I understand the SNP’s decision not to look at revenue options and simply to hand on Westminster’s cuts, though I disagree with it. But today UK Ministers have told us that someone in the Scottish Government let the powers lapse in 2007 when the SNP took office. Even the Labour/Lib Dem 1999-2007 coalition had the good sense to retain the power itself, though they didn’t use it (and during those budgetary boom years I think that was the right decision).
Michael Moore’s letter says it will now take two years to get the relevant HMRC systems up and running again, and then another ten months to bring any change in. It’s extraordinary. If some ultra-Unionist party had handed back a Scottish tax power the Scottish people explicitly and overwhelmingly endorsed in 1997, the SNP would be calling for Ministerial heads to roll. You simply cannot bang on about hypothetical future powers as an excuse for not using the existing ones, let alone when you’re returning them to Westminster.
Through SNP incompetence or deliberate intention, the voters now have their choice limited, and it will be much harder to find ways to raise revenue and step away from these Tory cuts. Someone should consider their position.
Does it remind anyone else of this epic speech? A nationalist Government, a nationalist Government, scurrying about in limos handing powers back to London.
#1 by Sophia Pangloss on November 18, 2010 - 6:52 pm
No.
#2 by DougtheDug on November 18, 2010 - 7:33 pm
Get a grip James. The Scottish Government hasn’t handed any powers back to Westminster as the Scotland Act 1998 is still as it always was but what they’ve done is stopped paying out our money to HMRC to maintain a tax system they were never going to use.
What Michael Moore has done is to point out that it’s going to take nearly three years to get the HMRC systems to the point where they are capable of identifying a Scottish Taxpayer and Scotland will have to pay for the privilege. Which is not a ringing endorsement of HMRC IT.
It’s going to put a spanner in any Green Party attempts to use the Scottish Variable Rate but none of the other parties had even hinted that they were going to use it.
There’s an article in the Scotsman which points out that as the IT systems have changed in HMRC since the agreement ended in 2007 and they need to spend millions to get the new systems changed to take account of the Scottish Variable Rate regardless of whether HMRC maintained the databases in the orginal system.
http://www.scotsman.com/news/Millions-spent-on-taxation-system.6626150.jp
It also means they never thought about the SVR when they introduced the new systems into HMRC and are going to have to patch it in after the event.
There’s also a second point. Because Calman is a dog’s breakfast which assigns taxes and then uses a block grant element to bring it into line with Barnett formula funding then it is now clear that there is going to be an ongoing cost to Scotland to fund the HMRC administration of this new tax system which is going to be imposed on Scotland by Westminster. This cost is going to be there regardless of any need for Scotland to impose higher taxes.
We’re going to get the tax mess of Calman and have to pay for it whether we want it or not.
#3 by EphemeralDeception on November 18, 2010 - 7:34 pm
What a strange post.
First a question -the letter states “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.” Doesn’t this mean that the Lab/Lib let is lapse since they needed to budget for it prior to 2007?
The government/executive has to commit in the PREVIOUS year, as shown later in letter (last paragraph, 1st page).
Now, question aside, we had the case that for every year till 2007 Scotland paid for a service it didnt use but paid just incase it might use it. And you call this ‘good sense’.
I call it criminally negligent.
Had I known that we were paying for such a stupid, stupid service I would be demanding that we stop.
You even go on that someone should resign over this by stating ‘Someone should consider their position.’ Why?
Any idea how much this was costing each year?
That this would be need to be paid despite the current cuts?
That no party has ever wanted to use it because it flawed beyond measure?
That no mainstream party is even considering to use it?
The letter is very interesting though – we pay upfront for any HMRC admin costs estimated whether they incur or not. For calman I can only imagine the admin costs would go up and we would have to pay even more even if tax was not varied.
What totally amazes me is that instead of lambasting such a totally insane system you make such as post as you have.
Especially when the greens are for smaller government. Eg from 2007 Manifesto “We believe there is a particularly urgent need for greater fiscal autonomy for Scotland and more devolved powers over taxation, energy and broadcasting.” And, in fact, the proposal was to merge Income and NI Tax together.
What I expected to see you post is that this letter shows that the current system is FUBAR, unworkable, costly, borderline insane. That the Calman group recommend more of it. And the greens want nothing to do with it but something much better and good on the SNP for not throwing taxpayers money down the drain.
#4 by cynicalHighlander on November 18, 2010 - 8:24 pm
Saving Scots taxpayers from a bill of £7 million pounds to keep the option open for another few years is called good governance. Westminster will charges us for implementing there Calman proposals next as they like fleecing all other regions to prop up the London one.
#5 by Jeff on November 18, 2010 - 8:47 pm
How does that tie in with paving the way for Local Income Tax? My understanding is that the £7m was “to collect money from Scots’ pay packets if MSPs voted to alter income tax after May’s Holyrood elections.” LIT would alter incomx tax for Scots so wouldn’t the money need to be spent for that anyway? Have we just delayed LIT for 3 years?
#6 by cynicalHighlander on November 18, 2010 - 9:30 pm
LIT was to replace the council tax this is about the variance of income tax up or down by 3p which no competant administration will touch as its throught with treasury potholes.
#7 by Jeff on November 18, 2010 - 9:35 pm
Yes, LIT was to replace the Council Tax but with a top-up of Income Tax, a change that would be very similar in practical terms to the use of varying powers.
To implement LIT, Scotland would need the HMR&C to assist them and I just want to know if the Scottish Government refusing to pay this money will harm that option, either directly or indirectly. LIT might be off the table as an electoral selling point for the SNP which would be very damaging indeed.
#8 by cynicalHighlander on November 18, 2010 - 10:03 pm
LIT is a seperate issue and I believe that the council tax claimants would suffer via the treasury and it wasn’t on the UK radar when devolution was initially set up so who knows.
#9 by Jeff on November 18, 2010 - 8:35 pm
It’s quite a news story isn’t it, I’m still wrapping my head around it. Can’t disagree with what you’re saying there James, including positions being considered.
We surely deserve to know if this was a conscious decision and, if it was, what was the logic behind it. 50+% of Scots voted for those powers, a few of us would be interested in knowing if we were losing access to them, particularly with such deep cuts on the way and an election around the corner.
Even though Labour, Lib Dems and Tories had no plans to use the power, presumably they will hammer the SNP into the ground for this and with fair reason. Where does this leave the Greens’ policy mix for May? Land Value Tax can of course step in to be the main selling point.
How much is this annual maintenance and why does it take two years(!) to get things up and running again but the main question I’m considering – Is the SNP gambling that this move will somehow help their independence cause?
#10 by Baron Sarwar on November 18, 2010 - 9:17 pm
I don’t quite get how what is essentially a Royal Mail PAF database merged into HMRC tax records can cost £7 million in upkeep and administration, when nothing is actually being altered in taxation other than a flag in HMRC records saying something like “Scottish Domiciled? Y/N”? OK, it won’t be quite that simple, but not far off it. Plus the Scot Sec quoting the best part of 3 years to do the above – are HMRC servers are running on 386s?
That’s not to say I think the govt’s decision to stop paying out was anything other than loopy, not least given the obvious political consequences when they were outed. Nicely played by Moore & buddies, shift the focus from outrageously inefficient IT systems at HMRC and onto the SNP govt for making the decision to bailout in the first place.
In summary: everyone’s a loser, baby.
#11 by James on November 19, 2010 - 10:31 am
Sorry, in my comment to Jeff’s LIT piece I may have lumped all the nationalist comments in together, but I quite agree with all this.
#12 by EphemeralDeception on November 18, 2010 - 9:57 pm
Could this be any more surreal?
We pay our taxes and the cost of Calculating/running this is handled by HMRC. They do not want us doing it ourselves.
In a brilliant deal(for HMRC) the Lib/Labs agree to a 12 Million pound capex project so that HMRC can setup as system to identify scots taxes -which they do already.
This was paid out of the money we are ‘granted’ back having already paid to UK to identify and tax us. We are then charged again for the privelege of an additional tax system, calculated separately, using this secondary system, managed and operated in England by HMRC on our behalf. OPEX was set at 50000 pounds just to keep it unused, not running, but I suppose in some data centres somewhere.
Then because we did not pay the OPEX. HMRC – let it the whole system Lapse. What does this mean? Where did the systems, we paid for, go – ebay perhaps?
Whatever happened this is totally rotten and a Government scam. We need to run our own finances, 1 system and soon because currently the loonies have taken over the asylum and are robbing us blind.
#13 by Willie Shieldon on November 18, 2010 - 10:15 pm
Jeff you’ve lost the plot.
SNP are not going add to the tax woes by uping the tax rates. The 3p option was always an non-option for any party.
Devolution is increasing being shown to be unsustainable; independence is the only logical viable option for Scotland.
#14 by Jeff on November 18, 2010 - 10:27 pm
That’s fine Willie, but when the SNP came to that decision back in 2007, do you not think Scots (who voted for those powers in the first place) had a right to know what their Government was doing on their behalf?
Why was it left for Michael Moore to come clean over what powers the Scottish Government does and doesn’t have in the immediate aftermath of a painful recession?
And are you suggesting that the SNP deliberately shelved the tax-varying powers in order to increase its chances of winning the independence argument?
#15 by Gaz on November 18, 2010 - 10:34 pm
Well, well, well. Have the Unionist cabal let the cat out of the bag with this nonsense?
Last I heard, this tax varying power was going to be swept away to be replaced with the Calman proposals that they all tell us will be so good for us.
So, actually, the unionists are claiming we should be paying to maintain a tax mechanism that has never been used and which they are going to totally overhaul anyway. Or are they?
Further, I fail to see why it would cost anything like this amount of money to maintain a mechanism that allows a different tax code to be applied to residents in Scotland once it has been set up. Do HMRC’s database schemas just evaporate at midnight on Hogmany every year?
On the LIT, I think Jeff is half right. That mechanism would be useful for its implementation. So, yet again, Labour and Tories are found because they were the ones that told us that LIT couldn’t be implemented. not only was that a downright lie, we had already paid for most of its implementation anyway!!!
Where Jeff is half not right (I think ‘wrong’ is too strong a term!!!) is that for a truly local LIT, the tax code woudl have to be variable by local authority area rather than just Scotland as a whole.
#16 by Jeff on November 18, 2010 - 10:51 pm
Valid points Gaz, I hadn’t thought about it that way in terms of Calman offering in a different wave of tax-raising powers. There is a valid argument that the SNP wouldn’t have known this back in 2007 so it won’t have formed part of the rationale but maybe the SNP has lucked out if it makes little difference once the Scotland Bill comes through.
Can LIT even work under the new Calman deal?
#17 by Lost Highlander on November 18, 2010 - 10:43 pm
Remember it would have taken 10 months to get the system back and running. There is no way on this earth that LIT would have less than a year to be put in place after being agreed. So no need to put money towards westminster that could have been used better elsewhere.
So it has lapsed and the condem scottish secretary says it will take 3 years to set up again. That is the real question why are they so ineficcient. There is someone who should resign it is Michael Moore. There is no excuse for this incompetence.
#18 by Jeff on November 18, 2010 - 10:48 pm
It’s a valid question – why should it take 3 years for our tax body to do something that a Government is telling it to do. However, one can only operate within the rules that are already set down and, crucially, it wasn’t the SNP’s power to give away. The SNP won’t budget up to 2013/14 but it will shutdown some of the financial levers available to whoever is in charge and not tell anyone about it? I find it genuinely annoying.
#19 by Dubbieside on November 18, 2010 - 10:46 pm
As the previous Labour executive had already paid £12million for this system and it had never been used, why would a Scottish government now pay an additional £7 million for a system that they will never use?
The big question is why has this been brought up now. Was it not just last week that Moores said that the coalition were advanced in their preparation for the introduction of Calman. Presumably they are going to introduce all the other parts of Calman minus the ability to alter the rate of income tax.
Anything that finally kills Calman stone dead is ok with me.
#20 by Observer on November 18, 2010 - 11:12 pm
There is something here that doesn’t make sense. The Local Income Tax was going to be collected by HMRC & yet they tried to stiff the Scottish Government for a share at least of a multi million pound upgrade to their IT systems, which the SG knocked back. I think rightly as clearly tax collection is a reserved function & why should a devolved government pay for it.
But who knew what when? & what implications are there for the SNP’s local income tax? More questions than answers at the moment.
#21 by Observer on November 18, 2010 - 11:17 pm
How did they manage to process the 10p tax rate change when they need a multi million pound upgrade for anything to do with Scotland?
At the end of the day HMRC is reserved so I think it’s Michael Moore’s issue to resolve. The tax varying power was included in the Scotland Act. That Act was passed in Westminster the ball is in their court.
#22 by EphemeralDeception on November 18, 2010 - 11:26 pm
Jef makes some good points. Why didn’t the SNP ‘out’ what the previous exec cooked up? Also why (at the time) did HMRC insist on charging us yet again if we did have the audacity to implement this?
However the current system is/was a deal specifically over the SVR. It does not apply to LIT even if LIT means adjusting the tax figures. But as stated in the Letter, the iniquitous Scotland Act states that Scottish ministers must pay for using its tax varying powers.
While that relates only to SVR, you can be sure that HMRC and treasury are going to charge, delay, overcharge and otherwise extort the Scottish taxpayer for any system we may try to think of that is not to their liking. They have a clear history of this already.
In short, they would charge us a fortune to be able to use LIT or anything else: BECAUSE THEY CAN
I think that this will make every voter and taxpayer, now aware of this system and charges, very wary of LIT (I know I am) since it is full of uncertainties of how it could actually be run and its TCO (total cost of ownership). I do not fault the SNP for trying to find some way, some loophole, to help Scotland, within the constraints of the Scotland Act.
The SNP should come clean and state the obvious that any system that wants to touch income tax will be torpedoed by London. Thank god planning control managed to slip through the net!! We have to have our own system and the election should be fought on this. The greens have similar policy, for different reasons, but its a single Scottish system.
On the other hand the LAB/LIB/Tory cabal have a whole lot of explaining to do over Calman, with Labour having to explain : Calman, their deal with the devil till 2007, and Council Tax increases. There could be trouble ahead…
#23 by Indy on November 19, 2010 - 4:40 pm
You may find this clarifies things slightly.
Letter from Alex Salmond to Michael Moore
Your letter of 18 November about the Scottish variable rate of income tax (SVR) is a travesty of the position. The reality is as follows.
The then Scottish Executive paid the UK Government £12 million in 2000 to add SVR functionality to Her Majesty’s Revenue and Customs (HMRC) tax collection systems. Thereafter, an annual fee of £50,000 was paid.
HMRC said in 2007 that additional work was needed to maintain the readiness of the IT system, and in summer 2008 made clear that they would be installing a new IT platform. Scottish Government officials attempted to elicit information on what this meant for Scotland and the functionality of the 3p tax power.
We were finally asked on 28 July this year to pay over the sum of £7 million to HMRC for this purpose. Why nowhere in your letter did you mention this demand?
Anyone proposing paying this £7 million to HMRC would need to explain where the equivalent cuts would be made in Scottish public spending.
And even if we had paid it – at a time when Scotland is on the receiving end of massive cuts to our budget from your government – the SVR under the new system could not have been implemented until 2012/13: another key point which you failed to mention.
In any case, at that stage it seemed an academic debate because the SVR itelf is set to be replaced under any version of the legislation which you intend to introduce in the next few weeks.
On 20 August, Scottish Government officials offered talks with HMRC on the issue of the SVR – an offer which has not been responded to. The first we have heard from the UK government on the matter since 20 August is your letter of yesterday.
It is clearly unacceptable that Scotland should be asked to pay, again, for something which millions of pounds have previously been paid for. If HMRC choose to replace their IT systems, that is clearly a matter for them. However, anyone would expect them in specifying their new systems to replicate the functionality of the old.
No Scottish administration has used the 3p tax power, none of the main parties in Scotland advocate using it now, and it is intended to be overtaken by the Tory/Lib Dem Calman financial proposals – flawed measures which, had they been established for the start of the current spending review, would have resulted in the Scottish Budget being £900 million lower in 2009/10.
The real issue, therefore, would appear to be about the future.
You stated – as did Danny Alexander in his letter to me of 20 October this year about the Spending Review settlement – that: “it is an established principle that the costs of devolution should be met from the Scottish Budget.”
This is not the case – in fact, the opposite is true.
HM Treasury’s recently-updated Statement of Funding Policy states at paragraph 3.2.8 that:
“Where decisions of United Kingdom departments or agencies lead to additional costs for any of the devolved administrations, where other arrangements do not exist automatically to adjust for such extra costs, the body whose decision leads to the additional cost will meet that cost.”
The clear impression can only be that your letter was not about the cost of financial powers that are going to be superseded, but rather about establishing a precedent for the Scottish Government paying to instal and administer the Calman tax proposals – which unlike the SVR will require to be used every year.
Given the huge pressures on the Scottish public purse because of your government’s spending cuts – and the further threat to our budget from the Calman proposals themselves – we need answers to these key questions as a matter of urgency:
How much is the UK Government intending to ask the Scottish Government to pay for the Calman tax powers – measures which could reduce Scotland’s budget, as indicated above?
When do you propose asking the Scottish Government, and therefore the Scottish people, to pay?
Exactly when would these financial powers be capable of being implemented?
A copy of this letter goes like yours to Annabel Goldie MSP, Iain Gray MSP, Margo MacDonald MSP, Tavish Scott MSP and Patrick Harvie MSP, and David Gauke MP, and also to the leaders of the Scottish parties at Westminster: Angus Robertson MP, Ann McKechin MP, and David Mundell MP. I am also sending copies to John Swinney and Fiona Hyslop.
Given that you released your letter to the media, I am also releasing this.
ALEX SALMOND
#24 by James on November 19, 2010 - 4:51 pm
If you expect this phrase to do anything but make me livid, you’re wrong:
Someone’s at it. HMRC say the power was left to lapse in 2007. This letter glosses over that entirely. If it did lapse in 2007 then the First Minister is at it. If it was operational until this £7m demand came in, then the UK Government is at it.
#25 by Jeff on November 19, 2010 - 5:06 pm
Solid response from the First Minister, thanks for posting Indy.
Probably too early to say precisely where the truth lies in all of this but the ball is in Michael Moore’s court and it could be a tricky backhander if he’s not been straight up to now. This is potentially a resigning issue, according to Patrick Harvie.
Could we be on our 3rd Scottish Secretary in the space of a year?
#26 by Indy on November 19, 2010 - 5:00 pm
Why don’t you take a wild guess about who is at it?
#27 by dcomerf on November 19, 2010 - 5:01 pm
Indeed! If this letter is factually correct then this is a shocking piece of spin from Moore (the corrollary that if it’s not factually correct then it’s a shocking piece of spin from Salmond also holds). In fact it’s not spin – there is a factual discrepancy and the media should focus on resolving the facts. However, no doubt it will be painted as a disgreement or “spat” and Brian Taylor et al will just report that A said X while B said Y not realising that the fact that X and Y contradict is not just a difference of opinion that he is reporting, but a dispute about the basic facts that it is his job as a journalist to get to the bottom of.
#28 by DougtheDug on November 19, 2010 - 6:13 pm
Why did Moore write this letter and why was he selective with the facts?
The only reason can be that he was trying to damage the SNP ahead of the election in Scotland. You have to think about that one a little as the only beneficiary of a slump in SNP support in Scotland is the Labour party.
As a Minister in a Con-Lib coalition government Michael Moore tried to do his best with this letter to ensure that Labour, the main opposition in Westminster, retakes the Scottish Parliament.
I wonder if he actually had the brains to work this out or was he blinded by his hatred of Salmond and the SNP into offering support in kind to his main parliamentary opposition in Westminster?
My advice is never trust a Lib-Dem.
#29 by Gaz on November 19, 2010 - 9:26 pm
Actually Doug, the LibDems are at risk of losing 4 (and even 5 at a stretch) constituency seats to the SNP which is more than any other party so it makes political sense for them to try and smear the SNP.
Their problem is that their vote is collapsing so much that they would have no chance of being recompensed on the regional lists for the loss of most of these seats as they are generally over-represented in the regions in question anyway.
The whisper is that Labour and the LibDems have already agreed they will enter a coalition next year to keep the SNP out. In my book that completes the perfect storm for delivery of Independence.
#30 by Paul Freeman on November 19, 2010 - 10:14 pm
Whoever is “at it” (and given Alex Salmon’s response is not at all in keeping with the dates from Michael Moore, I don’t think the First Minister has setting the matter at all) they must have been cursing when Patrick Harvie brought his idea forward.
Bet they were quietly thinking no one would be wanting to use the powers and it would be forgotten all about when Calman came in.
Salmon’s letter still doesn’t explain why the government stopped paying in 2007 as the demand for £7 million didn’t come until July 2008
It also doesn’t say why this was kept under the carpet.
On the other hand, real questions have to be asked as to why £7mil has been asked for and why it would take so long to reimplement. Lots of unanswereds going on here. To quote from somewhere “it gets better and better”
#31 by Erchie on November 20, 2010 - 12:03 am
Paul
I don’t think you picked up the details completely correctly
The FM is saying they were told in 2008 there would be a new system.
They were told in July THIS YEAR (2010) about the £7 million price tab.
So I guess, and it’s only a guess, they may have thought, why pay for something that is being replaced.
Of course the estimate is for 2012-2013 delivery of this system by HMRC’s supplier.
if they keep to schedule that is
If the FM’s letter is an accurate summation of events, then anyone who jumped on Mr Moore’s letter is going to look silly
#32 by Paul on November 20, 2010 - 8:38 am
Michael Moore’s letter clearly states that the SVR powers lapsed in 2007. So, Alex Salmond’s response, whilst raising relevant points about future costs, does nothing to explain why they let the powers lapse, or didn’t tell anyone.
With some wave handing magic trick Alex wants us to look at the price tag, whilst the cover up was in 2007. Unless Moore is lying in his letter and payments stopped in 2008. But does Salmond deny this in his letter?
my guess is administrative cock up by the SNP in 2007, followed by Labour UK gov taking advantage to try to get further money. SNP can’t being this up in public, because they’d have to explain why they stopped paying. Finally, they saw Calman coming, and decided it would all go away. Until Patrick Harvie thought it might be an idea to actually use SVR
#33 by Erchie on November 20, 2010 - 10:12 am
Paul
The SVR power hasn’t lapsed, it is still there. HMRC are saying.g that they are incompetent to collect it.
In 2007 was the money already paid by the election?
There is definitely more to know, but the SVR is still there
#34 by Neil on November 20, 2010 - 10:50 am
It’s pretty obvious to me that the UK government is just laying the groundwork to establish a precedent that all the costs of Calman, which they want to impose on us, will come out of Scotland’s budget.
They’re going to screw us AND make us pay for the privilege.
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#35 by Exiled Nat on November 21, 2010 - 11:43 am
The issue is plain and simple.
A variable tax power was, and still is, devolved.
The HMRC chose to administer systems which cannot accurately identify scots. (begs the question of competence in HMRC)
If Scotland was to raise tax, the HMRC is charged with collecting it. If they cannot, that is not an SNP issue, but an HMRC one.
It is a scam to offer the tax raising power but insist on paying for the privilege. It assures that being revenue neutral requires a higher rate than the rest if the UK.
It is clearly a political ploy aimed at harming the nats no matter which option they took.
In this case, they chose the most sensible and cost effective to Scotland option. It is the HMRC, and the Blair Govt who are to blame for the fallout.