The
political result of the Scottish referendum – the preservation of the Union
combined with a commitment by the UK political class to devolve further powers
to Scotland – has naturally led to most instant commentary being focused on the
political and, more specifically, constitutional consequences. By contrast, the economic results will have
difficulty competing for the attention they deserve – especially what looks
likely to be the most tangible economic result: higher taxes in Scotland. This
change holds out the interesting prospect of increased competition within the
UK as regards the balance between the tax burden and the quality of public
services.
The
likelihood of higher taxes in Scotland is clear from a straightforward analysis
of the referendum campaign and result. The ‘Yes’ platform was overtly
redistributionist. It depicted union with England as binding Scotland into
fiscal restraints that reflected the preferences of the UK political class
(especially as represented by the Conservative Party that is the dominant
partner in the present UK coalition government) rather than the choices and
needs of the Scottish people. The electorate clearly got that message. An
analysis of voting patterns in the referendum shows that the ‘Yes’ vote was
higher in areas where there were proportionally more voters with the greatest
dependency on the welfare state – such as the unemployed and recipients of
disability benefits. Against this
background, and on the safe assumption that the promised further instalment of
devolution will focus on tax raising powers, it follows that future elections
to the Scottish parliament are likely to be won on platforms of higher marginal
taxation to finance increased public spending.
