AN alliance of SNP and rightwing Tory MPs failed last night to give Scotland full fiscal autonomy and introduce tax competition in the United Kingdom.
SNP MPs agreed to back an amendment by Tory grandee Sir Edward Leigh, if he pushed it to a vote, which would have given Holyrood total control of tax and spend north of the Border.
And the SNP also tabled its own amendment which would have enabled Holyrood to take full powers when it decided it was ready.
It was expected that both amendments would be voted on and set to be defeated last night, with both the Tory and Labour leaderships opposing them.
The proposal was debated on the first day of the committee stage of the Scotland Bill, aimed at devolving the powers agreed in the Smith Commission to Holyrood including income tax and £2.5 billion of welfare spending.
If accepted it would have seen an end of pooling and sharing resources with the rest of the UK along with the Barnett Formula in distributing spending which gives Scots £1,600 per head more of government money than people in England.
The UK’s leading economic think tank the Institute for Fiscal Studies (IFS) has warned that the policy of full fiscal autonomy would cost Scotland £10 billion a year on top of the Scottish share of the UK national deficit.
However, the IFS figure was challenged by SNP shadow chancellor Stewart Hosie who confirmed that “if pressed to a vote” his party would support Sir Edward’s amendment which was backed by other right-wing Tories who want an end to the settlement Scotland receives from the Barnett Formula.
Mr Hosie also acknowledged that the policy would create tax competition in the UK, which some Tories believe will see a series of tax cuts as governments try to undercut one another.
Mr Hosie said yesterday: “We agree if we could have serious, justifiable tax competition, that is a good thing.”
After confirming that the SNP would back the Leigh amendment, Mr Hosie last night issued a challenge to Labour saying: “I hope (shadow Scottish secretary) Ian Murray who is grinning like a Cheshire cat will now get to his feet and tell us if he intends to back the government tonight in opposing powers for Scotland.”
Earlier in his remarks, Mr Hosie defined full fiscal autonomy as Scotland being able to collect all of its taxes and fund all of its spending.
He added: “It’s not simply about responsibility for taxation, it’s about responsibility for all spending outwith limited and agreed areas.
“We need and we deserve the bulk of decisions to be taken as close to the people as possible and more importantly we need these decisions to be taken in line with the aspirations and democratic choices of the Scottish people.
“We believe in the transfer of more power to Scotland not as an end in itself, but because the Scottish Government can exercise those powers to the benefit of Scotland’s economy and society.
“It’s not all about tax. It’s about other decision-making, for example, the minimum wage. We support a rise in the minimum wage and we currently don’t have the power in Scotland to do that.”
Mr Hosie refused to say whether the Scottish Government would increase corporation tax when asked, adding: “We have just come out of the 2015 election; I’m not going to write the 2016 manifesto.”
Asked how many times the Scottish Government had exercised its powers to increase or decrease income tax in the past eight years, he pointed to the small business bonus and abolition of prescription charges.
In putting forward his case, Sir Edward said he was not trying to call the SNP’s bluff but wanted parliament to learn from the mistakes that led to Irish independence.
Sir Edward dismissed some of the arguments against full fiscal autonomy, insisting tax competition would be good for Britain, saying it had worked in the US where it has fostered innovation.
Sir Edward also denounced the “doomsayers” who warn that full fiscal autonomy would lead to a £7 billion black hole in Scotland public finances, arguing it would create a “union based on solidarity”.
He said: “I believe this is an historic opportunity to cut through the negativity of the doomsayers, of the £7 billion black holers.
“Give Scotland control of its oil revenues and taxes and decide its own priorities – tax oil and encourage exploration and determine how you should tax it as the oil runs out.
“Then we are one union based on solidarity and need – the UK subsidises Northern Ireland to preserve peace, why shouldn’t we on the basis of need subsidise Scotland?”
The SNP has tabled its own amendment with the aim of giving Scotland full fiscal autonomy, but it differed from Sir Edward’s in that it gave power to the Scottish Parliament to move towards that position, rather than imposing it immediately.
Sir Edward later described the SNP’s amendment on full fiscal autonomy as a “bit of a fudge”.