Scotland ‘needs new fiscal arrangements’

Today’s Scotsman reports an extremely interesting speech by Shonaig MacPherson, the Chairman of the Scottish Council of Development and Industry (SCDI), which perhaps highlights some of the centrifugal forces I wrote about yesterday.

Scotland, she said "cannot adopt the ostrich position [we need to]
start preparing for new fiscal arrangements in the face of new
pressures from English nationalism".

She added: "Soon we may not have the luxury of time. It has been
said that it would do Scots good to learn that public money does not
grow on English trees. It may well be that English nationalism, not
Scottish nationalism, will be the dynamic of constitutional change." (Scotsman)

THE SCDI website features a very useful discussion paper Scotland’s Economy – The Fiscal Debate, which includes a section looking at the implications of the English nationalism which McPherson highlights.

There is also an interesting comment on last year’s ERINI paper Assessing the Case for a Differential Rate of Corporation Tax in Northern Ireland.

The publication of this Report has led to calls in Scotland that any tax concession offered to businesses in Northern Ireland must be matched by similar concessions to businesses located in Scotland. This is likely to prove problematic under the current constitutional settlement. There is little doubt that should UK Government seek to implement a reduced rate of corporation tax in Northern Ireland that it would subsequently have to justify this to the European Commission under the provisions of Article 87 (3) of the Treaty on European Union – i.e. EU State Aid legislation. Given the extremely difficult economic and social circumstances in that province, it is conceivable that such justification may be accepted by the Commission and the tax measure accepted. If a similar concession was sought for Scotland, and in the context of Scotland’s relatively better economic situation, it is likely that justification on economic development grounds would be considerably more difficult.

Of course, a Scottish or even Northern Irish cut would be legal under EU rules if the government concerned were prepared to bear the revenue cost itself without countervailing subsidies from Westminster.



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