Scotland Bill

Notwithstanding the deflationary bias, there might be growth in some elements of income tax revenue, but in terms of sharing risks the downsides for Scotland are much greater. In an intervention, I said that, if a future Scottish Government chose, for example, to reduce income tax to stimulate economic growth and it worked, they would take the hit in reduced income tax revenue, but the UK Government would benefit from the additional corporation tax yield. There are probably more downsides than upsides, because the range of devolved taxes is limited and, in cash terms, involve almost exclusively income tax. The other problem is that the provisions fall foul of not being fully devolved. Income tax rates do not stand on their own; they must be looked at alongside allowances and thresholds, neither of which is being devolved. So the consequence of a significant change, in particular the UK Government's plan to increase personal allowances to £10,000, which in principle is a very good policy, could mean a reduction in funding to Scotland of between £800 million and £1 billion a year.