.

Recently, the world respected Legatum Institute’s Prosperity Index 2010 placed the UK 98th in the world in terms of the public’s confidence in their job expectations. This ranking is usually the reserve of third-world countries and supports the case for Scotland wresting control over its economic future from London.

One of the CEA report’s key recommendations is: “Seeking to obtain tax powers in order to be in a position to influence the rate of economic growth and employment and engaging with the UK Government to make the necessary institutional changes for this to be possible.”

The case for economic independence, resisted by the unionist coalition inside the Calman Commission, is increasingly popular with Scots. Last week saw the publication of the Scottish Social Attitudes Survey 2010 which showed that 62 per cent of Scots favour significantly more powers for the Scottish Parliament. On tax (57 per cent) and welfare benefits (62 per cent) – a clear majority, want the Scottish Parliament to make these decisions on behalf of the nation.

Controversially, the Scottish parliament’s Scotland Bill Committee is chaired by Wendy Alexander MSP. Miss Alexander, as leader of the Labour group at Holyrood, was forced to resign in 2008 amid accusations of financial corruption. The issue continues to reverberate in public discourse as a result of successive revelations in connection with the matter and raises further doubts over the probity of the Scotland Bill.

With the Holyrood elections now less than six months away and with Westminster austerity cuts looming, the issue of economic competence will be pivotal for an electorate concerned about jobs and the economy. Recent polls have shown that the public blame the last Labour government for the UK’s unprecedented budget deficits.

During the campaign the SNP will ask why the electorate should believe that Iain Gray’s party can fix the sovereign debt, financial and currency crises that Labour itself created. At the same time the SNP will point to a popular record on governmental efficiency savings, the abolition of prescription charges and the freezing of council tax bills.

If Labour strategists cannot convince voters of the benefits of denying Scotland the real powers that Scots believe will improve their economic prospects, First Minister Alex Salmond will feel increasingly confident about his chances of keeping the keys to Bute House.