SNP move to block income tax powers ‘beggars belief’

The SNP government is threatening to block the transfer of sweeping new tax-raising powers to Holyrood, amid concerns that the measures could see Scotland’s budget cut by hundreds of millions of pounds.

As part of the Scotland Bill, income tax in Scotland would be cut by 10p, with MSPs then having to raise it to meet the level of need.

But Scottish Secretary Michael Moore was unable to set out the financial impact on the country’s budget when he gave evidence to MSPs on the Scotland Bill committee yesterday.

The lack of clarity was branded “extraordinary” by finance secretary John Swinney, who is now demanding a veto for Holyrood on the measures.

Mr Moore said mechanisms for handing control of the tax to Holyrood as part of the Scotland Bill were the subject of careful consideration.

Quizzed by MSPs on how much of its block grant Scotland would lose in return for the ability to set income tax rates, he rejected a figure of £691 million, which the SNP’s Joan McAlpine said had been quoted by him during a previous committee appearance.

He said: “The financial years in which [the reductions] will apply are in the future, by which time we are confident we will have recovered from the deepest recession we have seen since the war and be in very different circumstances than we were before. I don’t accept you’ll be worse off.

“We are looking at a process that sets up the income tax powers to be used from the year 2016, and the final adjustment on the block grant won’t happen until 2020, so there is quite a long way to go on that.”

Mr Moore said it would be “quite strange” for Westminster to bring forward proposals that were unacceptable to the Scottish Government.

And he stressed to MSPs that the legislation would not be “foisted on the parliament at a time when this is inappropriate or in a way that is inappropriate”.

But Mr Swinney said: “The Secretary of State conceded that he does not know what the impact of his own bill on Scotland’s budget would be going forward, and that MSPs would not have this information when the bill comes back to Holyrood.

“This lack of basic detail about the income tax measures – the central financial aspect of the Scotland Bill – is extraordinary, and is in stark contrast to the volume of information the Scottish Government has provided about the benefits of devolving corporation tax, which as things stand is not even in the Scotland Bill. This position cannot possibly stand.”

Opponents say it “beggars belief” that the Nationalists, who consistently demand increased clout for Holyrood, want a veto over the biggest handover of power since devolution.

The SNP wants a “joint commencement order” agreed with Westminster, meaning Holyrood could effectively block the tax-raising aspect of the bill from being implemented after the legislation is passed.

“That way, MSPs will have the comfort of knowing that they will need to be satisfied that Scotland’s budget is not going to be cut even further before granting approval to measures which, as things stand, threaten Scottish finances because of their deflationary bias,” Mr Swinney said.

Mr Moore agreed to consider this after a meeting with Mr Swinney yesterday, but he had earlier given a frosty reception to the proposal when questioned by Nationalist back-bencher Stewart Maxwell.

“At the core of this whole bill is the transfer of these income tax powers and the accountability that goes with it,” he told MSPs. “We need to ensure that happens.”

Previous analysis by the Scottish Government has suggested the “deflationary impact” of the Scotland Bill would have cut the Scottish budget by nearly £8 billion between 1999 and 2010-11.

The idea of the SNP trying to veto the income-tax powers came under fire from unionist parties at Holyrood yesterday.

“It beggars belief that the SNP want a veto to block the biggest transfer of financial powers to Scotland since devolution,” Labour finance spokesman Richard Baker said.

Tory MSP David McLetchie, who is on the Scotland Bill committee, said: “It would be quite extraordinary if the SNP, which is constantly bleating about more powers, were to turn powers down when they are on offer as part of a carefully considered and balanced package of measures to improve the devolution settlement.”

Scottish Liberal Democrat leader Willie Rennie said: “This is gunboat diplomacy. It is very disappointing that the SNP are issuing threats rather than working constructively to achieve the desired outcome.”

The Scotland Bill, currently going through Westminster, will hand over a range of new powers to Holyrood, including control over air weapons, drink-drive limits and national speed limits, as well as borrowing powers for the first time. It will come back to Holyrood for final approval later this year.

Corporation tax is another area which Alex Salmond wants devolved. The SNP says cutting it from 23 per cent to 20 per cent would lead to an increase in the level of Scottish GDP by 1.4 per cent after 20 years and create 27,000 jobs in Scotland.