Paying For It

April 13, 2016April 13, 2016 / Dr Craig Dalzell / 2 Comments

“I would say is that every public-private partnership in Scotland has delivered new hospitals or new schools in Scotland on time and within budget and that’s the sort of success I want to see in every building.” – Jack McConnell, 2002

Oxgangs Primary School, 2016. Built by PFI in 2005

The dramatic news from Edinburgh in the past couple of weeks has put into sharp focus the failures of some of the finance models used by our regional councils to build schools, hospitals and other public buildings in recent years. Public/Private Partnerships (PPP), Private Finance Initiatives (PFI) and, less well known, Lender Option, Buyer Option (LOBO) Loans have burdened our councils with near-crippling financial obligations and, as we now know, have too often failed to deliver on even the basic standards of results required. Just what these deals are and why they have been used is a topic which requires a bit of discussion.

PPP/PFI

Public Private Partnerships, of which Private Finance Initiatives are a specific type, are a form of capital investment introduced to the UK in the early 1990’s by Major’s Conservative government as an alternative to tradition procurement methods of the time. In traditional public investment models a local authority might decide to build an asset such as a school itself in a purely publicly funded model or it might contract a private source to build the school and then take over the full running costs of the project afterwards. The Tories were driven by an ideological pledge to reduce the budget deficit (then known by the catchy title of “public sector borrowing requirement“) and identified the use of PFI as a means to do this.

Instead of paying for a project out of the capital budget either up-front or over the span of the construction phase, PFI would spread the costs over a medium or long term contract, often more than 20 years. This reduced the single year outlay and hence massaged the budget figures.

It was under the Labour government though that PFI really took off as it had the advantage of taking capital debts “off-book” and allowed Gordon Brown to simply stop counting them towards the deficit entirely. This gave the illusion of the fiscal prudence on which he banked much of his reputation. This was doubled down in Scotland by Jack McConnell’s Labour/Lib Dem government which led to Scotland, with 8.5% of the UK population, ending up with some 40% of the UK’s PFI funded schools.

The lie to the illusion can be found in the realisation that the private sector doesn’t work for free. These contracts almost certainly mean that the total cost to the council over the lifetime of the council is significantly larger than the up-front capital costs.

To take a recent example concerning some of the schools in Edinburgh, the private company involved will be paid £12 million per year for 30 years for a project valued at £68 million in up-front costs and an additional £84 million in management costs. Subtracting the running costs, this represents an annualised return on capital investment for the company of 10% per year. For contrast, David Cameron’s offshore tax haven shares “only” earned him about 6.75% per year.

And this doesn’t even represent the worst example of increased costs due to PFI. Contracts worth three or four times the capital investment are common. Some have been found to be worth a staggering ten or even twelve times the total outlay.

It is these ongoing payments which are particularly affecting our own regional councils and the problem is only going to get worse with the peak of the outgoing payments not expected to hit till the mid 2020’s.

PFI

Whilst one of the advantages of PPP’s often touted is the obligation for the private company to maintain the asset over the lifetime of the contract this can be a double-edged sword. One of the other “advantages”, mentioned in the UN ESCAP video above, is the “realisation of private sector efficiency savings”. That can mean “cutting-corners” to you and me. If the company is required to maintain a school for only 30 years but is then free from that obligation on year 31 then the inducement to build to the minimum possible standards to see out that contract is strong. Indeed, there is some anecdotal eyewitness evidence that exactly this has taken place. Schools which, by today’s standards are insufficient but which nonetheless stood for more than 100 years are being replaced with buildings designed to last less than a quarter of that and, has been seen, sometimes don’t even make it that far. This is not “long term planning”. It is certainly not helped by the generally low standards of our building regulations. A private company will rarely build at anything other than barely above the minimum legal standards so if we’re going to continue involving “the market” in our infrastructure projects then we’re going to need to have a discussion about increasing those standards to something more suitable for the 21st century. Whilst PFI specifically may have been abandoned in Scotland, this discussion over standards remains.

LOBO Loans

Lender Option, Buyer Option loans make up a far smaller proportion of council borrowing than PPP/PFI and have hit fewer headlines but they are still a symptom of the chronic dysfunction of our public borrowing system.

These loans were launched in 2000 as an alternative to the National Loans Fund which, whilst cheap and stable due to being funded by UK gilts, are sometimes quite limited in scope and therefore not always avaliable when required. Instead, the public body can approach a commercial bank for a long term, often more than 40 years, loan which is offered at an initially low “teaser rate” but which includes a clause which allows the lender to change the interest rate, usually upwards, are regular, often annual, intervals.

Sometimes these rate adjustments carry with them a contract exit clause but one can imagine the conversation in that case.

Bank: “So, we’re planning on increasing your interest rate from 2% to 5%. Under Section 4 of our contract, you can exit the loan by paying back the outstanding primary plus our exit fee.”
Council: “If we had that kind of money, we wouldn’t have needed the loan.”
Bank: “Ok. 5% it is. See you next year!”

These loans were often offered to and accepted by councils without the council quite appreciating the potential volatility and uncertainty that these changes would represent, which is quite understandable as these contracts have been criticised as being some of the most complex in the financial world and as our locally elected representatives aren’t necessarily chartered accountants it’s perhaps understandable that some would have simply been sucked in by those teaser rates which, at the time, undercut even those bonds offered by the NLF.

What Next?

I’m not going to pretend I have a magic solution to all of this. Some have discussed simply canceling and renationalising PFI funded assets but whilst I have some sympathy for this I have concerns also. Right now, we simply don’t know how far the record of substandard workmanship within the works built runs and, in fairness to the companies behind this disaster, they are upholding their obligation to pay the costs of repair and, if required, rebuild of these schools. If the contracts were canceled before we know the extend of the repair bill then we might simply be bailing out a huge debt. I can see some kind of scope for some kind of renegotiation over the annual payments or contract terms, perhaps with some kind of profit cap. Perhaps the companies could be offered an exit but made to put up a bond in case future issues arise although as we’ve seen from the coal and, more recently, the steel industry those bonds themselves need to be planned carefully lest they prove insufficient or evadable.

In future, a more sustainable method of public borrowing and investment needs to be examined. The Common Weal has a proposal to use a mutual limited company to leverage funds backed by Scottish issued bonds to invest in our public infrastructure which is perhaps one of the better ways to go about this issue although it is acknowledged that Scotland’s very limited borrowing powers even under the “new powers” of the Scotland Act 2015 will likely cap the viability of such a scheme. Obviously, an independent Scotland wouldn’t have that problem but until that’s sorted, we may need to think of something else.

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Greening Tax

March 30, 2016April 2, 2016 / Dr Craig Dalzell / 9 Comments

“Unless Scotland has the boldness and the courage of its convictions to use the abilities that the Scottish Parliament is going to have in the next session to have a fairer, more progressive approach to taxation…many more communities are going to find that the public services they rely on will continue to be under threat.” – Patrick Harvie

Yesterday, the Scottish Greens published our proposals for reform of both the national income tax and a replacement for the local council tax. The proposals themselves can be read by clicking on the image below but I’ll spend a bit of time here explaining how they work and what might have been missed in some of the media coverage about them.

First though we need to remember just what the purpose of tax is for. It’s so easy to get caught up in the arguments over how much more or less a particular tax or tax change would raise without considering the deeper impacts of what a particular tax is supposed to do.

The Principles of Taxation

Why do we tax people in the first place? It’s a substantial chunk out of your paycheck every month and there’s not one of us who has, at some point, wondered what they could have done with that money instead.

The reasons for taxation are broadly covered by three principles:

Revenue Generation:- There are many services, such as roads, emergency services, healthcare, education etc, which we, as a society, have decided are best funded collectively. We may argue over just how much is paid for in this way and how much is funded ad hoc or privately but there are vanishingly few full blown anarcho-libertarians, especially in Scotland, who believe that absolutely everything should be in private hands and that Government shouldn’t exist at any level. For everything else, taxes are collected to fund the State and its operations.

Redistribution:- Societies are rarely entirely equal at every level. Some people end up earning or accumulating more than others, some people end up not earning enough money to meet their basic needs. Some regions end up with a greater concentration of wealth than others. Some, due to size or geographical constraints (such as the Highlands and Islands) simply require more funds to deliver the same level of services than others. It is well known that more equal societies experience greater levels of wellbeing and lower levels of ill health and other negative effects. Most societies, therefore, employ tax, alongside policies such as social security and welfare, in a progressive manner such that the richer pay more according to their abilities and the poorer gain more according to their needs.

inequality

Reshaping:- This is the carrot-and-stick approach of taxation. Governments often develop policies designed to encourage their citizens towards certain activities or discourage them from others. One prominent example at the national level would be the levies on tobacco and alcohol which are, at least partly, there to try to encourage us to smoke and drink less (obviously, taxes can fall into multiple categories and the Revenue Generation aspects of these taxes cannot be discounted, especially when used improperly).

In addition to these principles on the purpose of a tax, we must consider how it is structured so that it works in an effective manner. In 2013, local council body COSLA published a report into the effectiveness of current local taxes and in it laid out six principles outlined below.

LT Prin

Essentially, these principles boil down to taxes being fair, easy to manage and employing a sense of subsidiarity whereby local powers should, wherever possible, be used to effect local solutions. Whenever discussing a potential tax, local or national, all of these principles must be upheld or accounted for.

Income Tax

SGP Tax Bands.png

The Green proposal for the use of the income tax powers due to come with the implementation of the Scotland Act 2015 includes not just a tweaking of the rates nor the use of clumsy rebates as Labour (briefly) seem to have considered but the full use of what powers we shall have to create new bands appropriate to Scottish income distribution.

The headlining feature of these proposals, as one may have suspected, was the inclusion of a 60% rate on earnings over £150,000.

This certainly did grab the headlines coming so soon after the SNP announced that they would not be raising the top rate past it’s current 45%. Their decision was based on this document which suggests that the “tax induced elasticity” (TIE) of the richest 1% in Scotland may be substantially higher than in the UK as a whole. Simply put, they fear that Scottish millionaires may flee elsewhere if we tax them at a higher rate than their southron counterparts. Their claim is that in the worst case scenario, enough high earners would leave that the actual revenue collected could be up to £30 million less than would be if tax rate remained as it is (one has to remember that if a top rate tax payer leaves, you also lose what they’ve paid in lower bands too).

Now, I have a couple of reasons to doubt this will impact as badly as they fear. In particular, having had a read through the book on which the UK TIE figures are based and having back-calculated their suggested maximum top-rate income tax for those UK figures, the implication appears that if the high end TIE rate the SNP suggests (0.75 compared to 0.46 for the UK) were to come to pass the maximum allowable income tax rate would be something on the order of just 30%. I would suggest therefore that the conviction attached to that worst case scenario is somewhat low as not even the Scottish Tories have went into this election on a platform of cutting the top rate of income tax.

My other reason for skepticism over this fear of tax flight in relation to internal tax boundaries is the case actually seen in the United States (In particular, as found by this paper by Young et al in their study of tax migration and border effects) where each state has far more control over many taxes than Scotland has and consequently sees quite sharp tax boundaries between states. Now this is not to say that that tax induced migration does not occur but in the words of the paper linked to above it seems to occur “only at the margins of statistical and socio-economic significance”. This appears to be true even at easily commutable borders so don’t be readily expecting a cluster of Scottish millionaires moving to Carlisle or Newcastle.
[Edit: Alternate link to the Young paper here.]

The reason for this is quite profound. As it turns out we can broadly place the richest echelons of society into to one of two groups. The “transitory millionaires” who really are just seeking somewhere to park as much of their wealth as possible without contributing much to society in general and the “embedded elites” who more closely fit that classic-to-the-point-of-cliché term of “job-creator”. These folk are the ones who have built a business in their locale and, as it turns out, it is not a simple case to uproot it and move it wholesale elsewhere (especially when higher property prices may make the operation of that business significantly more expensive). Perhaps, we in politics have been too quick to conflate these two distinct attitudes among the most well off in society. Perhaps we should instead be asking which of the two groups we would prefer to have influence our policy decisions?

On the Greens’ part, we are not making any prediction of revenue based on our 60% rate. We’re operating on the basis that our changes to the top rate of income tax will not attract any additional revenue (although the changes overall could bring in some £331 million per year) and this managed to attract some attention during the recent STV Leader’s Debate with the Tories asking what the point was if revenue didn’t change and asking how that would improve the economy. Well, we’ve seen the answer to that in the principles section above. The Green tax plan would significantly reduce inequality within Scotland. From a social standpoint, this should significantly improve general wellbeing within Scottish society and from an economic standpoint there will be benefits due to what’s known as the Marginal Propensity to Consume. Essentially, if you increase a multi-billionaire’s income by £100 then it means next to nothing to them or their lifestyle but if you increase the income or decrease the tax burden of a minimum wage worker by £100 then it will give them the ability to pay down debts or spend more on goods and services on which they would not otherwise have been able to do so. By this means, a revenue neutral tax change which decreases inequality most certainly can have a positive economic benefit. It reflects poorly on Ruth Davidson that during that debate she either didn’t know or didn’t want others to understand that fairly fundamental point.

Property Tax

Incidentally, the Young paper linked to in the previous section points out that a far more significant cause of high-earner migration than income tax is a draw towards expensive housing which is a famously immobile asset and which leads us neatly on to the second half of the Greens’ proposals.

Given how limited the set of devolved national taxes actually are and given how long overdue we have been for doing something, anything, about the Council Tax, it’s perhaps no surprise that a large proportion of the campaigning has been dedicated to those taxes over which Holyrood does have near unfettered control.

Faced with the increasingly loud rhetoric over the need for change from many parties and the cross-party consensus on the need for radical change laid down by the Commission on Local Tax Reform’s final report it’s therefore been a deep disappointment that it has been left to the Greens to be the only party to lay down a system of local residential property tax which is meaningfully different from the Council Tax. The Lib Dems have dropped their long standing aspiration towards a local income tax. RISE have stuck to the plan for an income based service tax inherited from the SSP but have appear to have opted to set rates nationally thus remove the advantages of local control. The SNP have decided to keep the present system, including the quarter century old, out of date valuations, but will increase the rate multiplier, nationally, on the top couple of bands. Labour have come up with a system of a per household flat rate poll tax with the addition of value based percentile tax (In my previous article I mischaracterised this as a banded tax due to a misunderstanding of their press statements on the topic. I was in error.) which, on the face of it, is an interesting change but their actual calculations will leave us again with a tax which is deeply regressive with respect to house value.

The Greens, however, have opted to levy a local property tax based entirely as a percentage of the property’s value. This Residential Property Tax would be nominally set to 1% of the property’s value but it will be entirely within the local council’s power to set that rate at whichever value they wish and will be coupled with a scheme of reliefs for low earners similar to the system currently in place.

Of course, such a large step change in the tax system requires careful management and people will need time to adjust their financial affairs to reflect the change so we also propose phasing in the new RPT over the course of the next five year Parliament by stepping over to the new system in 20% increments until Council Tax is fully abolished.

The graph below shows this transition as well as a comparison of the tax regimes proposed by the SNP and Labour as a percentage of a house’s value (RISE’s SST, being income rather than property based, isn’t directly comparable in this way).

Green RPT Both

The contrast is quite profound. Incidentally, the large change in nominally band “C” and above properties may look alarming but one must remember that the lack of revaluations since 1992 has led to many houses, some 57% of the total stock, sit now in the wrong council tax band. The house I’m currently in is a fairly graphic example of this being a band “D” house with a present market valuation of approximately £100,000. Converting from the present Council Tax to a 1% RPT would actually cut the bill here by some 10%.

Also of specific note within these plans is a system of redistribution across councils. Essentially, there are some council areas containing a lot of very expensive houses (Edinburgh, say) and some where property prices are comparatively cheap. It couldn’t be fair that one of the higher priced areas takes the decision that they could cut property taxes to a bare minimum and still fund local services, as happens in places like Westminster, whereas lower priced areas must pull those tax levers harder. Therefore, the block grant given to councils will be calculated on the assumption that they will charge the 1% RPT which will remove much of the temptation from those councils with higher property values from perpetuating the cycle of inequality. They still would have the power to reduce those rates, but they’d have to be accountable to their voters for doing so.

But what of land? Isn’t that a core tenant of Green policy? Well, herein lies an aspect of property tax which has been almost entirely missed by the media and yet lays the path towards possibly the greatest change within them. The RPT includes a slider which will allow a council to weight the RPT between taxing property and taxing land. If a council decided to, say, weight 100% towards property and 0% on land then the system would look most like the present council tax (albeit, as said, greatly more progressive) whereas if another council weighted 0% on property and 100% on land then the system would be functionally equivalent to a Land Value Tax and those who owned not just a large house but also a large estate would have to account for those holdings. In practice, many councils will seek some compromise between the two and the Green proposal lays out an example as currently used in Denmark where a typical weighting is something like 70% on property and 30% on land. Once again, localism is the key here. Council regions which are largely urban will likely wish to weight towards property whereas more rural areas, particularly those with patterns of unequal land ownership, may wish to weight towards land. Simply setting a national rate is unlikely to be sufficient or effective in every region of the country.

Conclusion

I hope this then lays out our proposals for income and property taxation. I know. It’s a complicated issue which doesn’t soundbite very easily but we’re entering an interesting phase of Scottish politics whereby our Parliament will be getting more power than ever before and the need to use those powers effectively will become more important than ever before. Scotland Can be bolder if we want it to be.

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My thanks to Andy Wightman for technical advice provided for this post. His blog Land Matters can be read here.

Reformers Reforming Reforms

March 22, 2016March 22, 2016 / Dr Craig Dalzell / 4 Comments

“The present Council Tax system must end.” – The Commission on Local Tax Reform’s Final Report

Whilst we’re still just a bit too far away from the elections to get to see the actual manifestos, something resembling policy is now starting to trickle out from the parties.

Given the currently still limited nature of tax raising policy within Scotland it’s natural to focus on those areas where control is possible and since the publication and acceptance of the Commission on Local Tax Reform’s report on the need for an overhaul in local taxation in Scotland. So far, both the SNP and Labour have released their detailed plans and, so far, both have been somewhat lacking in ambition.

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We Need To Talk About: GERS (2014-15 Edition)

March 9, 2016March 15, 2016 / Dr Craig Dalzell / 17 Comments

Economics: The art of explaining why all of your models fail to predict either the future or the past.

Click image above for data

It’s that time of year again when everyone starts looking at the first page of a dense booklet of economic data and uses it to wildly forecast despite long known limitations in doing so. So it’s also, once again, time for me to try looking a little further to tease out some details that others might have missed.

First, to get some of the headline figures out of the way. There has been a slump in offshore oil revenue due, largely, to the crash in the oil price resulting from the ongoing economic conflict going on between Saudi Arabia and the US.

This has caused oil revenues to drop from £4.0bn in 2013-14 to £1.8bn in these current figures. And thus came sic a cry of a “>£2 billion BLACK HOLE” from certain sources…

…except…total current revenue is only down £600 million. Down from £54.050 billion last year to £53.443 billion this year. That’s just a touch over 1% of a change and is comparable to some of previous year’s “budget underspends“, thus it could even be said to be within the margin of error of budget estimates. So what is going on?

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No, The EU Didn’t Just Ban Alcohol Minimum Pricing

December 23, 2015December 23, 2015 / Dr Craig Dalzell / 10 Comments

Just a small sample

But even if they did, we can still do something.

The European Court of Justice has released its judgment of the Scottish Government’s proposals to introduce a minimum unit price on alcohol.

Their judgment, published here, states that the proposals as written would be illegal on the grounds of being discriminatory towards cheap alcohol imports and thus would be a restriction on the free movement of goods within the EU.

They have, however, upheld the Scottish Governments arguments that MUP would lead to substantial health and social benefits and have agreed that it would, indeed, meet the goals of both reducing hazardous alcohol consumption and alcohol consumption in general (in an earlier article I noted that Scottish consumption of alcohol can be seen as substantially higher than the UK average simply by examining the tax records).

The court has therefore not banned MUP completely but has ruled that it cannot be implemented until and unless the national courts (i.e. Edinburgh and then the inevitable appeal to the Supreme Court in London) rule that the same alcohol reductions cannot be achieved via taxation. This sets out a test to be met by the Scottish Government.

But if that test is failed and taxation ruled appropriate, what form could it take?

The obvious first step would be alcohol duty but this is currently a reserved power and its devolution was ruled out of the Smith Agreement and the subsequent Scotland Act 2015 Bill. I would think it unlikely, given the current track record, that an amendment to devolve alcohol duty would succeed at this point so I think I’m safe in assuming that it will remain in Westminster hands. Nor, do I suspect, will George Osborne be keen to adjust his own plans for the UK simply to allow the Nationalists even a moment of victory so I can’t see him being amenable to changing alcohol duty at UK level either.

There is another way though, as pointed out by Andy Wightman on Twitter today, the Scottish Government currently DOES have the power to create new LOCAL taxes. If the courts ultimately agree with the ECJ that taxation would be just an effective method of reducing alcohol consumption as MUP then this would be a method within the competence of the Scottish Government to implement without further devolution or delay.

Such a tax need not be set locally, national legislation could fix the rate, though the advantages to doing so are quite strong. By keeping money within areas particularly blighted by alcoholism and alcohol abuse and by allowing the rates to be set to particularly target these areas the greatest good could be done the fastest. Conversely, those areas which perhaps see a lot of through traffic, people traveling into town for a responsible night out say, but suffer little actual harm from chronic abuse may wish to set rates somewhat lower so as to avoid driving away too much business.

While we’re looking at locally devolved alcohol sales taxes we could also take the advantage of the discussion to bring back proposals for alcohol production taxes too. Scotland is perhaps best known for its whisky exports but what is lesser known is the fact that many of the most famous distilleries actually employ comparatively few people and yet produce vast sums of money for their generally multinational corporate owners without doing all that much for a local area which often gives their very name to that drink. Given that these distilleries, and many brewers and other manufacturers, cannot easily move elsewhere (and certainly cannot move out of Scotland) then a local production tax seems particularly apt. Again, by setting it locally and by allowing local people a say in how it is set then they are in a position of power again and can directly benefit from our renowned exports.

Personally, I welcome the prospect of minimum unit pricing and do believe that it would be an effective aid to our national alcohol problem but my challenge to the government is that if the courts rule otherwise, there is still something we can do. Indeed, even if they don’t….why not both?

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We Need To Talk About: Local Taxation

December 6, 2015December 13, 2015 / Dr Craig Dalzell / 1 Comment

Source: Flickr

Next year brings in the Scottish Parliamentary Elections and with it comes the proposals from each of the parties on how best to use the limited powers that the Scottish Government will have at its disposal. No doubt, much of the news and comment will be around whether or not the (marginally) expanded powers over income tax coming in under the Scotland Bill 2012 will be used and by how much.

Our approach towards local taxation, however, will perhaps lead to a far more fundamental change to the fabric of our society. There is also far greater scope within the devolution powers to do something a bit more radical that simply raising or lowering the rate of tax by a penny or so (or repeatedly defending one’s reasons for not doing so). It is therefore important, before the campaigning season begins in earnest, to understand what our options are and the potential impacts of them.

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The Devolution Journey: Devolution and Tax

November 14, 2015February 2, 2016 / Dr Craig Dalzell / 13 Comments

A comparison of the % of devolved control in Scotland now, under 2012 and under Smith as well as a comparison with Spain and Canada. Source: Scottish Government.

A comparison of the % of devolved control in Scotland now, as it will be under the Scotland Act 2012 and under Smith Commission recommendations as well as a comparison with Spain and Canada. Source: Scottish Government.

Monday the 9th of November saw the Scotland Bill 2015 make a further step towards completion. This Bill, which has been the result of the aftermath of the 2014 independence referendum, will mark another milestone on the devolution “journey” Scotland is traveling upon.

Some of the commentary both during the actual debate in the House of Commons and in the days since have shown considerable confusion at just how the system of devolution in the UK works at the moment and how it is to change with the implementation of the Bill. Before we really settle into a meaningful debate on whether or not any “additional powers” for Scotland will be to and for Scotland’s benefit we need to actually understand what those new powers are, what we have now and how they can be used.

This article shall focus on the powers over taxation devolved to the Scottish Parliament as this area will be undergoing several rapid changes over the next few years and much of the confusion amongst members of the public has arisen from the conflation of several phases of devolution.

One must understand the rather unplanned and piecemeal nature of the progression of devolution for Scotland, there is certainly no clear “destination” to that “journey”, and this reflects and contributes to the confusion but there are three major points in the form of the Scotland Act 1998 which formed the Scottish Parliament after the success of 1997 Devolution Referendum; the Scotland Act 2012 which resulted from the 2007 Calman Commission and the aforementioned Scotland Act 2015 resulting from the Smith Commission of 2014.

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The (Economic) Madness of George

October 15, 2015October 15, 2015 / Dr Craig Dalzell / Leave a comment

Last night George Osborne’s Fiscal Charter was voted on and rammed through Parliament on the back of the Tory’s majority. Today, the media focusing more on the shambles that is the current Labour party and their confused approach to supposed Opposition combined with the rumbling rebellion in the ranks as the party tries in vain to come to terms with what their members actually want the party to stand for.

Consequently, as usual, much less has been said about the actual contents of the Bill and its effects on our economy.

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We Need To Talk About: Budget Underspends

October 2, 2015October 3, 2015 / Dr Craig Dalzell / 39 Comments

Q. When is a surplus not a surplus?
A. When someone is talking down the Scottish Government.

Today the Auditor General published its annual report detailing an independent opinion on how well the Scottish Government is managing its finances (or how badly it is failing to do so).

This year, as last, there have been howls of anguish from those opposed to the Scottish Government at the fact highlighted by the Auditor General that the Government spent £350 million less last year than it was given in the Block Grant.

As the opening question suggests in most normal countries when your government spends less than it has available to spend then it is running what is known as a budget surplus. This is, especially in today’s economic climate, generally considered to be a “good thing“. Not so in Scotland, apparently, where the phrase to be used instead is “budget underspend”.

How this has occurred, is due to the peculiar way by which the Scottish Government is funded and is constrained to spend its money.

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How To Start a Currency From (Almost) Scratch

July 28, 2015January 27, 2016 / Dr Craig Dalzell / 10 Comments

An RBS £1 Note – Scottish Parliament Commemorative Issue

It’s fairly widely acknowledged that one of the weaker aspects of the 2014 Scottish Independence debate was that surrounding currency. I still hold to my long-standing view that all options open to us were and are equally viable. All come with unique benefits, all carry characteristic risks. All that was required was the will to manage those risks. Scottish Independence should never have even been about the question “Which currency should we use?”. I believe that instead, the real question was “Should we, in Scotland, have the right to ask that question?”

Recently though, the catastrophic circumstances facing Greece have focused minds back to this first question and many are now convinced that before we go into another debate on independence we must be able to answer the questions we failed to answer last year. So let us take a scenario where Scotland is faced with setting up its own currency. Just what would that involve?

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