The final report does not even go as far as the final recommendations made by the Calman Commission.  Calman recommend 6 new tax powers for the Scottish Parliament.  The Scotland Act 2012, often referred to as “Calman minus” only implements 3 of them.

This is from the final report: “We concluded that, for a variety of good reasons, VAT, national insurance contributions, corporation tax, alcohol, tobacco and fuel duties, climate change levy, insurance premium tax, vehicle excise duty, inheritance tax, capital gains tax and tax on oil receipts should remain reserved.” It is not clear from the final report if the Aggregates Levy will be devolved.  What is meant by the Crown Estate recommendation is anyone’s guess.

With regard to the only tax power left standing when the music stopped; income tax.  The interim report said: “In our view, a strong case exists for devolving income tax in full, and we are minded to do so“.  How Labour got from that point to the income tax proposal announced yesterday is again anybody’s guess.  I will come back to that point.

This announcement must also have exasperated those still arguing for “devo plus” and “devomax”.  These proposals are often misunderstood, often intentionally.  “Devo Plus” would devolve almost all tax and welfare powers.  “Devo max” goes even further. Remember there are over 25 taxes, charges and duties when comparing the Labour proposal to “devo plus” or “devo max”. The Labour proposal such as it is, when taken together with the recent announcements by the Liberal Democrats and the Conservatives may well prove to be the final straw for those arguing for the devolving of substantial powers for the Scottish Parliament. That I suspect can only be good news for the “YES” campaign.

Johann Lamont was unable to even answer basic questions on the income tax proposal when she was interviewed on Newsnight Scotland.  A link to this interview can be found here.  To be fair, I am not sure if anyone could easily explain the income tax proposal.  If I was the cynical type I might suggest that this looks like a policy that is intentionally created to make sure it never sees the light of day.  I was also interested to hear that she is opposed to tax competition if it involves Scotland.

This is from my chapter in the Hassan/Mitchell publication “After Independence” and titled: “The continuing battle for Scottish tax powers”.   Nothing it seems has changed.

“So how have the opponents of substantial tax powers for the Scottish Parliament been able to ensure that substantial tax powers are not devolved to the Scottish Parliament?  A template can be seen from Calman, what might be called the “Calman doctrine”. Make a huge fuss about having someone look at the issue, take your time, offer as little as possible, exaggerate any problems, minimise or ignore any advantages and ensure HMRC and HM Treasury remain in control.”

Although the Scottish Conservatives now appear to be moving towards arguing for the devolving of further tax powers there is as as yet no firm proposal from them.

Listed below are the taxes, duties and charges that Westminster has so far refused to pass control to the Scottish Parliament.

In bold are the additional powers the Liberal Democrats are putting forward for devolving.  This information is from its “Home Rule Commission” published in October 2012.

In red are the additional powers the Scottish Labour party might argue for devolving.  I say “might” as its report is an “interim” report only.

The figures are mostly from the “Government Expenditure & Revenue Scotland 2011-12” (GERS).  The figures are included to give an idea as to the level of revenue produced by a particular tax and are a number of millions of pounds.

1. Full control over income tax including the underlying law dealing with reliefs etc (some additional powers but not complete control)  (similar proposal from Labour) 10,790
2. National insurance contributions  8,393
3. Corporation tax (assignation of revenue only)  2,976
4. North Sea revenue  10,573
5. Fuel duties  2,296
6. Capital gains tax (partial control only) (similar proposal from Labour) 246
7. Inheritance tax (to be devolved)  (possibly)  164
8. Other stamp duties – stamp duty and SDRT on shares (estimated)  276
9. Tobacco duties  1,129
10. Alcohol duties  (includes spirit, wine, beer and cider duties)  981
11. Betting and gaming duties  115
12. Air passenger duty (even though included in Calman) (not clear if to be completely devolved)  (similar proposal from Labour)  213
13. Insurance premium tax  251
14. Climate change levy  64
15. Aggregates levy (even though included in Calman) (not clear if to be completely devolved) (similar proposal from Labour)  52
16. Vehicle excise duty  (possibly)  475
17. Bank levy (estimate as no separate Scottish figure)  180
18. Licence fee receipts  325
19. Crown Estate revenue  (not clear if to be completely devolved) (if Scottish Parliament accepts UK Government terms)  10
20. VAT cannot be devolved but VAT revenue could be assigned  9,554

Taxes already devolved to be devolved under Scotland Act 2012

1. Income tax (still only partial control over tax bands and will cost Scottish Parliament millions of pounds a year to administer even if not used)  (estimated partial control over)  5,395
2. Council tax  1,987
3. Business rates  1,933
4. Stamp duty land tax (Scottish Parliament control by April 2015)  330
5. Landfill tax (Scottish Parliament control by April 2015)  97

The Scotland Act 2012 also does not resolve the imbalance between the amount the Scottish Parliament is responsible for spending and which it raises.  The Scotland Act 2012 only takes us to about a third.

The starting point for these commissions is always the same.  They look around for reasons why a particular power should not be devolved.  They do not look at what could be achieved by control of that power being passed to the Scottish Parliament.

The main problem that I have with this report is that we have heard all this before and in fact quite recently.  The Calman Commission taught all of us with an interest in seeing the creation of a Scottish tax system how its opponents behave.   I like to call this the Calman doctrine.

“Make a huge fuss about having someone look at the issue, take your time, offer as little as possible, exaggerate any problems, minimise or ignore any advantages and ensure HMRC and HM Treasury remain in control.”

Calman also taught us that even if a report is produced and its recommendations are accepted not all of those recommendations actually make it to a Scotland Act.  That is why the Scotland Act 2012 is called “Calman minus”.

The absence of common sense is also a problem.  Why not look at which powers are already devolved and then devolve the areas of taxation most closely connected to these already devolved powers.  For example inheritance tax and succession law, tobacco and alcohol duties and health and vehicle excise duty and transport.  This would greatly help the development of policy and at the same time provide the Scottish Parliament with a serious number of economic levers.

Simplification for both the UK tax system and the new Scottish tax system is not even considered.

So what does report say?

The main taxes other than income tax are quickly dealt with and also the largest area of law not yet devolved, welfare.  The report rules out devolving National Insurance and with it any control of the welfare state, corporation tax and North Sea revenue.  That immediately restricts what can be done.    As VAT can only be devolved if Scotland becomes independent, of the 5 major sources of revenue, that only leaves income tax.

The report is quite clear and does not recommend devolving complete control of income tax.  At most it recommends devolving control of the rates, thresholds and allowances.  Almost all of the underlying law that governs how income tax is charged, or the type of reliefs, or the collection rules or who pays and when would not be devolved.   That means that income tax would have two masters.  As with the Scotland Act income tax proposal this is a recipe for disaster.

The report then looks at a number of minor taxes and uses a number of the “usual suspect” reasons as to why they should not be devolved.  They generally do not say that a particular minor tax should not be devolved but rather there is an “issue”.   The main issues are “concerns about avoidance” and “subject to EU law”.  This covers fuel duties, tobacco duties, alcohol duties, stamp duties other than SDLT which is already being devolved, insurance premium tax, betting and gaming duties, most of capital gains tax and a number of other minor taxes on income and wealth.  It is not clear what is proposed regarding climate change levy. Revenue from our TV licences and the National Lottery are simply described as “not relevant”.

So, along with slightly more control of income tax, what is left?  Possibly air passenger duty and aggregates levy as recommended by Calman but not included in the Scotland Act, possibly vehicle excise duty, possibly part of capital gains tax, possibly inheritance tax and possibly control of the Crown Estate.  The recommendations are not that dissimilar to the Liberal Democrat Home Rule Commission proposal.  Please see my earlier blog on this which can be found here.

The conclusion is simple.  The vast majority of tax revenue and taxes will remain controlled by the UK Government.   In any case, the response from a number of Labour MPs to the interim report tells us all we need to know as to the likelihood of these relatively minor proposals being enacted.