Terry Murden: Taxpayers will pick up tab for more devolved powers

ALEX Salmond’s demand for greater control over Scotland’s financial affairs worries those who fear ministers would be too tempted to introduce all kinds of taxes in order to fund pet projects with little or no benefit to the economy.

But an increase in Scotland’s powers is prompting concern of a different kind: the north of England, a traditional ally of the Scots, is becoming agitated by what is seen as a growing threat to its wellbeing if Scotland should gain an even greater advantage than it currently has over its southerly neighbour.

The north-east of England is vexed by the incentives already available in Scotland and is worried at the prospect of further financial firepower being offered to the Edinburgh government, such as control over corporation tax.

One concern is that this would cancel out any benefit regions such as north-east England would gain from new enterprise zones. The English have already lost the “grant for business investment” scheme, a job-supporting initiative for poorer areas, while Scotland retains the similar regional selective assistance scheme.

Today we report how airports are campaigning to stop an increase in air passenger duty, though there is another sting in the tail for England with pressure for this tax also to be devolved to Holyrood, providing the Scottish Government with another opportunity to gain an advantage.

A Tyneside MP has raised these matters with Chancellor George Osborne and Business Secretary Vince Cable at a time when One North East, the NE England development agency, is preparing to close at the end of March as part of the winding down of the English regional development agencies. Inward investment is at its lowest for seven years.

Scotland complains it suffers some form of financial and democratic deficit with the rest of the UK, but the north of England, deprived of any political or economic representation on the scale that exists in Scotland, arguably has greater cause for concern. Yet, as the campaign builds for ever more powers, through the Scotland Bill and full independence, it is worth pondering whether Scotland has really taken full advantage of the extra powers it has over other UK regions. Have the combined efforts of Scottish Enterprise, the Holyrood government, control over business rates, planning and transport allowed Scotland to pull clear of England? On some measures, maybe, but generally speaking I don’t think Scots feel they’re living it up while the rest of Britain goes to the dogs.

Maybe those fears expressed above – the potential of Scottish politicians to squander any extra resources given to them – is an even bigger worry. Free prescriptions, free bus travel, council tax freezes, lower education costs: everybody benefits in the devolved Scotland.

Except somebody has to pay for these freebies and low-cost services and, with greater control over taxation in an economy with no growth, it’s not difficult to work out who that will be.

Rally good news on share front

JUST what is firing the surge in the Footsie? The index of 100 leading shares is up 11.2 per cent this month, its biggest monthly rise for 21 years. In early October it slumped to 4,868 at the height of the alarm over the Eurozone and the threats of recession and only days after suffering its worst quarter for nine years.

The recent surge has been prompted by tentative signs of the Eurozone problem easing and better news on growth from America. China has also recovered its growth momentum.

So can the rally last? Sceptics say it has been fired by traders covering short positions and Europe escaping its worst-case scenario of a meltdown. But, without any further big shocks to the system, there’s still a chance of the FTSE 100 hitting 6,000 by the year end. Fingers crossed.