by Alex Porter, Economy Editor
Scottish politics and the Holyrood election race sprang to life last week with the release of an IPSOS Mori opinion poll which showed the SNP had leapfrogged Labour in terms of voting intentions for the elections on May 5.
The survey had further positive findings for the SNP government in terms of the electorate’s views on how income tax should be raised in the future.
Currently the UK government proposals for the Scotland Bill will see the Scottish Parliament being transferred greater powers. A Holyrood Exchequer would share the setting and collecting of income tax with the UK Treasury, although it is not clear under the current proposals that a Scottish Exchequer would have the ability to collect income tax. This position is supported by 27% of Scots while around one-third support the status quo position of income tax being wholly the responsibility of the UK government. Interestingly, 37% would prefer all income tax to be controlled and collected by a Scottish Exchequer, a policy supported by the SNP.
First Minister Alex Salmond, a former economist, will be delighted to note that going into the election his party’s tax policy enjoys more support than the policy of the Unionist opposition parties’ bloc whose shared policy of backing the Scotland Bill commands the support of around only one-quarter of Scots voters.
In terms of the election issues which Scots see as most important, the economy comes out top on 21%, followed by education on 18% and unemployment on 17%, according to the survey. Labour party strategists will be concerned to see their poltical rivals and incumbent Government go into the election campaign with the most popular income tax policy among Scots.
Scotland Bill credibility
Even more concerning for the opposition parties is that the Scotland Bill faces a relentless barrage of criticism from economists, academics and business leaders. The world-renowned economist Professor Andrew Hughes-Hallett of George Mason University in Virginia and others have warned that the income tax powers within the Scotland Bill are “dangerously flawed”, “unworkable” and “a perfect storm”.
Experts have told Newsnet Scotland that there is an inbuilt cost-disincentive towards the Scottish Parliament using the income tax powers within the Scotland Bill, as the costs of collection alone render use of the power a very expensive option for any government to take. Under the Scotland Bill proposals the bill for setting up the collection apparatus would have to be paid to HMRC from the Scottish block grant.
Demanding payment of this bill is a direct contravention of the Scotland Act 1998 which stipulates that any costs involved in changing devolution arrangements should be borne by the institution which instigates the changes. However a trend has emerged which has seen Westminster departments make administrative changes which affect Scotland and then divide and apportion a share of the costs to Scotland and send Holyrood the bill, simply ignoring the law.
Recently the Unionist opposition parties demanded an apology from the SNP Government which had refused to pay a bill sent from HMRC for costs relating to a computer system upgrade necessitated by a Westminster alteration to the tax system. The upgrade would have allowed the Scottish parliament to continue to have the facility to implement the three pence power should it so desire. As the Scottish Government did not pay the bill, there were claims from the Unionist parties that the three pence power had been lost.
Despite the fact that the SNP Government was not liable for such costs under the terms of the Scotland Act, and despite the fact that the powers were not lost at all, the SNP Government apologised anyway.
This was a sure sign that the Alex Salmond’s Government had learned how to handle being bullied by a media which often merely forwards certain opposition party narratives rather than engaging critically in Scotland’s democratic process.
If it were true that such a cost-disincentive is being built in to the Scotland Bill it would be very similar to the alleged strategy in relation to the Scottish Variable Rate (SVR) which since the inception of the Scottish Parliament has empowered governments with the ability to raise or lower income tax by three pence in the pound. The power has never been used.
In a sign of just how deep the rabbit-hole goes academic Alan Trench has claimed that the SVR, voted for in the Scottish devolution referendum, was never meant to be used. After giving evidence on the matter to the House of Commons Scottish Affairs Committee last week, Trench wrote in his blog Devolution Matters, “It seems to be news to some that the Scottish variable rate wasn’t meant to be used, and that people knew this at the time.”
What will concern the Scottish electorate is that if there is a disincentive to using the income tax powers granted by Westminster’s Scotland Bill rendering it a ‘pretend power’ then the net effect will be that more powers will be taken away from their parliament than given to it. The spirit of the Bill then would not be in keeping with its stated aims.
Lib Dem U-turn
More worrying is the position on the Scotland Bill of the Lib Dems. Holyrood leader Tavish Scott and Scottish Secretary Michael Moore promised that the Calman Commission’s proposals would be implemented “in full”. It transpires that many of the powers that were in the Calman recommendations have been dropped from the Scotland Bill, such as air passenger duty, aggregates levy and the assignation of income tax yield from savings and distributions.
Holyrood’s Scotland Bill Committee is chaired by the former leader of Labour’s Holyrood MSP’s Wendy Alexander who was forced to stand down in 2008 owing to accusations of financial impropriety. Ms Alexander suddenly announced last week that she is leaving politics to spend more time with her family.
During the election the spotlight will be shone on the diffferent parties’ proposals on tax powers. It should be a concern for the Unionist parties that their policy, which doesn’t enjoy significant popular support among Scots, may actually unravel under closer inspection.
The real concern will be for the SNP’s principal rival Labour whose manifesto, it was revealed recently, was not costed and now has to undergo a complete rewrite.
It also recently emerged that Labour’s Scottish cabinet was divided on Iain Gray’s decision to vote against the Scottish government’s budget despite the fact that it promised funding for 25,000 apprenticeships. It seems that some senior members of the party’s Scottish leadership were unhappy and criticised Gray for being unduly influenced by the more “immature” elements within his team.
The SNP will be keen to exploit the weaknesses and divisions which have been exposed in Labour’s policy platform and amongst its leadership. Alex Salmond’s team has a number of good media performers on economic matters such as John Swinney and Jim Mather. The recent revelations will only assist them to highlight Labour’s shortcomings during the Holyrood campaign.