Tuesday, November 23, 2010
Dear Alex Salmond,
You have defended John Swinney's budget statement that the SNP had decided not to use the Tartan Tax which was still "Within the Parliament's existing revenue powers". You now say the SNP already knew they had previously given away this power saying
“John was stating what is true, that we don’t have proposals to raise taxation in Scotland because we think it would be the wrong thing to do. Our proposal is to have the economic powers to enable us to grow our economy out of the Westminster cuts.”Thus you acknowledge that raising our income tax would be economically damaging by removing incentives. Few economists would disagree. However unless you have some reason to believe the Westminster government have had the improbable skill to set income tax at precisely the heretofore unknown point where taxing people does not in any way disincentivise effort, for both the UK & Scottish peoples, you are thereby acknowledging that varying our income tax downwards would have a real positive effect on our economic growth. Again few economists would disagree.
However there does seem to be a discrepancy.
You are on record as saying you will be unstinting in "We need the economic and financial powers to build a [Celtic] lion economy" matching Ireland's 7% annual growth over 20 years & indeed went into the last election saying you wanted the power to vary Corporation Tax.
You are now on record as acknowledging that the power to lower income tax is indeed useful in achieving that aim.
You are also on record as not only not doing so but saying that you have deliberately deprived the Scottish people, for the next several years, of the power needed to achieve that aim.
Perhaps you could explain
Should Mr Salmond or any assistant choose to explain I will, of course, publish it.
At the same time I am putting up Michael Moore's original letter. It seems to gave had far less coverage the Mr Salmond's reply to it:
I noted that John Swinney MSP made the following remarks in the Scottish Parliament yesterday:
'Within the Parliament's existing revenue powers, we have explored options for maximising our income. We have been mindful of the need to consider the effect of the significant tax rises that the UK Government has announced before we act. I therefore confirm that we will not raise the Scottish variable rate of income tax.'
I was about to write to you and others on the Scottish variable rate (SVR) to make it absolutely clear that this is a power which cannot, at this time, be exercised by the Scottish Parliament. Indeed, for the reasons I explain below, it could not now be used until 2013-14 at the earliest. You will be aware that the arrangements between HM Revenue and Customs (HMRC) and the then Scottish Executive, put in place at the commencement of devolution and intended to ensure the SVR of income tax could be invoked within
10 months, lapsed in 2007.
Section 80 of the Scotland Act 1998 allows for any administrative costs incurred by HMRC in relation to the Scottish Parliament's tax varying power to be met by Scottish Ministers. It is an established principle that the costs of devolution should be met from the Scottish Budget.
I am not privy to the dialogue which took place between your Administration and the previous UK Government in the past three years. However I do know that the Scottish Government confirmed in August this year that it was not able to commit the necessary resources to enable HMRC to proceed with work on PAYE systems to allow the SVR to be available in the first tax year after the 2011 election.
As the system has not been funded and maintained to allow for delivery within the ten month time frame under the original arrangements, HMRC would, in fact, now need two years' notice in order to invoke the SVR. This would mean that a new Scottish Parliament, elected at the May 2011 elections, would not be able invoke
the SVR until at least the 2013-14 tax year.
It is not yet publicly known whether the Scottish political parties will propose using the SVR in their programmes for the 2011-15 Parliament. I do believe that they must be advised well in advance of next year's elections that the SVR, in practical terms, cannot be invoked until the penultimate year of the next Parliament.
For that reason, I am copying this letter to Annabel Goldie MSP, lain Gray MSP, Margo MacDonald MSP, Tavish Scott MSP and Patrick Harvie MSP as well as to David Gauke MP, the Exchequer Secretary to the Treasury.
(HT to Caron's Musings where both letters are reprinted - she may censor to promote murder, genocide, ethnic cleansing, child rape & cannibalism in the Nazi cause, like almost all LibDem bloggers but credit where it is due)