Scotland to have new tax powers by 2015

Published on Monday 26 July 2010 19:19

THE most radical overhaul of devolution since the creation of the Scottish Parliament is under way after the coalition government began the process which will see the country handed more control over raising its own taxes within five years.

• Scottish Secretary Michael Moore: "an important symbolic moment"

Scottish Secretary Michael Moore hailed "an important symbolic moment" as he started work on the Calman Commission's recommendations, which he said would be implemented in full by 2015.

The move will eventually see Holyrood given the responsibility to generate its own revenue as part of a raft of changes to the devolution settlement.

Following the first key meetings with business leaders and public bodies in Scotland yesterday, Mr Moore committed his government to altering the devolution landscape by the end of the next Scottish parliamentary term.

He said technical groups will be set up within weeks to inform the shape of the bill as well as the secondary legislation that will be needed to implement the nuts and bolts of the reforms.

The Scottish parliamentary elections in 2015 will be the first to be fought on the basis of taxation policy, he said.

The Calman Commission proposed cutting the tax rate in Scotland by 10p, then allowing Holyrood to raise it back up to the level required based on need.

The coalition government has already committed to introducing a bill on the plans in the new parliamentary session and yesterday Mr Moore insisted the changes would bring greater accountability to the Scottish Government and introduce a healthy debate over the level of tax to be collected north of the Border. But as he set to work, the Scottish Government warned the financial recommendations made by Sir Kenneth Calman were a "poison pill" that Scotland could not afford to swallow. Finance secretary John Swinney repeated calls for the Scottish Parliament to be granted full fiscal autonomy.

Mr Moore, whose Lib Dem party committed itself to implementing the proposals in its election manifesto, joined Tory Treasury minister David Gauke in the first of a series of meetings with business leaders, tax experts and others in Edinburgh to begin the practical process of setting up the new system.

Representatives from the Federation of Small Businesses, the Law Society of Scotland, Institute of Chartered Accountants of Scotland, the Scottish Council for Development and Industry, Lloyds Bank and Standard Life, as well as an observer from the Scottish Government, were invited to the meeting to identify early issues with the proposals.

"Today was an important symbolic moment but also an important practical moment, because we have had senior characters from all the different parts of the Scottish economic agenda present and we have listened to what they have got to say and we'll take that forward along with the rest of the preparation for the bill," said Mr Moore. "Our underlying principal, our priority, is to give (Scotland] more powers and associated accountability."

He added: "The great excitement about this potential is that in Scotland the government will become much more accountable for their spending."

Among the issues discussed yesterday was the question of how a Scottish taxpayer will be identified in the new structure. Mr Moore said early anomalies had been identified over people resident in Scotland but working for a British company, or those resident elsewhere working for a company registered in Scotland.

He claimed that payroll professionals and government agencies had already considered potential changes to the Scottish tax landscape during the devolution negotiations that were to eventually hand the Scottish Parliament the — so far unused — power to vary the Scottish tax rate by up to 3 pence in the pound.

Mr Swinney, who has led the Scottish Government's demands to devolve yet more financial powers to Scotland, warned that the Calman financial proposals would offer the coalition government the "perfect opportunity" to cut the Scottish Government's budget.

"Scotland would be far better off taking responsibility for our own financial decisions, so that we can access our own resources, grow the Scottish economy, and invest in the public services we all value,"?he said, adding: "The Calman financial proposals are a poison pill, which Scotland cannot afford to swallow."

Pauline McNeill, MSP, Labour's constitutional spokeswoman in Scotland, called on the Scottish Secretary to ensure that the Scottish Parliament was fully consulted as the bill progressed.

PLAN TO CUT GRANT AND TAX

Under the financial plans put forward by the Calman Commission, the Scottish Government's block grant from Westminster will be cut and the income tax rate in Scotland lowered by 10p.

Holyrood will be given the power to meet the shortfall in its budget by raising that figure to whatever level it sees fit.

But critics believe this does not give the Scottish Parliament enough control of its finances to effectively influence economic growth and will see it become little more than a glorified tax collector. The Scottish Government is among those calling for the full range of Scottish taxes to be devolved, thereby handing more economic levers to Scottish ministers.