Letter: Holes in McMillan's defence of Calman

He speaks of a "further deterioration" in Scotland's public finances since April 2009 when in fact Scotland's public finances followed an improving trend between 2005-6 and 2008-9.

He refers to oil revenues from "declining output", ignoring opinion that oil prices are on a long-term upward trend in anticipation of global recovery and peak oil.

He attempts to bolster his case against fiscal autonomy by claiming that, under independence, the Scottish people would have to "shoulder in full" the 470bn of UK exposure to the liabilities of Scotland's two major banks.

Here he seems to confuse the speculative claim that if Scotland had been independent it would have followed the same road to banking failure as the UK and Ireland with a separate claim that, if Scotland were to become independent, it would inherit the whole of the UK's financial exposure to the two Scottish-based banks.

But why should it? The UK, not Scotland, had regulatory responsibility for the banks and the liabilities arising from its failure should lie with the UK as a whole. In its 2008-9 report, GERS perfectly reasonably allocates the Scottish account with an 8.8 per cent population-based share of the costs of the UK's financial stabilisation measures.

Mr McMillan finishes by claiming the public finances of the "arc of prosperity" have been decimated. In my understanding the arc of prosperity comprises the four continental Nordic countries plus Ireland and Iceland. While the latter two are in deep trouble the four Nordic countries' fiscal record puts the UK to shame.

Mr McMillan was the most prominent of the non-party figures on the Calman Commission and almost the only one who attempts a public defence of its proposals. The fact that he is so cavalier with evidence and argument will do nothing to increase public confidence in the Scotland Bill it has now spawned.

Stephen Maxwell

Findhorn Place

Edinburgh

The exchanges in your letters pages about CBI Scotland director Iain McMillan and Ben Thomson's views on fiscal autonomy are telling. Scotland faces hard choices on taxes, but we can make these easier by ensuring the correct incentives are put in place to make good decisions.

On one side we have a pessimistic view that autonomy would simply mean releasing politicians to chase more rainbows through the public purse.On the other there is a heartfelt view Scotland still cannot design its own destiny, with today's parliament a mere quango for the allocation of income transfers.

I think we should be more optimistic. Any Scottish-focused debate about tax and spending cannot become real until some measure of substantive rather than administrative tax autonomy exists.

Iain McMillan says we don't know what fiscal decentralisation might bring in economic terms, but what we do know is that it would ensure an accountability link between what our politicians decide and what then results.

Less spending and lower taxes would indeed make more competitive businesses and so more jobs and income growth but Ben Thomson's point is that unless we have fiscal clarity then the reality of intent and result is skewed by Westminster's wider goals and not those of Holyrood for Scotland. That denies Scots the real conversation we need about our future.

Eben Wilson

Taxpayers' Alliance Scotland

York Place

Edinburgh

In his attack on fiscal autonomy, Iain McMillan states that had Scotland been fiscally autonomous in 2008-09 it would have run a budget deficit of 3 billion.

Even if one accepts this figure at face value, it represented less than 3 per cent of Scotland's GDP in that year, when the UK government ran a budget deficit in excess of 8 per cent of GDP.

One might also be led to conclude from his letter that under fiscal autonomy the entire costs of the recent "bail-out" support of the UK banks would have fallen on the Scottish Government.

This is incorrect. Under fiscal autonomy the regulation of the financial services sector would - like defence - remain a reserved matter, as would any financial obligations arising from episodes of regulatory failure such as that we have experienced.

It would be the same as asserting that - under fiscal autonomy - the costs of defending the realm against an army invading Britain from north of Hadrian's Wall should fall entirely on Scottish taxpayers until the invaders reached Carlisle.

Drew Scott

Europa Institute School of Law

University of Edinburgh

Edinburgh

In response to my letter (1 January) Mr McMillan seeks evidence of a correlation between the extent of a country or sub-state's fiscal powers and its degree of economic success (Letters, 3 January).

In terms of practical examples, in Spain the two regions of Navarre and the Basque country have used their powers to reduce tax burdens within their borders, including lowering corporate income tax, making them more attractive places fiscally than other areas in Spain.

Interestingly, it is the two areas which have the greatest financial powers that are also among the wealthiest areas of Spain as they have the fiscal levers required to address their economic requirements.Mr McMillan makes selective reference to the paper Scotland: A New Fiscal Settlement by professors Andrew Hughes Hallett and Drew Scott on fiscal freedom to belittle the link between economic growth and the extent of fiscal powers.

What the paper actually says is that "the literature on this point is not extensive, but suggests that the effect on growth is likely to be positive rather than negative for two reasons.

"First autonomy allows decisions to be tailored closer to the needs of the economy; and allows more efficient investment decisions, including human capital.

"Second, because autonomy incentivises regional governments to seek growth to expand their tax base given that they now have jurisdiction over the revenues."

Evidence points to the fact greater fiscal responsibility would provide the Scottish economy with a platform for higher growth and help it match the best performing.

Alex Orr

Leamington Terrace

Edinburgh