Scottish independence: Tax alone 'cannot tackle inequality'

Montage, Nordic country images The report highlights the challenge of achieving Scandinavian levels of equality

Academics at Stirling University have warned major change would be needed to reduce inequality in Scotland using taxation and government spending.

They said, given "relatively high levels" of income inequality in Britain as a whole, achieving a substantial reduction would be "challenging".

The Stirling economists suggested this would be true even if Scotland had full control over taxes and spending.

They warned income tax powers were a "relatively blunt tool".

The Scottish government has argued independence is needed to effectively tackle inequality.

The pro-union Better Together campaign claimed the report undermines the Scottish government's argument.

Stirling University researcher Dr David Comerford and research assistant David Eiser point out in their report that Nordic countries are "often seen as operating the type of social-democratic model that an independent Scotland might wish to follow", but said that inequality is higher in Scotland than in these nations.

Inequality in Scotland is around five percentage points higher than it is in Nordic countries, according to the the GINI index - which is commonly used as a measure of inequality of income or wealth.

Tax thresholds

Putting a penny on the Scottish rate of income tax, when Holyrood gets power to do this in 2016, would only reduce this by about 0.2%, the report said.

Further devolution of powers over income tax - such as the ability to vary tax thresholds - could provide the Scottish government with "an opportunity to more effectively use fiscal policy to influence the income distribution".

Start Quote

The conclusion is that if we want to look like Scandanavians, in terms of income distribution, we would have to do a lot more than they do to compensate for the inequalities within pay rates set by the market”

End Quote

The report also said control over benefits for those who are out of work and those on low incomes "would provide other important levers with which to influence inequality", adding these could be used to target specific groups of the population.

But it warned major changes to tax levels in Scotland could result in higher earners leaving the country, as it concluded: "It is difficult for a small, open economy to implement substantially different redistributive policy from that of its close partners."

Mr Eiser said: "The Nordic countries have lower levels of inequality than Scotland, not only because they have more progressive tax and benefit policies, but also because the level of inequality in income before taxes and benefits is much lower than in Scotland."

Dr Comerford commented: "An independent Scotland would have access to fiscal powers with which it could influence inequality more directly than it can at the moment.

"However, achieving the level of inequality reduction the Scottish government desires through fiscal policy alone would require major policy change.

"This could be problematic because Scotland's high degree of integration with the rest of the UK means such policy change could trigger migration between countries."

Policy tools

Deputy First Minister Nicola Sturgeon welcomed the report. She said: "This report makes clear that Scotland currently has very limited powers to properly tackle the huge inequality which has seen the UK become one of the most unequal societies in the developed world.

"It also finds that independence will give a Scottish government real economic and social policy tools to address the issue."

The Better Together campaign said it believed the report strengthened their argument in favour of retaining the United Kingdom.

A spokesman said: "This report completely undermines the nationalist argument that leaving the UK would automatically reduce inequality.

"In fact, it says quite the opposite."


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  • rate this

    Comment number 256.

    Some excellent articles on inequality in Scotland on Newsnet Scotland

    also Wings Over Scotland

  • rate this

    Comment number 255.

    "I suggest contacting MSPs on the Culture Committee who have investigated the BBC news operation previously. I also sent a message to the Electoral Commission to ask they have a role in warning the regulated media, as in broadcasters to remain impartial ahead of the legal election pending period starting on June 1", Derek Bateman, ex-BBC Radio presenter.

  • rate this

    Comment number 254.

    At least the SNP are committed to trying to reduce Inequality.

    Our current shower don't even accept that a problem exists.

  • rate this

    Comment number 253.

    But King Alex promised me that the minute Scotland achieves independence the celtic fairies will come & turn it instantly into a magical utopia....

  • rate this

    Comment number 252.

    Obviously we need socialism to end equality. Don't they learn anything in the Socialist Workers Party meetings at Uni? And I thought attendance at these meetings was necessary for a post in the media.

  • rate this

    Comment number 251.

    "The Committee found that the Reporting Scotland item (Creighton Affair) had not been duly accurate and that a breach of the BBC’s Editorial Guidelines had occurred. The Committee expressed regret for this breach in its published finding. The Committee considers these actions to be a sufficient remedy to this complaint and will not be instructing BBC Scotland to issue an apology." - BBC Trust

  • rate this

    Comment number 250.

    It's clear that Scottish and English democratic ideals are slightly different. Scotland has more socialist leanings, England more progressive. Both are valid. I believe the two nations should be free to pursue these separately if they wish. We'll still have trade, we'll still have open borders.

    It's not like we're going to build a moat!

  • rate this

    Comment number 249.

    For me, in an ideal world everyone would put as much into the system as possible and would get back what they need in return.

    Yes, people have different capabilities and some will go on to accomplish more than others. However, those lacking in natural ability shouldn't be punished for it. Right-leaning Britain will steer as far away from that as possible, left-leaning Scotland wouldn't.

  • rate this

    Comment number 248.

    Something seemingly missing from this report - or at least this article - how would the UK fare at tackling inequality? That's surely the most important thing - a comparison between an independent Scotland and Scotland within the UK?
    It's something Better Together & their pals in the media seem to completely ignore. They have to put a case forward for the Union, not just attack independence.

  • rate this

    Comment number 247.


    Scandavian countries are high wage economies.

    A Worker with average national wage

    UK: £23,000 minus tax/NI of £4935 = £18,065 disposable income
    Norway: £41,000 minus tax/NI of £11,070 = £29,930 disposable income"

    Norwegian worker has a take home pay of over £6000 more *after tax* than a UK worker gets before tax.

  • rate this

    Comment number 246.

    Trust is key when it comes to the referendum.

    bbc have shown consistently over time they cannot be trusted when it comes to reporting the referendum.

    How can the people of Scotland be informed when their state broadcaster can't be trusted to present the truth?

    For this story the bbc could have presented this as a positive opportunity in Scots control, rather than warning of fear.

    C McK

  • rate this

    Comment number 245.

    Inequality does not exist simply because wealth isn't distributed from the wealthy to the poor.
    Without resorting to the stereotyped cries of 'lazy scroungers' and 'tax dodging toffs' - why are some rich and some poor (and everything in between)?

  • rate this

    Comment number 244.

    The better together traitors of Scotland would if we were free keep us in the same vain, Rich V the poor! It is they who have no answers and who on Gods earth would want to live in today's so called all in it together UK.

    It is being made so hard for the people of Scotland to see the truth when the media (BBC) paint a picture of doom and gloom if we leave!

    Time to leave and be careful BBC!

  • rate this

    Comment number 243.

    Tax alone 'cannot tackle inequality'

    Absolutely not. Gordon Brown's quite right that the Crown Estate's powers should be devolved to Scotland. Then perhaps the land can be given back to the people, including the disadvantaged, whose forebears were thrown off it in The Clearances, the root of so much poverty yet today. I'm English, incidentally.

  • rate this

    Comment number 242.

    "the simple numerical preponderance of anti-independence statements over pro-independence statements on BBC Reporting Scotland and STV News, was clear", Dr John Robertson, UWoS

  • rate this

    Comment number 241.

    It's the stupid fiat money system and the distribution of money that is the problem. There is no moral argument for people to struggle when their is plenty to go round.

  • rate this

    Comment number 240.

    Maximum wage, end of story. Maxwag should be twice Minwag with a medium term objective of equal pay across the board. Equality for real.

  • rate this

    Comment number 239.

    Scotland needs full independence to tackle inequality,as it is not just about tax & welfare.

    Scotland is an energy rich country yet people are suffering from fuel poverty

    Westminster have had time to fix this but failed, it's Scotland time now

    An independent Scotland would have power over energy policy.

    And lets not forget how Osborne hit the North sea oil sector with his "surprise" tax

  • rate this

    Comment number 238.

    The Jimmy Reid Foundation, a leading think-tank, released new research - an independent Scotland would have been at least £50 billion better off. This is based on Scotland’s strong tax revenues which have been constantly above the UK average.
    Scotland’s wealth has drained into the UK Treasury for decades with a lower percentage of spending sent back to Scotland through the bloc grant.

  • rate this

    Comment number 237.

    Yet another misleading item from BBC Scotland. A year-long academic study of 730 hours of early evening TV news coverage broadcast by the BBC and STV of BBC carried out by researchers at the University of the West of Scotland, found that an overwhelming number of news items were styled in a manner the research team concluded was favourable to the anti-independence campaign by a ratio of 3:2.


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