Tartan tax debacle not our fault say Labour ex-ministers

They angrily rejected claims from Mr Swinney that the incoming SNP administration inherited a system which was not "functioning" in 2007.

A major political row broke out after it emerged recently that Holyrood's power to raise or lower income tax by up to 3p had been allowed to lapse under the SNP, which say it faced a multi-million-pound computer bill to keep it going. It cannot now be used until 2013-4 at the earliest.

Lord (Jack) McConnell was the first finance minister under devolution. He was joined by Andy Kerr and Tom McCabe at Holyrood's finance committee yesterday and said his administration had agreed to pay HM Revenue & Customs 50,000 a year to keep the tax-raising powers at a ten-month state of readiness so that any incoming administration would be free to use them.

MSPs heard that the ministers wanted decisions of the then Executive to be "transparent and sure of parliament's support".

"Those were the underlying principles of the relationship between the ministers and the parliament on financial issues and the management of finance," Lord McConnell said.

"That's why it is at least regrettable that whatever decision has been taken by Mr Swinney in June 2007, that decision was not communicated to parliament."

Lord McConnell said that this could have been done in the form of a parliamentary answer, which would then have allowed MSPs to question Mr Swinney over the decision in committee.

All three former Labour finance ministers said they had received assurances that the tax was ready to go, and the issue only arose after Mr Swinney came to power and was asked to contribute to the HMRC's computer systems upgrade.

The finance secretary has already apologised for not informing MSPs that he had effectively allowed the tartan tax to lapse by not paying 3.4 million to HMRC for the upgrade that would have given them the ability to action the variable rate of tax at the earliest opportunity.

Lord McConnell said he had envisaged that the system - which cost 12 million to set up in 1999 - would have to be upgraded "probably within a decade".

Mr Swinney yesterday defended his remarks about the "woeful record" of his predecessors by challenging their claim that they successively handed down a system that was fit-for-purpose.

He said: "I did not inherit a functional system. It would not function without further capital investment.

"The advice I was given was that the system would require to have IT investment to go live right away."

But Mr McCabe, the finance minister when Labour left office, said that Mr Swinney's decision in 2007 effectively allowed the tax powers to lapse."He compounded this by not only denying parliament information but, even worse, he sought to blame others for this unfortunate situation," Mr McCabe said.