Funding cuts to reflect new tax powers Friday 28 November 2014 THE controversial Barnett Formula on public spending will continue, Alistair Carmichael has insisted, but the amount of money going to Scotland under it will be reduced to take into account the new tax-raising powers the Holyrood Parliament will receive. Coalition sources made clear the £30billion block grant the Scottish Government receives from Whitehall each year will be reduced to reflect the new powers once they are introduced. Treasury officials are now working on the details but the Smith Commission made clear the new rules would ensure neither the Scottish nor the UK Governments will lose or gain financially from the act of transferring a power. According to the UK Government, the total amount of money the new powers over such things as income tax, welfare, stamp duty, land tax and air passenger duty as well as the assignment of VAT will produce is around £25bn a year. During Commons exchanges, Tory backbencher Philip Hollobone said Scotland received from English taxpayers an additional annual public subsidy, over and above what any English region receives, not because there is an extra level of deprivation but simply because Scotland is Scotland. He asked the Scottish Secretary about what proportion of the funds will be affected by the ceding of tax-raising powers to the Scottish Parliament? Mr Carmichael replied: .The amount of money that goes to Scotland under it (the Barnett Formula) will be reduced because what is taken in taxation directly by the Scottish Parliament will be taken out of the equation. Comments Peter Piper, Ayrshire neither the Scottish nor the UK Governments will lose or gain financially from the act of transferring a power. I presume this is in terms of the initial act of transferrence, as it could be that Scotland will use a power better, or even worse. Dr Douglas McKenzie Peter Piper, Ayrshire Devil is in the detail. There needs to be an agreement on what the levels are on day one. This is trickier than it sounds as the Treasury only knows how much income tax was actually raised about 18 months after the event. The amount going out in Barnett is easy to calculate. The income is then subtracted from the Barnett consequential. This is all fine. But if this exercise was repeated each year then it would be worthless to Scotland since any increase in tax revenues would just lead to a loss of Barnett. Conversely, any reduction in tax receipts would lead to an increase in Barnett. However, I cannot believe anyone is seriously suggesting this would be the mechanism so it would only apply to day one, after which the Barnett will reflect English spending and be independent of how much income is raised in Scotland. I suspect that the day one figures will be used to establish a percentage ratio: thus if the income calculated to be raised is 80% of the Barnett consequentials (which is what is suggested in the article though it sounds high) then in future years we would receive 20% of whatever the Barnett figure is for that year. It doesnt take a genius to realise that this residual will become a bone of contention if Scottish tax revenues improve allowing higher government spending in Scotland than in England. All of which points to this being a temporay measure before the UK moves to either a federal structure or towards Scottish independence. ronald richardson, hartlepool Dr Douglas McKenzie I think we will find that the Barnett formula will be re-calibrated over fixed periods, I cant see Westminster allowing Scotland to increase its tax take to the detriment of Westminster, its just not in their nature. Elizabeth Myles,Crail ronald richardson, hartlepool I suspect any re-calibration will not be in Scotlands favour.
Posted on: Fri, 28 Nov 2014 21:10:15 +0000
Trending Topics
Recently Viewed Topics
© 2015