Friday, November 26, 2010

Swinney didn't lie about tartan tax

 The world held its breath as conflict erupted between North and South Korea; Ireland braced itself for civil unrest as its government imposed a crushing austerity budget;  British students and school six formers took to streets and occupied universities over tuition fees.  And Holyrood spent the afternoon rowing over the unspent cost of collecting a tax, the SVR, that no one intends to raise and is about to be abolished. Cover up? Abuse of power?  Grow up. 

  There is a strand of infantilism in the Scottish parliament  which occasionally causes MSPs to get things out of proportion.  Henry McLeish’s resignation as First Minister in 2000 over subletting his constituency office when he was an MP in Westminster, was a case in point.   MSPs get so wound up by petty squabbles that they lose all sight of the big picture, or even the little picture, or even the thumbnail print.  Really, the SVR is such a silly issue that I can hardly bring myself to pontificate about it. “The greatest act of political sabotage since devolution”, according to Andy Kerr. Get a life.  

   The Scottish parliament’s tax powers have not been “abandoned” or “abolished” or “taken away”.  The Scotland Act has not been repealed.  The Scottish government merely took the decision that it wasn’t worth spending £7m to upgrade the machinery for collecting the SVR or Tartan Tax since there was no foreseeable prospect of it being used.  The SNP’s own election manifesto in 2007 specifically ruled out using the tax as did everyone else’s, apart from the Scottish Greens.  

  Yesterday,  John Swinney give a pretty comprehensive apology for failing to inform parliament of this before now -  as well he mighty since, technically, this could prevent an incoming government to levy the tax until 2013.  Swinney ate his humble pie like a man.   But the Labour leader Iain Gray’s claim of a “deliberate, secret disempowerment of this parliament” was risible.  Especially after it emerged that the Labour had mothballed the Tartan Tax in much the same way in 2000.     
   Why didn’t Swinney tell parliament? All he needed to do was drop a line into a budget debate saying that he didn’t think it was worth blowing the annual cost of 275 nurses on a dodgy IT project.   Probably human error, no one thought it through, too much going on. Perhaps also the omission arose from a subliminal reluctance to raise the issue of tax at all.  A refusal to face up to reality of the Scottish parliament’s existing tax powers, while arguing so vehemently for new ones.

     For the real question, which wasn’t of course raised yesterday, is precisely why in the current financial crisis, no party apart from the Greens is even considering using the SVR to raise revenue for threatened services.   The Scottish Variable Rate  could raise around a billion pounds for the Scottish government. A penny or so would meet the cost of free personal care.  Another penny would fill the hole left by the introduction of tuition fees south of the border. But the SVR remains the great unmentionable - a toxic tax.  Mr Swinney, is not alone in his selective amnesia.   Labour have been proposing an increase in council tax to maintain local services and have called for cuts in the NHS.   What they haven’t done is look at the most direct way of raising revenue: though the SVR. 

   Now, the Tartan Tax has many critics, of which I am one.  There has always been a suspicion that it was never really intended to be used since it only allows variation in the standard rate.  There is no mechanism for amending the higher rate of tax, above £43,000, or introducing new bands or any of the other adjustments that the UK Chancellor can introduce to make tax less taxing.  However, there is no doubt that it is a tax on general income - which everyone agrees is the fairest method of raising revenue.  It is the progressive alternative.  

   And while the SNP reject the SVR today as beyond the pale, they haven’t always had this attitude.  Recall the 1999 Scottish election when Alex Salmond called for a “penny for Scotland”  to save Scottish public services. You might have thought that a penny for Scotland could be rather better spent today  than in the boom years of the late 90s.   Of course, the SNP got its fingers burnt in that election.  They discovered that, contrary to conventional political wisdom, the Scots are no keener on paying tax than the English.  This is still probably the case. Which raises the question of what Scots will make of the new tax that is intended by the Coalition government to replace the Tartan Tax. 

     Next week, the UK government will unveil the Scotland Bill which is intended, among other things, to implement the Calman commission proposal to give Holyrood the power to raise  or lower up to 10p of income tax across the bands.  This, of course, is the real reason we had the SVR row this week.  The Liberal Democrat Scottish Secretary, Michael Moore, saw an opportunity to wrong foot the Scottish government on the eve of the debate, so he leaked a letter in which he revealed that John Swinney had mothballed the Tartan Tax without telling anyone.  It made it look as if the Nationalists were rather poor guardians of parliament’s existing economic powers.  This will make it more difficult for the Scottish government to reject Calman out of hand. 

    The SNP claim that Scotland would have lost $900m if if Calman had been in operation.  It is deflationary and ill-thought out.  That may or may not be true.  But my own view is that Calman presents an opportunity for the SNP rather than a threat.  They should use the Scotland Bill as an opportunity to present their own progressive tax alternative to both Calman and the Tartan Tax. Just talking about fiscal separation isn’t good enough.  In any federal system, and that is the only serious option right now for Scotland, there has to be a mechanism for fiscal redistribution - for allowing wealthier regions to support less wealthy ones.  This implies tax sharing of some sort.  

   Swinney, Salmond et al are clever guys.  They can surely turn this debate to their advantage and secure Scotland’s financial well being.  And they might even raise another interesting question.  Just how much would it cost to establish the Calman machinery, and how long would it take? 



Mr. Mxyzptlk said...

'Swinney, Salmond et al are clever guys'

Yep! to clever by half(in an English way)

The little is Big in politics

Anonymous said...

It's easy to see why Michael Moore was a second choice.

I'd have though third choice, certainly third rate. Not really surprising for a party which never expected in a month of Sundays to hold power, and had little to choose from by way of MPs.

The alternative of the one and only Tory was too laughable even for David Cameron to contemplate ... and he's the bloke who made Osborne the chancellor!!

Alan said...

he was just "economical with the actualité".

brownlie said...

"The greatest act of political sabotage since devolution" - so impressed by Kerr's view of reality that I had to repeat it.

Greater than the sabotage by opposition parties of just about every SNP initiatives?

Frightening to think that the estimable Kerr could be a minister after the election?

Jo G said...

If Gray's behaviour was risible then what on earth can we call Tavish Scott's hysterics?

I cannot believe the "outrage" of the lot of them given not one of them would dare to attempt to impose a three pence in the pound tax rise on working Scots.

Newsnight Scotland this last week involved Kerr behaving appallingly towards Alex Neill and essentially calling him a liar. Brewer sat almost giggling throughout and failed to warn Kerr about his conduct. Kerr is despicable. HE is the man who gave us PFI and left us to pay for various schools and hospitals for the next THIRTY years. His Party also gave us the Edinburgh Trams project and just LOOK at the mess and the costs of that.

Surprised by the latest polls I have to say. Presumably these people who intend to put Labour back in power back free prescriptions, a Council Tax freeze and pay restraint? Hello???

Meanwhile Gray has virtually promised to revive the Garl project and introduce "living" wages in the public sector. He wants Council Tax freezes lifted and he isn't keen on free prescriptions. Gray's Party, like the Tories, used prescription charges as a means of raising revenue and exploited the sick in order to do so. Prescription charges, lest we forget, were close to EIGHT POUNDS under Labour. Clearly an awful lot of people out there aren't thinking very clearly if Labour are ahead in the polls.

Anonymous said...

Interesting to watch Mr Moore, Scottish Secretary, on Politics Now - see it on iPlayer. Seems this whole thing had more to do with deflecting attention from the Scottish Budget and from the fact that, once more, the opposition parties in Holyrood do not have anything by way of policies.

Interesting to if an inquiry is held and it goes right back to 2000 since it would appear that many senior Labour and LibDem politicians in Holyrod knew of this problem with the tax and HMRC and did nothing about it when in office. Also did they tell Holyrood about the £12 million paid to HMRC?

Anonymous said...

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Redhat Sly said...

I thought your Liar Loans article was very good.

I agree that the FSA have been completely useless. Did you see this speech by the FSA's "Mortgage Policy Manager" in October?

"Self-certification mortgages have been more or less withdrawn from the market by lenders, following the credit crunch. But non-income verified mortgages continue in the form of ‘fast track’. Even in Q1 this year, this accounted for 43% of mortgages sold."

Now the long long long long awaited FSA Mortgage Review has been put back another year so the reckless lending via Liar Loans can continue.

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