FOR some time, the Scottish Government has been drifting into a serious financial problem, the cause of which is an attempt to operate progressive, redistributive policies within the funding framework of a UK-wide settlement that is based on entirely different philosophies.

There is a limit to the amount that can be spent on initiatives such as a well-paid and properly staffed health sector, free higher education, poverty elimination and affordable public transport while the system is largely financed by a Barnett formula determined by the sums Westminster spends on the same areas. There has been nothing in current leadership debate that indicates any of the candidates recognise this limitation.

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Tinkering with income tax rates will eventually, and probably very soon, hit a practical limit and unless new methods of funding are introduced, there will be a lot of very difficult decisions to be made. What this highlights is that, over the entire duration of the Scottish Parliament, and despite numerous commitments to do so, insufficient effort has been devoted to modernisation of overall public-sector funding.

A clear starting point would be to reduce the reliance of local authority spending on flows of money from central government by replacing the outdated council tax with some alternative system. The fact that this has been discussed for years without any progress is a clear indication of the lack of long-term planning within government. While a practical land value tax model is unlikely to generate the perpetual flow of milk and honey some have suggested, it is only one of several options that could individually or in combination provide a path to delivery of the council services we would all like to see.

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As has been argued elsewhere, an intelligently designed system could also incentivise more productive land use in both urban and rural settings, and free up money currently being dispensed by the Scottish Government for other purposes.

At a national level the opportunity for income generation from the exploitation of renewable energy needs to be grasped. Again, this is unlikely to provide the scale of revenue from oil and gas that successive UK Governments have managed to squander over the years, but a smart government participation mechanism that gives the state a production share – either through an equity share or through a production sharing contract as part of the licence – from every wind or water turbine installed in Scotland could form the basis for a Universal Energy Scheme giving every household the right of up to, say, £1000-worth of electricity per year before a graduated tariff kicked in.

This would cut energy poverty at a stroke, incentivise a move away from gas as a heat source and help drive energy efficiency in homes. If energy was channelled through a state-owned production and supply company, revenue surpluses could be used to improve infrastructure, stabilise prices and contribute to a wealth fund.

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I’m sure an economist could identify other avenues to explore, but this is an urgent problem that needs urgent attention. If any of the solutions are outwith Holyrood’s competence, this needs to be identified and very publicly challenged. It is infinitely more important to the demonstration of Scotland as a viable country than squabbling about the magical GERS statistics. We are rapidly painting ourselves into an ever-smaller corner from which it will be increasingly difficult to escape without damaging the precious paintwork.

I fear a government that is struggling to introduce a workable deposit return scheme, despite many effective models operating worldwide, will simply keep painting. I hope I am wrong.

Cameron Crawford
Rothesay