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."

 

More on This Story

Scotland Decides

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +6

    Comment number 276.

    265.therealist
    Scandavia succeed because of huge natural resources shared by relatively small populations.
    ---------------------------------------------
    If only Scotland was in the same position...

  • rate this
    +14

    Comment number 275.

    This report seems to be saying that the Nordic model would be difficult for an Independent Scotland to replicate as the wage differentials are so large to begin with, before any efects of fiscal policy could take effect. So, it might take a long time to achieve. How long will it take if we stay in the union? The whole point of indendence is that we would be free to move in the right direction!

  • rate this
    -9

    Comment number 274.

    I do not think equality will be substantially improved, if at all, via Scots independence.

    Had independence happened 20/30 years ago, before peak N sea oil/gas, then yes, but basically starting from scratch as resources decline is not a clever idea by any logical reasoning.

    How does one fairly/justly share already earned wealth among many who have not earned it & dont want to earn it.

  • rate this
    +16

    Comment number 273.

    @265 "Scandavia succeed because of huge natural resources shared by relatively small populations."

    AHEM ! COUGH ! ... and of course, Scotland is nothing like that is it?
    *slaps head*

  • rate this
    +17

    Comment number 272.

    262 Jack Napier
    "[...] Scotland's future in the EU or keeping the pound is like trying to nail water to a wall."

    The SNP are perfectly clear on their position - keep the pound, stay in the EU. The EU will only respond to the UK government (they refuse to ask) and the UK Government also won't rule out a currency union, because they know it's the sensible option.

    (Also, try freezing the water).

  • rate this
    +4

    Comment number 271.

    Can inequality ever go away? There will always be intelligent hard working individuals with qualifications (vocational or academic/professional) who will do well. And there will always be the rest.
    It's two of government's jobs to ensure that all - without exception - get the opportunities to achieve maximum potential regardless of background and the local economy can provide the jobs & careers.

  • rate this
    -6

    Comment number 270.

    I've always questioned why 'tackling inequality' should be regarded as a matter for the government.

    To me, inequality is a fact of life that will always exist and that using public money to try and 'tackle' it will only result in the stifling of human ambition and the creation of wealth.

    It's all part of the big socialist social experiment which works contrary to human nature.

  • rate this
    +13

    Comment number 269.

    @262 Jack

    These are not things the Scottish Government can 100% guarantee since David Cameron refuses to "pre-negotiate Scotland's exit from the UK".

    It's a clever trick from the UK Gov. to demand answers to things only you can supply then act with indignation!

  • rate this
    +8

    Comment number 268.

    262. Kind of hard to give answers to questions that are only in the gift of Westminster.

    Are Westiminster providing the answers to your questions?

    In 2017 is Scotland going to be in the EU following a No vote?
    When are we going to have to work till to get state pension?
    What budget cuts will there be after a no vote?
    .
    .
    .
    etc.

    I for one choose progression, not stagnation!

  • rate this
    +9

    Comment number 267.

    "It is perfectly in order to contact BBC Scotland itself to ask the Press Office if there is going to be an official response to what is a published academic report proving political bias" - Derek Bateman, ex-BBC Radio presenter.

    http://www.bbc.co.uk/mediacentre/contacts/nations-publicity.html

  • rate this
    +5

    Comment number 266.

    260 JC
    "At least the First Minister is doing what he preomised in the manifesto and giving the people living in Scotland the democratic right of a referendum."

    I think that's why so many people distrust him. A politician actually doing what he promised to do? Must be something fishy going on there!
    Much safer with Labour lies & Tory spin. At least then you know where they stand.

  • rate this
    -9

    Comment number 265.

    259.aphoristic
    If this results in a reduced GDP and poorer UK PLC than that's fine by me so long as the PEOPLE of the UK are better off and there is less inequality

    By "better off" you mean equally poor? When there is no wealth left to re-distribute the socialist model grinds to halt. Scandavia succeed because of huge natural resources shared by relatively small populations.

  • rate this
    -5

    Comment number 264.

    Scotland suffers from a "brain drain" with much of its talent going abroad, so the plan is now to tax the more talented people ? Genius.

  • rate this
    +13

    Comment number 263.

    The rate of income tax isn't really the problem, it's how incredibly easy it is to opt out of income tax once you earn a certain amount and instead set up complex systems of dividends from offshore companies that leave you with an effective rate of zero. Close the loophole, ensure people are taxed on all incoming money and problem solved.

    Problem is most leaders are using these scams as well!

  • rate this
    -8

    Comment number 262.

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

    ---

    Is Mr Salmond any better?

    Trying to get an answer out of him about Scotland's future in the EU or keeping the pound is like trying to nail water to a wall.

    Less than 10 months to the referendum & he still won't give Scottish people the answers they need to make an informed decision.

  • rate this
    -3

    Comment number 261.

    So major change is needed. Hardly news.

  • rate this
    +11

    Comment number 260.

    253. Oh the old King Alex rubbish, change the record!

    He is the democratically elected leader of the Scottish Government based on a PR system.

    By your reconing the House of Lords ans Westminster are what exactly?

    At least the First Minister is doing what he preomised in the manifesto and giving the people living in Scotland the democratic right of a referendum.

    Whats your proposal

  • rate this
    +4

    Comment number 259.

    The whole of the UK needs greater equality not just Scotland!
    Only socialist measures such as nationalisation of utilities, proper taxing of wealthy corporations, MUCH higher min wage, private rent cap to a lower level than at present etc can do this
    If this results in a reduced GDP and poorer UK PLC than that's fine by me so long as the PEOPLE of the UK are better off and there is less inequality

  • rate this
    0

    Comment number 258.

    265.You

    Just now

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

    Meanwhile the SNP would claim that it's categorical proof that independence is the only way to go. Nothing like self-interested political point-scoring to keep the electorate ill-informed!

  • rate this
    -14

    Comment number 257.

    I earn the same as many people, I do the shopping & pay the bills, I am on top of best deals , I make my money go much further which enables increased disposable income.

    Others on same income may spend it on whatever, drink, Nike trainers, cheap clothing with a brand name on it & inflated price & then struggle to pay heating/rent.

    Who created the inequality?
    Much inequality is by choice

 

Page 12 of 25

 

More Scotland politics stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.