Lib Dem Moore admits tartan tax letter sent because of Scottish budget

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Scottish Secretary of State Michael Moore has admitted that his recent letter that led to the furore over the so called ‘tartan tax’ was sent as a result of John Swinney’s Scottish budget statement and in anticipation of the Scottish elections in 2011.

Speaking on The Politics Show Scotland Mr Moore also revealed that the problems with the IT system used by HMRC – needed should the tax ever have been used – were known to him for some time and also to Labour Ministers in the last UK government.

Asked why he had written the letter when he did Mr Moore said: “I’ve always believed that the Scottish government should be clear about the state of play with the Scottish variable rate.”

When asked if he himself had just found out this past week Moore appeared momentarily lost for words and claimed not to have heard the question.  When host Gary Robertson repeated the question Mr Moore admitted that he had known about the situation for some time saying:

“No, not at all, it was known for some time. Indeed it would have been known to Ministers in the previous Labour government.”

When pressed again on why he had written the letter when he did Mr Moore said:
“What I was conscious of as a Minister is that we’re getting to the point where parties are beginning to form their election manifestos for next year and I thought it would have been wrong, particularly after what the Finance Secretary said in the budget debate, for parties to believe that the variable rate powers were there and available to them next May.

“They’re not, sadly, and so they need to take account of that fact.”

http://www.youtube.com/watch?v=7D_OXCFy46w{/youtube}

In the letter written by Moore, John Swinney had been accused of failing to maintain a payment of £50,000 in 2007 and, as a result, rendering the ‘tartan tax’ unusable for two years.  Moore’s letter was seized on by Holyrood opposition parties who accused the SNP Finance Secretary of misleading parliament by not informing them and of having ‘lost’ powers that the Scottish people had voted for in a referendum.

The accusations led to an emergency debate in the Scottish parliament that saw Mr Swinney apologise for not telling fellow MSPs of his refusal to pay the £ millions demanded by HMRC in order to maintain the IT system that would handle the tax.

However, speaking in the debate Mr Swinney revealed that the tax had in fact been ‘mothballed’ by the previous Labour/Lib Dem administration in 2000 and that the ten month timescale for implementing the tax had been lost as a result.  The earliest that the tax could have been implemented when the SNP assumed office was April 2008, a twelve month delay not ten, and the cost was not £50,000 as claimed by Mr Moore but was in fact £3.4 million.

http://www.youtube.com/watch?v=3_UP-ebDINU{/youtube}

Mr Swinney also revealed that in 2007 he had in fact taken the advice from HMRC and agreed to a fee of £1.2 million that he was told would ensure a ten month lead time would be in place ready for whoever won the next Holyrood election.  However another demand, this time for £7 million, was then made by HMRC in June this year, which the Finance Minister refused to pay arguing that the system upgrade was the responsibility of HMRC  – negotiations then began.

http://www.youtube.com/watch?v=0-VVfaSJBhU{/youtube}

Despite requesting that  the negotiations remain confidential, Michael Moore then sent a letter to Holyrood opposition leaders attacking Mr Swinney.

The explanation from the UK Minister and Lib Dem MP for the reasons for the letter is sure to lead to questions over his motives.  It will also lead to disquiet in certain quarters if UK coalition Ministers are thought to be using their positions in order to interfere in the election campaigns of devolved administrations.

That claims made in the original letter are now being seriously questioned will do little to enhance the reputation of the current Secretary of State for Scotland.

Mothballed
Meanwhile, last week’s emergency debate exposed chaos and embarrassing confusion amongst Labour MSPs over their parties own position on the tartan tax prior to May 2007.  SNP members reacted angrily when it emerged that the previous Labour/Lib Dem administration had taken a decision to ‘mothball’ the power in 2000.

However, in a little reported incident in the chamber, when SNP MSP Stewart Maxwell angrily attacked the mothballing revelation, former Labour Finance Minister Tom McCabe raised a ‘point of order’ and stated that Mr Maxwell’s statement was “totally and utterly untrue”.

http://www.youtube.com/watch?v=YcW5EjD9fzM{/youtube}

Soon after though, Mr McCabe’s assertion was called into question when Labour’s Shadow Finance Minister Andy Kerr admitted that, yes, Labour had indeed taken a decision to ‘mothball’ the power.

http://www.youtube.com/watch?v=sNODoQCLy_s{/youtube}

Mr Kerr’s subsequent claim that, despite mothballing the power, Labour had still maintained a ten month lead time by paying £50,000 was challenged by John Swinney who quoted figures from a document from HMRC explaining that ten month implementation was not possible and that the earliest implementation of 12 months would require a sum of £3.4 million.

http://www.youtube.com/watch?v=8MuUMaSCNS0{/youtube}

Mr Swinney also challenged Labour’s group leader Iain Gray who tried to make the same point:

http://www.youtube.com/watch?v=T1rZRrRaqHk{/youtube}

This weekend, BBC Scotland are reporting that Labour leader Iain Gray has joined with Lib Dem leader Tavish Scott and demanded an inquiry into the tartan tax matter and are questioning whether Ministers have broken the ministerial code.

BBC Scotland say that: “The deal, which allowed Scotland to raise or lower income tax by 3p in the pound, was allowed to lapse in 2007 and cannot be used until 2013-14.”