The ‘tartan tax’ – who is misleading who?


So, the so called tartan tax is either no more – or has lapsed.  Scots voted for it in 1997 but, if the media are to be believed, then the dastardly SNP have thwarted the democratic will of the Scots and binned the power.

John Swinney, we are told, is under pressure as Labour once again accuse an SNP Minister of misleading parliament.  Tom Gordon over at The Herald suggests that the furore may end Swinney’s political career. (1)

Everywhere you turn the talk is of an SNP government under pressure, under fire or selling out – and all for a paltry £50,000. 

But, sadly, we now live in a Scotland that demands every political article and broadcast be thoroughly checked over before being swallowed.  Lib Dem Secretary of State Michael Moore has made some potentially damaging claims and if we are to digest an unpalatable truth then let us be sure it contains no artificial additives and is not ‘virtually fact free’.

The background
The backdrop to this story was Wednesday’s budget.  There is no doubt that John Swinney delivered a clever and measured budget statement to the chamber.  The headline items of a pay freeze for those earning more than £21,000, protection for vital services like free personal care and a generous offer to councils in order to maintain the council tax freeze put the opposition on the back foot.

For months the Labour, Tory and Lib Dem parties had been poised like greyhounds in their traps waiting for the ‘budget hare’ to appear.  Media commentators, reporters and journalists salivated alongside their barking political counterparts in readiness for the expected savaging.

Swinney’s performance nonplussed them.  Labour’s Andy Kerr was reduced to accusing the SNP of announcing an ‘election budget’, a claim that was more a statement of the obvious than a damaging attack.  That Labour refuse to put forward an alternative budget of their own merely compounded the vacuity of Kerr’s words.

Kerr’s boss, Iain Gray, carried on with the bizarre habit he appears to have acquired of endorsing two completely different policies at the same time – Mr Gray supports public sector pay restraint but appeared on budget day beside a Scottish Labour banner outside Holyrood at a small demo………. against pay restraint.

So, this was the backdrop against which we were informed, with miraculous timing, that the SNP had caused the Scottish parliament to lose the ability to tax her citizens more than the rest of the UK, or less if one is being entirely fair.  The ‘tartan tax’ had been allowed to lapse in 2007 claimed Lib Dem Michael Moore.

Calman and democracy
A power that has never been used and will soon be rendered obsolete by Calman proposals has been elevated to the top of Scotland’s political news agenda.  Overnight the mantra from Unionists that constitutional matters are a distraction from the ‘real’ issues of jobs, public services and cuts has been ditched.  It’s not the economy stupid, it’s the constitution stupid.

Two former Labour First Ministers and assorted Labour, Lib Dem and Tory MSPs are now apparently consumed by constitutional matters and have clearly forgotten the words of former Secretary of State Jim Murphy who said:

“It would be ludicrous timing, in the midst of a global recession, to get involved in a debate about powers for politicians when we are trying to work out how we can get people back into work and save businesses.”

Sadly it isn’t the mature debate over full fiscal autonomy that has grabbed their attention; it is the apparent loss of the ‘tartan tax’.  This, say Unionists and media commentators, is an example of the views of the people being ignored.

However sitting in the shadows is the uncomfortable truth that is the Calman Commission.  Recommendations – very damaging recommendations according to some – from this Unionist dominated group will be foisted upon Scots regardless of whether we wish them or not.  There is an obvious irony here in that we have Unionists complaining about the democratic wishes of Scots being ignored whilst at the same time denying Scots a referendum on the constitution.

£50,000 versus £7 million
But I digress, back to the ‘tartan tax’ powers?  What is the truth behind the claims being paraded in the newspaper pages and airwaves?

Well, contrary to what you might infer from headlines and broadcasts the power has not been lost at all – it is still there.

What is in fact the case is that the mechanism that would have been used in order to implement the policy is being upgraded.  This upgrade means that the powers would not be available for the incoming Scottish government until 2012/13.

It is clear that there are also two completely separate strands to the story.  Firstly there is the very small annual fee, £50,000, levied on the Scottish government for the upkeep of the old IT system.  This fee has been paid every year since 2000, but was stopped by the SNP when they came to power in 2007.

Now, this part of the story, that the Scottish government stopped paying £50,000 to HM Revenue and Customs in 2007 is not in dispute.  It is essentially this part of the story that is driving the headlines and being used by Unionists in order to attack John Swinney.  It is also, very mischievously, being conflated with another part of the story – namely a decision by the UK department in charge of the IT system to upgrade that same system at a cost of around £30 million.

What hasn’t been made clear though is what effect this £50,000 non payment had on the ‘tartan tax’.  Did the ending of this payment in 2007, as claimed by Moore, render the power temporarily impotent and, if so, was it the three years Moore claims?

This is an important aspect of the story and one that has been muddied.  It has been conflated with the upgrade to IT systems which WILL have a serious impact on the ability to use the power.  It is this UPGRADE to IT system that will render the power unusable until 2012/13, not the ending of the £50,000 payment.

So, even if the Scottish government were to pay the disputed sum of £7 million towards the cost of this upgrade, the ‘tartan tax’ would STILL not be usable until 2012/13.

In essence, we can see clearly that the tax varying power will be rendered unusable until 2012/13, not through the actions of the Scottish government, but through the actions of the UK government.

Unionists are now claiming that John Swinney misled parliament and ought to have informed the Scottish parliament that the original agreement to pay a £50,000 annual fee had ended and that it was no longer being paid.  In keeping with tradition, Labour’s Pauline McNeil is reported to have submitted a complaint about John Swinney’s ‘conduct’ and there are demands that Mr Swinney make an emergency statement to the chamber, hence the ‘under pressure’ headlines.

Rather noticeable however is a complete lack of mention of former Scottish Secretary of State Jim Murphy.  If Mr Swinney is being viewed as having behaved in a less than forthcoming fashion over the ending of the £50,000 payments then what of Mr Murphy who had the same access to information in 2007 as current SoS Michael Moore now has.  Remember it was Moore who last week ‘revealed’ the details of the £50,000.

Also, whereas £7 million is a relatively large amount of money, £50,000 is not.  Indeed in the grand scale of things it is a trifle, an insignificant amount.  What’s the story behind this fee?

The fee has been dutifully paid out by every Scottish administration since devolution began.  It was intended to cover maintenance costs should the tax varying power ever be utilised.  When the SNP won the election in 2007 the contract ended and the payment stopped.

Perhaps the question ought not to be why the SNP stopped paying the money but rather why did the Labour and Lib Dems happily pay £millions of the Scottish Block Grant to HMRC, when there appears to be no legal basis for them to charge these costs to the Scottish Government?  It’s just possible that the politically astute Jim Murphy realised this and decided to remain quiet about the years of unneccessary spend.

Now, it is entirely reasonable to suppose that had this meant that the tax varying power had been lost, albeit temporarily, that this would have been seized upon by Labour UK Ministers keen to attack the fledgling SNP administration.  That it wasn’t suggests that all is not what we are being led to believe. 

There is a suspicion amongst some that the SNP’s ending of the payment in 2007 did not in fact result in the ‘tartan tax’ power being ‘lost’ at all, that it would have had little or no effect and the power could have been used had the SNP desired with little practical delay.  The right to levy an SVR is enshrined in the Scotland Act and only legislation from Westminster can remove it.

So, how is it that this claim that the powers were lost for three years, as a result of the £50,000 non payment, is accepted as fact by seemingly everyone?

Thus far the only person to make this claim is the Lib Dem Secretary of State for Scotland Michael Moore who seems to have finally decided that the position of Secretary of State for Scotland is as much about briefing the media against the Scottish government than anything else.  It also appears that Iain Gray’s Holyrood group are falling for his spin, not a good sign for Mr Gray if he has allowed himself to be so easily manipulated.

The events leading up to Moore’s decision to release these claims to the media suggest a Machiavellian process at work – or snidy as we Scots would describe it.  For we understand that the Scottish government were in the process of negotiating with the UK over the IT upgrade costs but had not received a reply from their last letter.

Had it emerged that London was effectively demanding £ millions from the Scottish budget at a time of the most severe cuts to the Scottish grant in history it would not have gone down well.  Alex Salmond also explained in an interview on BBC Scotland that such a demand for payment would have set a dangerous precedent that could in fact have led to future Scottish governments being billed for £10s of millions.

Moore’s act to brief the media with these claims about the £50,000 was a disgraceful breach of protocol.  The timing, immediately after the Scottish budget, ensured that opposition parties, already lining up to attack John Swinney but short on ammo after the SNP Minister’s first class budget statement, were given extra ammunition with which to attack the SNPs Finance Secretary John Swinney.

The act has also blown the Con-Dem coalition claims of a respect agenda out of the water and may have very serious repercussions for the Lib Dem vote in Scotland should this not play out as Moore hopes.

In summary, this looks like a classic political manoeuvre from Michael Moore that has resulted in the issue deflecting from a £7 million demand from Westminster.  The ending of the £50,000 payment has been known about for over three years yet was never deemed significant enough to merit a mention.

When asked about this ‘story’ on Sunday’s Politics Show, former Trade Union boss Campbell Christie called it a typical Ya-boo story, the sole aim of which was to deflect.  Mr Christie contemptuously dismissed host Gary Robertson’s question and insisted that the real debate was about Full Fiscal Autonomy.

In that brief answer, Mr Christie revealed the paucity of real journalistic scrutiny and mature political commentary in Scotland.
If only we could buy back all of the powers from Westminster for £50,000 each – what a bargain that would be.