THE debate this week over tax credits has thrown light on to the challenges and opportunities that come with the new powers proposed by the Smith Commission.
If the Scottish Parliament is to properly embrace these responsibilities, then we must all acknowledge that new powers for the Scottish Parliament are about much more than undoing the damage done by the UK government.
They are about enabling this, and future Scottish governments, to take a distinctive approach to the challenges we face, to design policies and programmes that align with our vision of a stronger, wealthier and fairer society.
We all know the Scotland Bill is far from perfect. It does, however, contain more powers that can be used in the best interests of Scotland, working with stakeholders across the country. That is what we are preparing to do. New fiscal powers mean the Scottish Parliament will gain more power over income tax from 2017, giving us the ability to vary both tax rates and tax thresholds.
This government has used the tax powers we have to support those on low incomes – for example, by freezing the council tax or removing tax on buying a home from the 50 per cent of people at the bottom of the market. When we set out our tax plans, they will be driven by our principles of establishing a system that is fair and progressive.
We have also used our limited economic levers to support business by helping nearly 100,000 small and medium-sized firms pay no or reduced business rates. We will do the same with powers over Air Passenger Duty. Improving connectivity and competitiveness is essential for Scotland’s future success, yet APD is currently a barrier to investment, to exports and to our tourism industry. A recent study estimated that reducing APD could have a positive net effect on the Scottish economy, and that’s why we are working with others to design a replacement tax which better meets the needs of Scotland’s economy.
On social security, the Scotland Bill will see us gain responsibility over 11 benefits worth £2.5 billion a year in Scotland. We will also gain powers to top-up those entitled to benefit payments and create new benefits.
It is important – even with these powers – to recognise that over 80 per cent of social security remains reserved. The UK government retains effective vetoes in some areas and the powers of conditionality and sanctions which our evidence suggests hurts the most vulnerable hardest will remain at Westminster.
There can be no doubt full powers over social security would enable a fairer approach to helping those on child and working tax credits, particularly those who might suffer the greatest impact from changes to those benefits to be announced by the Chancellor later this month, and Westminster can support those powers tomorrow.
Work is already under way to create a fairer system in Scotland that ensures people are treated with respect and dignity, one that removes the barriers for some of our most vulnerable people. And we will exercise the new powers according to the people’s needs, tackling poverty and supporting our economy.
As well as taking early action to scrap the hated bedroom tax and to support low income households following any tax credit cuts, we’ll put in place a Scottish approach to employability. This will replace the UK government’s failing Work Programme and will connect social security support properly to areas like health, education and skills development. There are other areas where we are developing our plans; on employment tribunals, legislation for gender balance on public boards, the Crown Estate and consumer protection.
This week, after months of pressure, the UK government lodged over 80 amendments to try and bring the Scotland Bill up to scratch. These are welcome but there are still shortcomings and Holyrood will make a final decision on the bill in a few months’ time. That final vote will depend on the outcome of negotiations between the Scottish Government and the Treasury on the funding framework that comes with it.
John Swinney is Cabinet Secretary for Finance, Constitution and Economy