Scotland to get power to set own income tax rates

 

SCOTLAND IS to get substantial new powers to set its own income tax rates and win new rights to borrow money in phase two of the devolution of greater autonomy to the Scottish parliament.

The measures were described by Scottish secretary Michael Moore as the most significant transfer of financial power out of London since the formation of the UK more than 300 years ago, making Holyrood more accountable to voters.

They were unveiled by Mr Moore on St Andrew’s Day, a date originally chosen by first minister Alex Salmond to launch his ill-fated independence referendum Bill, which was killed off by Labour, the Liberal Democrats and Conservatives.

The proposals form the centrepiece of a new Scotland Bill drafted by the UK government, which will allow the Scottish government to increase or cut income tax rates by up to 50 per cent for basic rate taxpayers, and by 20 per cent at the highest rate.

The measures also go further than expected by offering the Scottish government much greater borrowing powers, and more quickly, than originally recommended by a cross-party commission on devolution chaired by Kenneth Calman.

Scottish ministers will be able to borrow up to £2.2 billion (€2.6 billion) from 2013 for capital spending and up to £500 million for shortfalls in income tax revenues, allowing them to fund major projects such as a bridge over the Firth of Forth near Edinburgh. The income tax powers would be in place for Scotland’s fifth devolved parliament, in 2015.

In addition, Holyrood will be allowed to introduce new, Scotland-only taxes, with Westminster’s approval, and have control over stamp duty and landfill tax.

In all, the powers will give Holyrood control over about £12 billion or 35 per cent of its current spending: its block grant from the treasury, worth £29 billion a year, will be cut by an equal amount.

The powers were immediately denounced by Mr Salmond as “extraordinarily modest; a missed opportunity”.

Mr Salmond said Scotland actually needed control over all income tax at the very least and ultimately financial autonomy, as a step to full independence. The proposals only gave Scotland control of 15 per cent of all the taxes it provided. He said the battle over Scotland’s financial powers will dominate next May’s elections to the Scottish parliament, when the debate would be decided “on the streets of Scotland”.

He added: “I’m relishing the prospects of taking the Scotland Bill and our alternative proposals to the Scottish people; the only test which really matters is the test of popular sovereignty and popular assent.”

Mr Salmond said the powers, which will not be passed by Westminster until after May’s devolved elections, would have a deflationary effect on the Scottish economy and fail to give Holyrood the freedom it needed to stimulate industry and employment. He claimed UK ministers were “extraordinary control freaks” because they had failed to cede power over other taxes, such as aggregates and aviation duty.

An opinion poll released on Tuesday showed only a minority of Scots favoured independence.

The Ipsos-Mori survey found that 44 per cent of voters favoured giving Holyrood greater financial powers, while only 22 per cent supported full independence. Recent polls suggest about a quarter of Scots back independence.

Mr Moore said: “We want to see a Scottish parliament which is further empowered, that’s more accountable and provides stability for Scotland within the United Kingdom. That’s a very different vision from that set out by the first minister. I think all the parties are confident in their position and happy to debate it at whatever elections.” – (Guardian service)