Devolution: A Decade On - Justice Committee Contents

Examination of Witnesses (Questions 300-308)


26 FEBRUARY 2008

  Q300  Mr Turner: If we have got the level of devolution approximately right, which I realise you disagree with but is equally possible and, for instance, Wales does not have as much, Northern Ireland does not have as much, England has none, you would accept, I think, that people are prepared to bring those up-to-date or would you say, "It's completely irrelevant to me?"

  Nicola Sturgeon: I take a very keen interest in developments south of the border. Scotland and England share an island, that is not going to change, and there will always be a very keen interest in what each other is doing. The point I am making is I think if there is an appetite in England to change the governance arrangements to have more devolution within England, and there have been some attempts at that in recent years that have not in every case come to fruition, then that should happen on its own terms regardless of what further devolution or what further debate there is about the constitutional arrangements in Scotland. It is perhaps simply underlining the point on asymmetric devolution that I made earlier on. It is inconceivable and unsustainable to argue that one part of the UK should almost put its own aspirations and advancing its own interests on hold while another part catches up. We all have to decide what arrangements best fit our own interests. Of course, there will always be a need to ensure, whatever our constitutional settlements are, that we work well together with whatever relationships we will have.

  Q301  Chairman: If the Barnett Formula starts to work in reverse, as I would put it, that is to say if we enter a period in which public expenditure in the UK is being reduced and, therefore, Scotland's defined share of it is being reduced, will the reluctance you have shown so far, shared by all the other parties in Scotland, to use the limited tax raising powers you have, have to cease? Will you not have to use those powers at that point?

  Nicola Sturgeon: We do have a Barnett squeeze and anybody who doubts that only has to look at the budget settlements this year which in Scotland's case was an extremely tight settlement, much tighter than south of the border. The Government has made a very good fist of the resources we have available but it was a very, very tight settlement. That process you talk about is already in operation. As you know, as well as I do, the Barnett Formula is in itself designed to bring about convergence. My position is that Scotland would be better served not in trying to respond through existing tax raising powers, which are pretty blunt instruments to that process, but by financial independence so that we are responsible for raising all of our own taxes and making the spending decisions that flow from that. I think that is the best arrangement for Scotland. I note that we are not the only party now which believes that and that is far more in our interests than trying to find imperfect responses to imperfect systems.

  Q302  Chairman: Why are the existing tax raising powers a blunt instrument? They are a very limited instrument obviously in the amount of money they can raise but they flow from the existing tax system.

  Nicola Sturgeon: They are blunt in two senses. One, because, as you say, they raise very small amounts of money but, secondly, because three pence on the basic rate of income tax is one tax power out of a whole panoply of possible tax powers that a normal parliament would have, so by definition it is a blunt instrument because most parliaments anywhere else in the world would have a whole range of tax options to use not just to raise expenditure but to grow their economy as well. Ireland is an example with their Corporation Tax and what it was able to do to boost economic growth. To have one very narrow tax power is a blunt instrument in both of those senses.

  Q303  Chairman: So those powers are really a dead letter which you might as well not have?

  Nicola Sturgeon: It is up to parties at every election to take a decision at that time depending on prevailing circumstances at that time as to whether or not they propose to use the tax varying power or not. It will not have escaped your notice, Chairman, that in the first election to the Scottish Parliament my party proposed using the tax varying power and we chose for very good reasons on both occasions not to do so in the subsequent two elections. Since we are talking about the Barnett Formula, although I have made clear what my preferred option would be, the current operation of the Barnett Formula is perhaps one of these issues that would benefit greatly from reactivated Joint Ministerial Committees. There is an issue just now, for example, around funding of the London Olympics where if we leave aside core funding for the Olympics, on the funding associated with the Olympics on regeneration, for example, a completely arbitrary decision has been taken by the UK Government to exclude that funding from the Barnett Formula where any other regeneration spending in England would be included. That has caused great consternation on the part of all the devolved administrations but it is the kind of issue that a Joint Ministerial Committee would be able to discuss and hopefully resolve.

  Q304  Chairman: In the context of the constructive way you have addressed how you manage devolved government, notwithstanding your aspiration for independence, is there are a greater degree of financial autonomy which could be accommodated within the devolution settlement?

  Nicola Sturgeon: Of course, anything is possible. You know what my preferred option is, but one of the reasons we have cast the national conversation as inclusively as we can is to make sure that all of these different options, and there are a variety of possible different options, some of them of more merit than others, have the opportunity to be discussed and people who put them forward are able to do so. I think it is for people who advocate one of these many other options to put forward what they are and what the benefits are. It is for me and my party to argue the case that we believe in and it is for others to do likewise.

  Q305  Chairman: Do I understand from that that the Scottish Government does not actively seek greater fiscal autonomy within the existing devolution settlement but only as part of independence?

  Nicola Sturgeon: If there is an opportunity for financial greater financial autonomy, of course the Scottish Government would welcome that. We welcome any new powers for the Scottish Parliament. The SNP campaigned enthusiastically for a Scottish Parliament. It was not quite the Scottish Parliament we aspire to, and on the basis that we will warmly welcome and campaign for any more powers for the Scottish Parliament then we would warmly welcome greater financial autonomy but that does not change the fact that we think the best outcome is financial and full independence for Scotland.

  Q306  Alun Michael: Can I put that question another way round. If there were any greater financial autonomy for the Scottish Parliament, how would you want to use it?

  Nicola Sturgeon: I am not trying to dodge the question but it is a huge question because obviously it depends exactly what would be on offer. For example, the power that would be of greatest advantage fiscally to Scotland just now is the kind of powers I spoke about earlier on, the power to vary Corporate Tax, because we have made growing our economy our top priority.

  Q307  Alun Michael: Does "vary" mean cut or increase?

  Nicola Sturgeon: From the policy perspective of my party in the Scottish Government that would mean cut. I cannot speak for other parties and other policy perspectives. There is real evidence from not just Ireland but a range of other European countries that cutting Corporate Tax actually grows your tax base because of the boost it gives to your economy. That would be one power that we would want. We have announced proposals that were in our manifesto to cut and in some cases abolish business rates for small businesses. That is a good move and I think it will make a big difference to a lot of small businesses.

  Q308  Chairman: You would be happy to have the tax raising powers elsewhere to pay for that, would you?

  Nicola Sturgeon: Like any government, regardless of what our arrangements are, we have to balance our budget, we have to make sure that our all of our commitments are affordable. The one I was talking about there is fully funded within our budget. What I was going on to say was while that is an important measure I would not for a minute suggest that is as powerful as what Ireland was able to do by cutting Corporate Tax, attracting investment, growing the economy and growing the tax base and tax take as well.

  Chairman: Deputy First Minister, thank you very much for your evidence today, we have found it extremely helpful and we much appreciate it. Thank you very much.

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