Blair keeps firing at Tory estimates on cost of devolution

Scottish devolution will "not cost Britain a penny", Tony Blair said yesterday. Speaking in Edinburgh during Labour's local elections campaign, Mr Blair dismissed Tory claims that the establishment of a Scottish parliament with revenue-raising powers would threaten investment north of the border.

On a visit to Scotland last week, the Chancellor, Kenneth Clarke, warned that devolution would "strangle entrepreneurial flair with red tape, causing great harm to Scottish jobs, prosperity and commerce". But Mr Blair dismissed his arguments as "lies which are designed to intimidate people".

The Labour leader pointed to an independent report published yesterday which argues that an Edinburgh assembly with the power to raise income tax by up to 3p in the pound would have "no negative effect on Scotland's inward investment position". The study, compiled by Professor Neil Hood, the former head of Locate in Scotland, the Government's economic development agency, acknowledges that constitutional change will create political uncertainty.

But its effect on investment "will be neutral over the short to medium term" because much of the new foreign investment in Scotland in recent years has come from companies which are already well established north of the border. Professor Hood, who now heads the International Business Unit at Strathclyde University, concludes that doubts surrounding Britain's policy on a single European currency risk causing more economic hardship than does constitutional change.

Mr Blair said the report "comprehensively debunked" the Chancellor's arguments. "Devolution will not cost the people in Scotland or Britain a penny more," he said. "It's about bringing power down from Westminster to the Scottish people."