By David Scott
25 March 2010
Plans to increase the financial powers of Scotland’s Parliament amount to the most dramatic change in taxation ever envisaged by the UK Treasury, Scottish Secretary Jim Murphy told the CIPFA in Scotland annual conference.
He said the radical change – giving the Parliament the right to set a ‘Scottish tax’ – would involve a huge amount of work and take some time to implement.
‘We have to do it carefully,’ he added.
Labour plans to introduce the change – which will first require legislation at Westminster – in the next session of the Scottish Parliament, which begins in 2011, Murphy said.
The Scottish secretary was responding to a question from an Edinburgh University academic. Alan Trench had raised concerns that during the transitional period to phase in the new power, Scotland’s tax yield would be based on Treasury projections rather than on actual income.
This arrangement had led to warnings of a budget ‘black hole’ of more than £1bn.
Murphy pointed out that a transitional system was needed because the change – giving Scotland influence over a 10p tax rate – was much more radical than most people ever expected.
He said: ‘To phase in such change will take a while – quite rightly. It involves a different rate of tax… there is a huge amount of work to go on here and I think for the first few years it has to be based on projections rather than on actual [income].’
Trench later challenged Murphy’s claims about the ‘radicalism’ of the tax power, recommended by Sir Kenneth Calman’s Commission on Scottish Devolution.
He argued that Calman had produced a ‘fairly conservative’ report based on policy functions agreed in 1998.
Trench told Public Finance: ‘It’s not actually about taking devolution significantly further forward in the sense of conferring significant new powers on the Scottish Parliament.’
