Westminster reviews devolution plans after tax power confusion

Published on Wednesday 26 May 2010 22:35

CONFUSION over what tax powers should be handed to Holyrood has forced the new coalition government to review its plans for devolution, Scottish Government sources claimed last night.

The claim came as more questions were raised over proposals to give MSPs control of the top 10p of income tax.

But with a Scotland Bill promised for the autumn, pressure is mounting on the government to find a solution.

A source close to SNP Finance Secretary John Swinney said: "It seems clear that the UK government ministers do not have a clear idea at this stage of where they want to go on financial powers, and they know that Calman is flawed." Amid the uncertainty, Lib Dem Scottish Secretary Danny Alexander yesterday announced he was reconvening a committee set up to put through the recommendations proposed by the Calman Commission.

This followed government sources over the weekend revealing to The Scotsman that the bill containing these proposals could be "slimmed down" with new tax powers delayed.

Mr Alexander, who has refused to say what tax powers will be in his bill, admitted on Tuesday that this was being considered because of objections from First Minister Alex Salmond.

But according to Whitehall sources, there is growing opposition from the Treasury where civil servants have been reluctant to accept the proposal.

They have suggested that the changes to income tax being proposed by the coalition government by raising the threshold where people start to pay will make the already complicated Calman proposals even more difficult to implement.

But the revelations that the tax powers could be delayed has led to attacks on the Tory-Lib Dem coalition government from Labour who have accused them of giving the SNP a veto on the process.

Earlier this week, Scottish Labour leader Iain Gray held talks with Tory Scotland Office minister David Mundell to demand that the coalition parties did not renege on the previous agreement.

As a result, Mr Mundell proposed reconvening the steering group with the unionist parties' senior Scottish representatives in Westminster and Holyrood leaders. Its meetings will happen in conjunction with the talks between the SNP administration in Holyrood.

Mr Mundell said that this was intended to help build consensus on a final outcome. But a Whitehall source suggested that Calman would only be "the starting point" of the discussions.

But senior sources in the Scottish Government believe that the new coalition has been left in an almost impossible situation because the Calman proposals are "flawed and unworkable" and face stiff opposition from the Treasury.

SNP ministers will make the case again for full fiscal autonomy, which they argue is simpler, but will also make it clear that the status quo is better than the new income tax powers being offered through Calman which they believe are "dangerous" and could lose Scotland money.