Daithí
04-09-2008, 10:38 PM
By EXCLUSIVE: BY HAMISH MACDONELL
THE Treasury has dealt a devastating blow to Alex Salmond's flagship local income tax plan, by concluding that Scottish ministers do not have the authority to introduce it, The Scotsman has learned.
A Treasury source revealed that officials had studied the SNP's proposals and decided they did not fall within the competence of the Scottish Government.
The Scotland Act, which created the Scottish Parliament, makes it clear that Holyrood can alter "local" taxes, such as council tax and non-domestic rates. But Mr Salmond's local income tax would be set centrally and collected nationally with no local variations and, as such, would be viewed as a "national tax" by the Treasury.
The source said: "My understanding is that the proposal in the consultation document is for a 3p income tax rate set centrally by the Scottish Government and collected nationally.
"The fact it is set centrally and collected nationally means it is not a devolved matter under the Scotland Act.
"If the Scottish Executive wants to introduce a local tax, set and collected locally, that's a devolved matter, entirely up to them. But a tax which is set centrally and collected nationally is not devolved."
The source said "Treasury officials" had looked into the issue and this was their clear assessment of the situation.
Professor Richard Kerley, a public finance expert from Queen Margaret University in Edinburgh, has already raised concerns about the legal competence of the SNP's tax plans, but this latest intervention, from non-political civil servants, will have a much more damaging effect on this flagship policy.
The Scottish Government needs the co-operation of the Treasury to introduce a local income tax, because it is looking to Her Majesty's Revenue and Customs to collect it.
But if – as now seems the case – the Treasury takes the view that the tax does not fall within the competence of the Scottish Parliament, Mr Salmond's chances of success will all but disappear. The plans have already run into a hail of criticism, from the Labour and Conservative parties, some trade unions and the business community.
John Swinney, the finance secretary, is relying on the return of £400 million a year in council tax benefit to make the local income tax work, money that Westminster has made clear will not be given to the Scottish Government.
He has faced accusations that there is a £750 million black hole in the plans, and now there is the prospect of having his policy knocked back on legal grounds by the Treasury.
A source close to Mr Swinney said: "The Treasury is talking nonsense. And, given the mess they have created over income tax, they would do far better putting their own house in order, instead of interfering in clearly devolved matters."
He went on: "They are charging around behaving like a proconsul dealing with some far-flung territory. In the process, they are doing enormous damage to Labour's poll ratings in Scotland.
"The Scottish Government and parliament are not a Whitehall department which can be bullied by the Treasury. We represent a country, and we have every right and ability to scrap the unfair council tax and replace it with a fair local income tax to fund local authority expenditure, which will help low- and middle-income Scots."
But David McLetchie, for the Tories, said the Scotland Act was clear that any new tax had to be local, and this meant either locally determined, locally set, or based on properties in a local area. "I do not think the SNP's income tax proposal meets these criteria, because it is essentially a tax on individuals who, by definition, are mobile," he said.
"I think the Treasury is quite right. If there is no legal competence in the assessment and the collection of the tax, then it is clearly incompetent."
Wendy Alexander, the Scottish Labour leader, said: "This is just another example of how ill thought-out this local income tax policy has been. They are taking Scotland for a ride.
"They have been unable to tell us how much the tax would raise, they have been unable to tell us how much it would cost, and now, it seems, they have been unable to establish its legality."
LEGAL MINEFIELD FOR PLANS TO INCREASE GOVERNMENT REVENUE
THE legality of the Scottish Government's controversial local income tax plans could be investigated by an influential Holyrood committee, it emerged last night.
The Tory MSP David McLetchie wants the local government and communities committee – of which he is a member – to examine the legal competence of the tax plan.
Mr McLetchie has become increasingly concerned over the Scottish Government's ability to introduce a new national tax, given that the Scotland Act refers only to "local" taxes.
The committee will meet next week to consider its work programme for the next few months, and Mr McLetchie will recommend that the MSPs take evidence on the legality of the Scottish Government's proposals.
He said: "This is an issue we should take some evidence on. I would regard the legal competence as something we should pursue, because I believe it's fairly fundamental to the whole policy."
There would be no dispute over the competence of the tax plan if SNP ministers decided to invoke the tax-varying powers of the Scotland Act, the so-called Tartan Tax, as a new national tax. But they do not want to do that. The Tartan Tax only allows the Scottish parliament to raise or lower the standard rate of income tax by 3p in the pound. Scottish ministers need to levy their new local income tax on both the standard and higher rates of income tax.
If they used the Tartan Tax, they would not raise enough money from high-earners to meet their needs and they would open themselves up to allegations from opponents that the well-off were being allowed to avoid at least part of the new tax.
The full article contains 994 words and appears in The Scotsman newspaper.
Last Updated: 09 April 2008 9:21 AM
THE Treasury has dealt a devastating blow to Alex Salmond's flagship local income tax plan, by concluding that Scottish ministers do not have the authority to introduce it, The Scotsman has learned.
A Treasury source revealed that officials had studied the SNP's proposals and decided they did not fall within the competence of the Scottish Government.
The Scotland Act, which created the Scottish Parliament, makes it clear that Holyrood can alter "local" taxes, such as council tax and non-domestic rates. But Mr Salmond's local income tax would be set centrally and collected nationally with no local variations and, as such, would be viewed as a "national tax" by the Treasury.
The source said: "My understanding is that the proposal in the consultation document is for a 3p income tax rate set centrally by the Scottish Government and collected nationally.
"The fact it is set centrally and collected nationally means it is not a devolved matter under the Scotland Act.
"If the Scottish Executive wants to introduce a local tax, set and collected locally, that's a devolved matter, entirely up to them. But a tax which is set centrally and collected nationally is not devolved."
The source said "Treasury officials" had looked into the issue and this was their clear assessment of the situation.
Professor Richard Kerley, a public finance expert from Queen Margaret University in Edinburgh, has already raised concerns about the legal competence of the SNP's tax plans, but this latest intervention, from non-political civil servants, will have a much more damaging effect on this flagship policy.
The Scottish Government needs the co-operation of the Treasury to introduce a local income tax, because it is looking to Her Majesty's Revenue and Customs to collect it.
But if – as now seems the case – the Treasury takes the view that the tax does not fall within the competence of the Scottish Parliament, Mr Salmond's chances of success will all but disappear. The plans have already run into a hail of criticism, from the Labour and Conservative parties, some trade unions and the business community.
John Swinney, the finance secretary, is relying on the return of £400 million a year in council tax benefit to make the local income tax work, money that Westminster has made clear will not be given to the Scottish Government.
He has faced accusations that there is a £750 million black hole in the plans, and now there is the prospect of having his policy knocked back on legal grounds by the Treasury.
A source close to Mr Swinney said: "The Treasury is talking nonsense. And, given the mess they have created over income tax, they would do far better putting their own house in order, instead of interfering in clearly devolved matters."
He went on: "They are charging around behaving like a proconsul dealing with some far-flung territory. In the process, they are doing enormous damage to Labour's poll ratings in Scotland.
"The Scottish Government and parliament are not a Whitehall department which can be bullied by the Treasury. We represent a country, and we have every right and ability to scrap the unfair council tax and replace it with a fair local income tax to fund local authority expenditure, which will help low- and middle-income Scots."
But David McLetchie, for the Tories, said the Scotland Act was clear that any new tax had to be local, and this meant either locally determined, locally set, or based on properties in a local area. "I do not think the SNP's income tax proposal meets these criteria, because it is essentially a tax on individuals who, by definition, are mobile," he said.
"I think the Treasury is quite right. If there is no legal competence in the assessment and the collection of the tax, then it is clearly incompetent."
Wendy Alexander, the Scottish Labour leader, said: "This is just another example of how ill thought-out this local income tax policy has been. They are taking Scotland for a ride.
"They have been unable to tell us how much the tax would raise, they have been unable to tell us how much it would cost, and now, it seems, they have been unable to establish its legality."
LEGAL MINEFIELD FOR PLANS TO INCREASE GOVERNMENT REVENUE
THE legality of the Scottish Government's controversial local income tax plans could be investigated by an influential Holyrood committee, it emerged last night.
The Tory MSP David McLetchie wants the local government and communities committee – of which he is a member – to examine the legal competence of the tax plan.
Mr McLetchie has become increasingly concerned over the Scottish Government's ability to introduce a new national tax, given that the Scotland Act refers only to "local" taxes.
The committee will meet next week to consider its work programme for the next few months, and Mr McLetchie will recommend that the MSPs take evidence on the legality of the Scottish Government's proposals.
He said: "This is an issue we should take some evidence on. I would regard the legal competence as something we should pursue, because I believe it's fairly fundamental to the whole policy."
There would be no dispute over the competence of the tax plan if SNP ministers decided to invoke the tax-varying powers of the Scotland Act, the so-called Tartan Tax, as a new national tax. But they do not want to do that. The Tartan Tax only allows the Scottish parliament to raise or lower the standard rate of income tax by 3p in the pound. Scottish ministers need to levy their new local income tax on both the standard and higher rates of income tax.
If they used the Tartan Tax, they would not raise enough money from high-earners to meet their needs and they would open themselves up to allegations from opponents that the well-off were being allowed to avoid at least part of the new tax.
The full article contains 994 words and appears in The Scotsman newspaper.
Last Updated: 09 April 2008 9:21 AM