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Fiscal Autonomy in Scotland: The case for change and options for reform

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Executive Summary

  • Choosing Scotland's Future opened a National Conversation on the type of government which best equips Scotland for the future. This conversation is even more important in the current economic climate. Scotland needs a fiscal framework that enhances our country's long-term competitiveness and our ability to respond swiftly and decisively to short-term economic pressures.
  • The Government Economic Strategy set out the scale of the challenge in putting Scotland on a path of higher sustainable economic growth. Scotland's economic growth in recent decades has under-performed relative to both the UK and other comparable European countries. Over 30 years (1977 to 2007), Scotland's annual average growth in GDP was 1.9%, well below that of comparable European countries, and significantly below the UK average of 2.4%.
  • The Scottish Government is already taking forward a wide range of actions through the Government Economic Strategy and Economic Recovery Programme to meet this challenge head-on, but we lack the full range of economic levers that other countries have.
  • The current framework significantly constrains the ability of the Scottish Government to boost Scotland's long-term competitiveness through, for example, introducing a simpler and more competitive tax regime. It also constrains the ability to take short-term measures to stabilise the economy, through, for example, tax cuts or significant increases in public investment. The ability to stabilise the economy in the face of a downturn has been brought into sharp focus by recent events.
  • There is now a growing consensus on the urgent need to enhance the taxation, spending and borrowing responsibilities of the Scottish Parliament.
  • This paper sets out the main options for reform which are assessed against a number of key criteria. The options are:
  • full fiscal autonomy in an independent Scotland;
  • a position of 'devolution max' - full fiscal autonomy within the UK;
  • creating enhanced devolution;
  • assigning revenues to the Scottish Parliament; and
  • continuing with or marginally changing the current framework.
  • The view of the Scottish Government is clear. This Government believes that independence is the best way forward for Scotland and would provide the assured constitutional structure to deliver increasing sustainable economic growth.
  • The publication of this paper is part of the National Conversation. The Scottish Government welcomes views on the issues raised in this and planned subsequent papers which will consider specific policy options under independence, such as establishing a competitive corporation tax regime, a Scottish oil fund and management of government borrowing.