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Anger within Labour at income tax proposals

PROPOSALS to give Holyrood full powers over income tax will be subject to the broadest consultation and debate, the Scottish Labour leadership has made clear.

The message was delivered amid claims by colleagues at Westminster of an attempted stitch-up ahead of the start of the party’s annual conference in Inverness today.

Anger felt by the party in Edinburgh at the leak of its commission’s findings on the way forward for devolution was mirrored by some in London, who claimed there was an attempt by Johann Lamont to bounce them into acceptance.

The report from the party’s internal commission, entitled “Powers for a purpose – strengthening devolution”, said: “In our view, a strong case exists for devolving income tax in full and we are minded to do so.”

However, it made clear the plan could be shelved if it turned out administrative costs were too high to make it worthwhile, if the number of Scots MPs at Westminster could be reduced or if the Barnett formula, which allocates money across the UK, was likely to be scrapped.

Ms Lamont said: “This interim report provides a starting point for our debate about the future of devolution ...we need to open it up to the people of Scotland so Scottish Labour can reflect the views of the majority of Scots who want to stay within the United Kingdom.”

As Scottish Labour seeks to find the best alternative to independence, acknowledging it has also to provide a “new offer” to Scotland in place of the status quo, protests have this week been made at Westminster about how the issue is being handled.

Party sources said concerns at the prospect of full devolution of income tax were raised not just at the Scottish Group of Labour MPs but at the full meeting of the Parliamentary Labour Party, where “forthright” and “robust” views were aired.

One backbencher said: “There was a blatant attempt to stitch it up and bounce us into this.”
Another MP said: “We shouldn’t be getting ourselves in such a situation where we are making ourselves more nationalist than the nationalists. That’s the potential here.”

One Labour colleague noted how MPs north and south of the Border felt this was not just a matter for Scottish Labour as devolving income tax to Holyrood would have consequences for the whole of the UK.

A third Scots MP pointed out any change for tax at Holyrood has to be voted on at Westminster.

He said: “It’s not going to happen as it does not stack up. You can’t devolve income tax and it not have an impact on the money Scotland gets from the Barnett Formula.”

A senior Labour source at Holyrood sought to allay colleagues’ fears, stressing: “The commission’s report is interim and we’re at the start of a consultation; no-one is being bounced into anything.”

The commission report ruled out devolution of corporation tax and said National Insurance was too closely linked to the UK-wide benefits system, which Labour wants to maintain. It suggested there was a strong case for devolving air passenger duty under certain conditions.

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