Anger as new Scots tax powers face delay

Controversial plans to give Holyrood power to raise and lower income tax may be delayed for up to five years, the UK government revealed last night.

Politicians were at each other’s throats over whether and how fast this and other proposals to strengthen devolution can be introduced.

There were claims Labour and Tory leaders have gone back on their support for further devolution proposed in a report from the Calman Commission which was supposed to have their backing and that of the Liberal Democrats.

And the SNP – demanding the faster handover of powers over airguns, speed limits and drink-driving limits, and better working relations between Edinburgh and Westminster – flatly rejected the tax proposals for not going far enough. They want full control of all tax revenue raised north of the border.

Scottish Secretary Jim Murphy, who said a week ago he hoped to introduce the changes before the next Holyrood elections in May 2011, committed himself last night only to doing so in the next “term” of the Scottish Parliament – by May 2015.

His white paper revealed progress with tax powers and accompanying borrowing powers will depend on the overall economy, and made it clear any borrowing, which will be subject to strict limits depending on the economy, will have to be paid back by increasing the rate of “Scottish” income tax further.

The tax powers will be matched by a cut in the block grant. It means that, with a standstill Scottish budget of around £30billion, a “Scottish” 10p rate would be added to a basic UK rate of 10p, so Scots would pay 20p – the same as the 20p of basic rate payers elsewhere in the UK are charged.

But Holyrood could agree a higher rate, increasing the overall budget, or a lower one, with more cuts in spending. Higher-rate bands would change to maintain existing differentials. The power would be accompanied by responsibility for stamp duty land tax, landfill tax and aggregates levy as well – but not air passenger duty, as Calman recommended.

Tory leader David Cameron said his party “accept that the Scottish Parliament needs to have more financial accountability through greater powers over raising and spending taxes and over borrowing”.

But he labelled the proposals “a starting point”, insisting “we will not be bound by any white paper produced by the present government”. A Tory administration would produce plans of its own if it wins the election, he said.

Scottish Lib Dem spokes-man Alistair Carmichael said this means the proposals are “dead in the water”, adding: “The disgraceful spectacle of Gordon Brown and David Cameron running away at full speed from implementing new tax powers is a truly shameful breach of good faith. They will be punished at the next election because they cannot be trusted to deliver a constitutional settlement Scotland needs.”

A UK Government spokes-man said it does plan to act as quickly as possible. So did a Tory spokesman. But neither would give a firm date for the transfer of tax powers.

The purpose of the most radical shake up of the devolution settlement since 1999 – to stop First Minister Alex Salmond blaming every “cut” on London – was spelled out by Mr Murphy.

He said: “Since the first day of devolution, the Scottish Government has been accountable for how it spends taxpayers’ money.

“Under today’s proposals they will also be held to account for how they raise it.”

Overall, the tax proposals would give Holyrood power to raise about £4.5billion, or 14% of current spending.

The UK government has rejected Calman plans to devolve aspects of housing benefit and council tax benefit.

In the Commons SNP Westminster leader Angus Robertson, MP for Moray, challenged Mr Murphy to explain why action on measures like drink-driving on which there was agreement was being put off until after the election.

But Mr Murphy retorted he was behaving like a nationalist, putting SNP interests first.

SNP constitution spokes-man Pete Wishart criticised “a messy fudge which will damage the Scottish economy in the long term”.

In Edinburgh, Constitution Minister Michael Russell said: “We reject the tax proposals because they are the wrong tax proposals, drawn up in the wrong way.”

Mr Salmond wrote to Mr Brown to say legislation to give Scotland control of airguns, drink-driving limits, and speed limits, could be acted on quickly and it was “disappointing” these were being delayed until after the election.

Meanwhile Scottish Energy Minister Jim Mather published a paper on energy resulting from the SNP’s National Conversation on independence, demanding Edinburgh take control over North Sea oil and gas.