New tax powers unlikely to placate Scottish public

Scotland's Daily Record newspaper appeared on news stands early yesterday with the blunt headline: "The Vow Delivered", shortly before the publication of proposals to devolve extra powers to Holyrood.

Before the September 18th referendum, when the Yes campaign was rampant, the tabloid had pressed former Labour prime minister Gordon Brown to get David Cameron, Labour’s Ed Miliband and Liberal Democrat Nick Clegg to pledge more powers.

The three promised, under the headline “The Vow”, that Holyrood would get “permanent and extensive” new powers on tax; that National Health Service spending would always be a matter for Holyrood; and that Scotland would continue to enjoy the benefits of UK membership.

There was no agreement on what it meant: for some it was nothing less than home rule –– the power to run all of Scotland’s internal affairs, bar defence and foreign affairs. For others “The Vow” meant less.

In Gordon Brown’s case, for example, it meant Holyrood would have greater powers in collecting income tax, but would not have complete authority over it as it would, in his view, threaten the right of Scottish MPs to vote in the House of Commons.

However, the Smith Commission has recommended that Holyrood set income tax rates and bands, though the size of personal allowances would continue to be set in Westminster. In addition, it should get limited control over some welfare issues – including the power to get rid of the much-hated “bedroom tax”, which sees local authority tenants penalised if they are deemed to have too big a house.

VAT revenues

Other recommendations include that Holyrood should be able to create new benefits, as long as it is pays for them itself; should get a share of VAT revenues; have power to get rid of air passenger duties; and have freedom to let 16 and 17 year olds vote in all Scottish elections, except for the House of Commons.

Much remains unclear. The transfer of income tax to Holyrood should cut the sums it receives from the treasury public spending block grant under the complicated Barnett formula. However, there is no way of telling by how much.

Scotland, for example, got power two years ago to set its own taxes on house sales and landfill duties. The changes come into force next April. Yet no one has a clue how much will be deducted from the treasury grant as a result.

The commission, led by Lord Smith, included representatives from all Scottish political parties, including John Swinney from the Scottish National Party. It heard evidence from figures in Scottish public life and its conclusions were reached by unanimity. However, unanimity in Scottish politics does not mean everybody agrees, as Swinney showed within minutes of publication when he said Smith had not “honoured the promises made”.

In truth, Swinney’s boss, newly elected Scottish first minister Nicola Sturgeon, could comfortably dismiss the recommendations as “disappointing”, but, equally, she will be quite happy to use them to justify eventual separation.

Much of the Scottish public will believe they have not got enough, or what they were promised, while Sturgeon can exploit the continued toxic association of Labour with the Conservatives in the minds of many ahead of May elections.

Sturgeon is also aware the income tax powers, even if not complete, cause paroxysms of rage among English Conservative MPs. Former Welsh secretary John Redwood is outraged Scottish MPs could decide on England’s income tax rates and bands, though their English equivalents would not north of the border.

The issue is central to British politics, because Scottish Labour MPs – assuming they hold off the SNP next May – could make up the numbers to to get Miliband into Downing Street, but their absence from key votes would mean he could not do anything once there.