FINANCE secretary John Swinney would have to “more than double” income tax north of the Border to fill the financial black hole created by the introduction of the SNP’s plans for full fiscal autonomy, the UK government has warned.
The claim was dismissed as “ludicrous” by SNP deputy leader Stewart Hosie but was based on a £10 billion annual funding gap identified by the UK’s leading independent economic think tank, the Institute for Fiscal Studies (IFS). The Scotland Office made its calculation as HMRC released its report into identifying the number of Scottish income tax payers for new powers set to be introduced next year, which will see the beginning of an official Scottish rate of income tax.
The row broke out as the SNP’s 56 MPs have been publicly dared to back an amendment by Tory grandee Sir Edward Leigh to the current Scotland Bill on further devolution which would deliver full fiscal autonomy for Scotland. Sir Edward’s amendment was compared by critics to one put down by the SNP which was described as “a fudge designed to ensure that Scotland would never get full fiscal autonomy”.
Full fiscal autonomy would mean Holyrood was responsible for all tax and spending while it paid a supplement to Westminster for defence, foreign affairs and servicing the national debt.
The issue looks set to be debated in the committee stage of the bill on Monday against the background of a report by the independent Office for Budget Responsibility (OBR) which said that oil and gas revenues will be virtually wiped out as a significant tax take, with an expected £2bn coming into the Exchequer between 2020/21 and 2040/41 instead of the previous estimate of £37bn.
The OBR claimed while the expected revenues were much lower because of the dramatic fall in the price of a barrel of oil, a rise in the price would still leave “minimal” tax revenues because of the cost of decommissioning former oil and gas fields.
“SNP desperately rowing back on manifesto promise”Labour’s Ian Murray
Another report drawn up for Scottish Labour suggested that the price of a barrel would need to rise from its current $60 to $200 for Scotland to break even.
Scottish Secretary David Mundell said the Scottish Government’s reluctance to press ahead with fiscal autonomy could be explained by the fact that the basic rate of income tax in Scotland would need to more than double to cover the near-£10bn gap identified by the IFS.
Highlighting an admission by Mr Swinney that he could use powers already agreed for Holyrood and due to come in next year to raise income tax, Mr Mundell said: “The onus is now on the Scottish Government to tell us what the new rate is going to be. John Swinney has already confirmed that he is considering increasing tax.”
He went on: “If full fiscal autonomy were ever to happen then the basic rate of income tax in Scotland would need to more than double to keep spending at current levels.
“Even the First Minister now accepts that fiscal autonomy would be a burden for Scotland to shoulder. They are demanding something they don’t want so that they can complain when they don’t get it.”
Mr Hosie described the claims as “ludicrous”. He said: “The UK had a deficit of around £75bn in the most recent financial year – so by his bizarre logic, Westminster would have had to raise taxes by £75bn in a single year to be financially viable.
“We have made our commitment to fiscal autonomy clear but the Tories should just get on with delivering the powers the people of Scotland were promised instead of indulging in the politics of fantasy and fear that were so roundly rejected at the ballot box last month.”
But questions are being asked why the SNP amendment for full fiscal autonomy appears to delay its introduction. Instead, the amendment by Sir Edward, MP for Gainsborough, would deliver full fiscal autonomy quickly. Sir Edward told The Scotsman that he had tabled in his amendment because he believed it was the settlement Scotland wanted based on the referendum result and the general election, where the SNP won 56 of Scotland’s 59 seats, with full fiscal autonomy a central pledge for which Nicola Sturgeon stated her party would push in the first year.
Sir Edward said: “It is clear full fiscal autonomy is what Scots want and have voted for. They want to run their own affairs but have the safety net of defence and foreign policy from the UK and the state pension protected.”
He admitted that he will get backing from other Tories because “many of them think Scotland needs to start to take responsibility for themselves”.
But others believe that the amendment will call the SNP’s bluff on whether they will back their election pledge or not.
A Downing Street source said: “Sir Edward’s amendment is the acid test for the SNP over whether they will back their own policy on full fiscal autonomy.
“The SNP’s own amendment is [so] caveated and confused that it clearly is aimed at not getting full fiscal autonomy and then trying to complain about it afterwards.”
Labour’s shadow Scottish secretary Ian Murray said: “The First Minister gave a commitment during the general election that her MPs would vote for full fiscal autonomy this year.
“The SNP has submitted an amendment to the Scotland Bill that fudges the issue as they know their central manifesto promise is economically illiterate. The Conservative amendment would effectively deliver the SNPs full fiscal autonomy promise by 10pm on Monday.”
He went on: “The SNP are desperately rowing back on their key manifesto promise to the Scottish people as they simply can’t explain how they would fill the independently assessed £10bn funding black hole.
“Labour always said that the worst possible scenario for Scotland was the SNP demanding full fiscal autonomy and a Conservative majority government delivering it for them.”
He added: “They must be honest with the Scottish people and admit this would be a disaster for our schools, hospitals and pensions. They claim to be standing up for Scotland but they could be within days of selling Scotland down the river with their full fiscal folly. They have no economic credibility left.”
SNP Westminster leader Angus Robertson said that his group would consider supporting the amendment. He said: “We will consider all amendments, but our priority is amending the Scotland Bill to reflect the manifesto on which the SNP won 56 of the 59 seats in Scotland last month.”
Meanwhile a consultation is to be launched by HMRC on how people qualify for paying the Scottish rate of income tax.