Tories in pledge to hand Holyrood tax-raising powers

Published on Wednesday 25 November 2009 22:04

THE shadow chancellor pledges today that Scotland would be guaranteed powers to raise revenue from taxation under a Conservative government.

His promise followed news of the most dramatic changes in the constitution in a generation.

Writing in The Scotsman today, George Osborne has revealed that he backs Scotland winning more control over its tax raising and spending.

Mr Osborne was responding to the government's white paper on Scotland's future in the UK, which set out its backing for the Calman Commissions proposals for more powers for Scotland.

The government said that it would, in principle, support devolving control over airgun legislation to Scotland, as well as giving Holyrood control of speed limits and alcohol restrictions for drivers.

But suspicions were raised that both the main parties would delay such proposals.

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The Tories refused to rubber-stamp the changes, saying they would bring in their own white paper if they won the election, while the Labour government chose to bring forward a white paper, rather than a bill.

While the Tories had always backed powers over airguns and driving laws for Scotland, the party had sent mixed messages on whether or not it would give Scotland more tax and borrowing powers.

Mr Osborne has clarified the Tories' position. He supports more powers, but warns that the Tories would have to come up with their own white paper – a move which critics said would cause a delay.

In his article in The Scotsman, the shadow chancellor says: "We believe the current balance is wrong and does not work. We want to achieve a better balance and, to do so, we will use the recommendations in the Calman report as a starting point. We believe that the Scottish Parliament needs to have greater powers over raising and spending taxes and borrowing."

However, he also warned that the party would not be bounced into adopting hasty proposals.

Labour's proposals for more devolution

"We need to change things, but we need to make sure we make the right changes," the shadow chancellor said.

The Scottish Secretary, Jim Murphy, set out proposals which the government said marked the most radical change since the Barnett Formula was introduced 30 years ago.

The government is taking up 39 of the 42 Calman recommendations, including giving Scotland control over its own speed limits.

Westminster would cut basic and higher rates of income tax by 10p in Scotland, leaving Holyrood to decide on the overall tax level. With the tax cut, Westminster would make a corresponding cut in Holyrood's share of public spending.

About 4.5 billion would be cut from the annual block grant from London, which finances Holyrood's yearly budget of 30bn. This would require Holyrood to impose a Scottish income tax of 10p if it wanted its budget to remain unchanged, or more if it wanted extra money.

However, many of the changes on taxation – including giving Scotland scope to set its own income tax level – could not be implemented until 2015.

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Critics accused both the main parties of kicking further devolution into the long grass.

Holyrood constitution minister Michael Russell said the income tax proposals outlined in the white paper were "deeply flawed" and "drawn up on the back of an envelope".

Mr Russell said: "What appears to be happening is that we have to raise the money to pay for borrowing by increasing tax powers. The Treasury doesn't want this to happen, therefore they have changed the proposal in such a way that they are virtually useless." He welcomed the transfer of responsibilities for airgun legislation, drink-driving and speed limits, and called on the UK government to implement them as soon as possible.

"Any further delay would be inexcusable," he said, in the interests of "public safety".

Mr Russell revealed that First Minister Alex Salmond had written to Gordon Brown proposing that the Privy Council should consider orders drafted by the SNP that would accelerate the legislation.

These could be brought before the Privy Council on 10 February next year.

"This is a tight but entirely achievable timetable. There is no possible reason why the people of Scotland need wait for these important and necessary changes."

The Liberal Democrats' Scottish affairs spokesman, Alistair Carmichael, said both parties were using stalling tactics.

"The real scandal in this is that the Labour Party are prepared to let the Tories off with this outrageous breach of faith. They can both run from delivering tax powers but, come the next election, there will be nowhere for them to hide," he said.

Andrew Hughes Hallett, a professor of economics and an economic adviser to Mr Salmond, warned:

"In the UK, income levels have dropped 5 to 6 per cent and the government has had to borrow 11 per cent of national income to keep spending going.

"Translating this to a Scotland without non-capital borrowing, public spending on schools and health would have to be cut by at least 5 to 6 per cent immediately."