I AM dismayed my old colleague Professor David Bell has lent any credence to the National Institute for Economic and Social Research and the Centre for Constitutional Change report (“Time bomb” faces public finances if not future proofed, The National, December 21). This will be even more grist to the mill for Unionist politicians who wouldn’t know which way up a demand-supply diagram should be viewed.

So, the scary part of the academic research is that Scotland, in order to fund its future fiscal expenditures, will have to raise taxes by 8.5 per cent of GDP. Unionists will jump on this figure and tell us how awful the future would be if we were independent given these dynamics. But therein lies the whole problem: theses dynamics refer to a Scotland straitjacketed by its position in the UK. In other words, the critique only applies to a Scotland that is supposedly ‘Better Together’. Let me take a few claims one by one.

The article quotes the report saying: “It (Scotland’s public finances) is also generationally unbalanced, since the responsibility to close the intertemporal budget gap falls disproportionately on future generations”. What the researchers are trying to say is that, if we keep spending at current levels, our children and grandchildren will have to pay for it much more than we do.

Well, here is the big news: that is the case in every single developed country in the world with a welfare state ie, all of them. What the researchers seem to have set out is the case that, somehow, Scotland is different from the norm. Somehow, Scotland is the country that will have to face a reckoning. No mention of the fact that pensions, Medicare and Medicaid will bankrupt the US in exactly the same way. No mention of the fact that the World Bank estimated some time ago that citizens of Shanghai would have to pay 66 per cent of their income in taxes by 2030 to meet pension obligations in that country. Yes, there are problems with long-term liabilities in Scotland’s public finances – and they are shared across the world.

One of the authors, Katerina Liskenova, says: “Our research demonstrates, if future demographic pressures are not taken into account when discussing devolution, it will create a time bomb in Scottish public finances”.

Scottish public finances will be a time bomb in a devolution context because the Scottish Government will not have the levers and policies available to it to defuse that time bomb. It is the same time bomb that faces the whole of the UK.

This isn’t a research conclusion about Scotland it is just a statement of fact about the insolvency of the UK. An independent Scotland, with the ability to adopt quite different fiscal, monetary and exchange rate policies – as well as business and labour market policies – might not face the time bomb currently imposed upon it.

Lastly, the authors claim the impending crisis is due to three main reasons: “declining North Sea revenues, a budget deficit at the beginning of the simulation period and a widening gap over time, primarily due to population ageing”. Well, come on! These reasons may well be true for a Scotland locked into the UK constitutional settlement. But we were encouraged to vote for it in September 2014 by all sorts of threats and smears – that “the UK has broad shoulders to help us out”.

How could it be possible that an independent Scotland be worse off with 100 per cent of North Sea oil revenues rather than the notional 8.4 per cent that we are treated to at the moment (and that is before our contribution to the cost of HS2, the third runway at Heathrow, the London Underground and the London sewerage system – never mind Trident)?

The researchers have locked themselves into the small thinking of our current devolved position. In that respect they are quite right in concluding that there is no hope for Scotland’s public finance position as currently constituted because we can do very little to stop the rot 50 years of UK Government policies have produced. Only with independence and a completely different approach to economic policy does Scotland have a hope of avoiding the problems that the authors outline. And as for population ageing – yes, it is a challenge. But it is a challenge that an open-door policy to refugees might well overcome in easy measure.

The problems the researchers foresee for Scotland are the problems which exist in the minds of academics who cannot think beyond the assumptions they adopt to give the outcome they desire. These are the problems of a Scotland locked into the UK straitjacket. The real world is a much bigger, more dynamic, unpredictable place than they seem to envisage and an independent Scotland in that constantly changing, dynamic world would have huge opportunities as well as inherited (from the British state) challenges.

Dr Jim Walker
Chief Economist, Asianomics

REGARDING Pete Nicoll’s comment about the “personal powergrab politics” of Rise (Letters, December 21). The SNP has slid to the right since 2007 and that is due to there being no socialist voice at Holyrood. Rise aims to combat that by holding the SNP to account from the left, a position Labour vacated some decades ago. As to his accusation of a desire for “personal gain”, if Rise is successful in gaining representation in Parliament, those elected will earn the wage of the average skilled worker. Additionally, they would be restricted to two terms. Unlike some MSPs, they would also not be gaining from a second job in tandem with their responsibilities to the electorate. “Personal gain” is the footprint of those who play the system and seek external positions and remuneration while in office and once out of it.

David Stevenson
Cambuslang

I UNDERSTAND Carolyn Leckie’s view on the problem with the current council tax (Council tax should be scrapped – and quickly, The National, December 21). But what she did not emphasise was that the less well-off benefit from, and use, council services the most. In addition many on low incomes pay no council tax or very little.

This is not to say I support the current system. Nor do I think the state should hit the wealthy with a graduated tax either. Most on moderate and high incomes already support society with higher income taxes. My view is that we should abolish taxes to the council altogether. Many may say this will remove local accountability but council tax is only 12 per cent or so of the monies the councils manage. Years ago it was more than 25 per cent. The cost could be put on national income tax so the more you earn the more you pay. If you do not work or are on low wages you would pay hardly anything. Ireland did this years ago by increasing the basic rate by two pence in the pound. The system for collecting tax already exists and would be no extra cost to administer. Other options such as local income tax or a new property tax all incur additional costs.

Robert Anderson
Dunning


Letters: While the wealth gap widens, it is boom time for the markets