By Michael Roy
So should John Swinney have mentioned that he couldn’t have used the Scottish Variable Rate power to the Scottish parliament earlier? Probably. He expressed “regret” for not doing so in today’s debate.
He could have actually gone the whole hog and said sorry, but that’s beside the point as far as the general public are concerned. The general consensus seems to be that although ‘SVR-Gate’ seems to be rippin’ the knittin’ of opposition MSPs, this is a “non issue” in the eyes of the electorate so far.
But it really shouldn’t be: this matter is probably one of the most astonishing in the short history of devolution. The reason? The Scottish people voted overwhelmingly – in a referendum – for the right of their representatives to vary tax. The decision of the people was Yes:Yes. The decision was not Yes: Yes but your tax powers may be at risk if you do not keep up payments (on the HMRC’s computer system)! This ability to raise (or lower) taxes is precisely what makes the Scottish Parliament a Parliament and not an Assembly. The fact that the tax raising power was never intended to be used is a moot point – it’s a cornerstone of our devolution settlement, if a bit of a shoogly or wonky cornerstone! (If you’re interested in how useless the power is/was then Alan Trench’s excellent article explains just why…‘the SVR was never really of much use’.)
OK you could argue that the power hasn’t actually been “given away” or taken away – that would involve legislation, but let’s be clear: the Act cannot now be envoked for the next few years, the point made by the Scottish Secretary in his letter last Thursday, due to the fact that certain payments for an HMRC IT system weren’t met. The SNP’s response to his letter makes this clear, and it seems that Alex Salmond has more than a fair point.
The Scotland Act is a UK Act. HMRC has a UK remit. So why was Scotland (still part of the UK the last time I looked) having to make this anomalous payment to keep an IT system – which serves the whole of the UK – up to date? And not just up to date – to remedy the system to undertake the same tasks it was able to do previously. As Mr Swinney said in the debate today, for us to be faced with a £7million bill for, essentially, making the SVR compatible with a system that the previous administration had already paid £12m for, and £50,000 per annum thereafter, begs more than a few questions! As Alan Trench has said “The real surprise here is that HMRC were surprised. In any case, that position is highly contentious, and the UK Government would be well advised to drop it and instead accept that the ‘UK end’ of devolution is a UK cost and not one to be borne by the devolved administration, whether through the block grant or otherwise”.
As I said from the outset, you could argue that the whole thing could have been raised in Parliament before now – although when the “right time” was, and in what context it would have been raised, is entirely up for discussion, but I don’t remember there ever being a debate on the principle of whether we should make the payment to HMRC for “services not received”.
These bills are not set in statute – it’s simply HMT policy that the devolved administrations pay for the cost of devolution from their budgets. But why is this the case? Whether you agree with the Barnett formula or not, the formula was determined on the basis of the populations of the countries that comprise the UK. No allowance was made in the original formula for ‘admin fees’. It’s simply unfair that the Treasury can unilaterally decide this. Although it’s fair to say that the Treasury hasn’t exactly made a habit of being fair to Scotland (don’t get me started on the anomalous position of the London Olympics vs. the Glasgow Commonwealth Games!)
It will now be seen whether the Finance Minister will now face a motion of no confidence brought by the opposition parties. The decision certainly won’t hinge on his competence: he is universally regarded as a very safe pair of hands. But with an election on the horizon, the opposition parties will be keen to make as much political capital out of this stooshie as they possibly can. As Margo McDonald said in today’s Scotsman; “although the unpaid bills for services not received have had no effect on Scotland, some MSPs think the principle too big to ignore, and others think it too easy a hit to pass up”.
The impending implementation of the Calman proposals will make the SVR issue yesterday’s chip paper soon enough. But this whole mess is precisely why the people of Scotland deserve clarification – once and for all – on a number of peculiarities that have arisen because of devolution.
The bottom line is that this mess has probably arisen due to partisan considerations spilling into intergovernmental relations. HMT’s arrogance is legendary, but one thinks that if England (or at least some of the various regions) were to become devolved then perhaps more effort might have been exerted in UK institutions to iron out these anomalies – particularly the big constitutional ones – once and for all.