|Will Scotland ever be able to afford the financial ‘cold turkey’ of independence?|
Scotland’s Fiscal Framework – an essential part of the devolution of new tax & welfare powers – was finally agreed one month ago, after many months of tortuous negotiations. It states that ‘for the first 5 years of devolution the block grant adjustments (BGAs) will first be calculated using the UK government’s Comparable Model but then adjusted to “achieve the outcome delivered by the Indexed Per Capita (IPC) model’.
Under this method, if Scotland’s devolved revenues & welfare spending per person grow at the same percentage rate as those in the rest of the UK (rUK), then ScotGov’s budget will be exactly the same as if devolution had not happened;
This is the approach that the Scottish Government wanted and satisfies its interpretation of the Smith Commission’s principle that there should be ‘no detriment [simply] from the decision to devolve’ a power. But it does not satisfy the Commission’s ‘taxpayer fairness’ principle, which the UK government placed more weight on.