Ministers meeting over Scotland Bill financial powers

Scottish and UK government ministers have met to discuss proposed new financial powers for Holyrood, amid an ongoing row over the issue.

Treasury Minister David Gauke and Scottish Finance Secretary John Swinney attended the first meeting of the joint exchequer committee.

The group is focussing on the financial implications of the Scotland Bill, currently going through Westminster.

The SNP said answers were still needed over the planned tax changes.

The Scotland Bill will devolve £12bn of new tax and borrowing powers under plans which will see Scotland control a third of its budget, the UK government has said.

Central to the legislation was a recommendation that Scotland should take charge of half the standard income tax rate - 10p - with a corresponding cut in the block grant Scotland gets from the Treasury.

Sir Kenneth Calman, whose report on the future of devolution led to the creation of the Scotland Bill, previously told MSPs the 10p figure was not devised with any "magic formula", but was a straightforward one which would spark debate.

UK ministers say the powers within the bill mean Scotland, with its annual £30bn budget, will have more accountability for the money it spends.

The joint exchequer, which met in Edinburgh and was also attended by Scottish Secretary Michael Moore, came as a special Holyrood committee set up to scrutinise the Scotland Bill held an all-day session.

Ben Thomson, chairman of the think-tank Reform Scotland, told the committee that powers should be devolved, but added: "It's up to the parties to then set out how they can then use the powers.

"It would be very useful for the electorate to start hearing how each of the parties would use the powers being proposed."

Martin Togneri, former chief executive of Scottish Development International, told MSPs there was strong support for the devolution of powers.

"Smaller economic systems have a strong track record in increasing their competitiveness of inward investment," he argued.

SNP MSP and committee member Stewart Maxwell, said the Treasury still had key questions to answer.

"So far evidence from UK ministers has not given the comfort anyone would need to endorse this tax change, and the evidence from Sir Ken Calman suggested the tax level was simply made up," he said.

"I hope that in today's committee we will get real answers, real costs and a substantial assessment of the impact of tax changes on Scotland, not the back of an envelope costings we have had so far."

Meanwhile, two economists have urged Holyrood's Scotland Bill committee to back Scottish government demands to devolve corporation tax, a measure not contained in the Scotland Bill.

Image caption The Scotland Bill will devolve new tax and financial powers to Holyrood

Professors Andrew Hughes Hallett and Drew Scott said the move would enable Holyrood ministers to address underlying weaknesses in the economy.

"The opposition to devolving corporation tax to the Scottish Parliament and government is, insofar as the economic evidence is concerned, very ill-informed," they said.

"Critics seem prepared to ignore both the predictions from economic theory and the wide range of empirical evidence from the many other economies where corporation tax is already devolved."

The Scottish government says cutting the headline rate of corporation tax, paid through company profits, from 23% to 20% would create an extra 27,000 jobs over 20 years.

But, amid economic uncertainty, UK ministers said any case to devolve corporation tax to Scotland would need to be strong.

Elsewhere, the professors raised concern that the tax measures contained in the Scotland Bill could force a future Scottish government to implement "unexpected and damaging public spending cuts".

Tax approval

The committee also heard from Mr Gauke, who said moving ahead with the bill as it is "must be the priority".

He also raised concerns that the Scottish government has failed to provide "robust analysis" behind its requests for additional powers.

Mr Gauke was pressed several times on whether the UK government would implement plans for a capped Scottish income tax without approval from MSPs.

Mr Maxwell asked the Conservative MP: "If the Scottish Parliament ... decides on a vote of the democratically elected members that it does not wish to implement the income tax powers because it believes it would be damaging to Scotland's interests, would you then, the UK government, go ahead and force those powers on us?"

Mr Gauke said it was "a very hypothetical question". He added: "The intention of the UK government is that we do not find ourselves in that position. We will be working very hard to develop the proposals and work with the Scottish government."

Mr Gauke said the bill was an opportunity for the Scottish government to take much greater responsibility and for it to be held to account in a much clearer way.

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