Tax Devolution May Need Financial Support

February 20, 2013 Taxation in UK

Scottish taxEDINBURGH – Tax hikes will be a necessary reality for Scotland if it continues to pursue the devolution of tax powers from the UK, unless the country can increase its own economic expansion over the long term.

After years of pushing for the devolution of tax powers from the UK, the Scottish government has still not produced a concise plan of how such a move could be financed and whether the country could still meet all of its obligations  without financial support from the UK, according to a new report released by David Bell, a prominent Scottish economic researcher.

The finding in the report were presented by David Bell at a seminar held by the David Hume Institute on February 19th in Edinburgh.

David Bell pointed to the country’s rising welfare costs, and warned that in order for Scotland to continue to meet its payment obligations the government will need to foster “a return to consistent patterns of economic growth“, otherwise taxpayers will need to pay out more in taxes in order to make devolution a viable reality.

In 2011 the total welfare spending in Scotland reached GBP 21 billion, with nearly 75 percent of the funding coming from the UK Department of Work and Pensions, and the total spending is equivalent to nearly GBP 3 972 per capita, and is over GBP 300 more per person than in England.

The cost of welfare is only projected to rise, with an increasing number of pensioners, and a higher proportion of the population being unemployed or unskilled.

Photo by Emz.watson