Sunday, 21 November 2010

Why keep schtum about the tartan tax?

So why the mystery over the tartan tax - more accurately known as the Scottish Variable Rate - which the SNP has allowed to slip into abeyance. And all the while keeping it quiet - in last week's Budget statement John Swinney said he wouldn't be using the powers available to raise the rate of income tax north of the border by up to 3%, but his stance on this was surely disingenuous. What he should have said was that the Scottish Government had effectively abandoned this option.

Precisely why remains something of a mystery, because, as Ian Bell says in the Herald: "You do not build a parliament, or advance towards independence, by ceding power, any power".

But, superficially at least, the reasoning is obvious. No major party wants to go into an election promising to raise income tax - of course, the Greens may want to, but they won't be forming the Scottish Government come May 2011, nor will any leverage they exert at that time extend to raising income tax - and the SNP had its fingers burnt with its "Penny for Scotland" policy nearly a decade ago, while Labour's Westminster election prospects suffered under John Smith's so-called "tax bombshell" and subsequent "double whammy" in 1992. Of course, the SVR is a totem of devolution but it is primarily just that - it's of symbolic value only, because the mainstream parties won't use it.

But, say the Nationalists, it's all London's fault. Spins Duncan Hamilton in Scotland on Sunday: "Scottish Secretary Michael Moore took it upon himself to brief the press that the SNP government had refused to hand over an additional £7 million to the UK Treasury to pay for a new IT platform designed to maintain the option of raising the Standard Variable Rate - pejoratively known as the ‘tartan tax'."

Ah, so that's the reason. But if so why not take the Treasury on over this rather than keep schtum? This almost seems heaven sent for the SNP. Indeed, a letter written by Alex Salmond and published yesterday comes out all guns blazing.

Of course, the answer is that the Nationalists didn't want to pick a fight on this because they didn't want to draw attention to the tax raising powers, because the opposition parties would have portrayed that as a sign that the SNP wanted to raise income tax. Thus it was electorally advantageous to keep the whole thing quiet.

And while Michael Moore's disclosure has forced Alex Salmond's hand on the issue, the latter's gung ho response merely underlines questions over why he hasn't done this previously, hence fear of alienating voters must be the answer.

Obviously jettisoning this measure of fiscal autonomy makes the SNP's clarion call for more financial powers seem rather hollow, and perhaps indicates that it's the ability to borrow that the party wants rather than the power to raise taxes. Thus perhaps a tartan version of the Brownite delusion that borrowing powers could be utilised to pay for all sorts of goodies in the hope that economic growth would raise sufficient tax to repay the debt, and without raising rates of taxation to do so. Or just like, er, Ireland.


Anonymous said...

First sensible comments about the tax powers and the situation seen on the internet.

Stuart Winton said...

Thanks, Anon.

I sent a rehashed version to the Scotsman and they published it as a letter this morning.

Of course, Mr Swinney is such an upright politician the reason nothing's been said for three years or so is because he didn't want to offend the Unionists!!

The Aberdonian said...

Going back to an old argument, but surely the Crown Dependencies have both tax raising and borrowing powers.

As do the Swiss cantons (on one end of the scale of geography) to the American States and Canadian Provinces (on the other end of the scale of geography).

Or would you prefer the German system - where the state governments have veto/amending powers over the common national rates of income, corporation and sales tax via the Bundesrat. None of these taxes can be touched without the consent of the majority of the votes of the state governments.

What scares you most. Alex Salmond setting taxes purely for Scotland or him (along with Carwyn, Peter and Martin) having a big say in the setting of the UK rates?

Are the Ontarians better, cleverer and more sophisticated than the Scots in the first scenario or the Bavarians better etc in the second?

Stuart Winton said...

Aberdonian, I'm agnostic about the constitutional and economic matters you allude to, as I am towards the 'size' issue.

What I am is sceptical of government. I couldn't care less where it comes from - Brussels, Westminster, Holyrood or City Square in Dundee - but none of these institutions inspire confidence at present, thus I gravitate towards the status quo.

And is your final comment suggesting that Alex Salmond is still and MP? ;0)

The Aberdonian said...

No I am not suggesting he is an MP.

Minister-Presidents and their state government delegations in Berlin are members of the Bundesrat, not the Bundestag, which hires and fires the government. The Minister Presidents take their turn to preside the chamber's meetings.