25 Nov 2014

Scottish Labour U-turn on tax devolution

Jim Murphy, the front-runner for the leadership of the Scottish Labour party, has decided he does want full devolution of tax to Scotland after all. It is a remarkably swift U-turn by the former Scottish Secretary and long-time devo-sceptic, rushed out to make sure that Labour, the Lib Dems and the Tories are singing from the same hymn sheet when the Smith Commission publishes its conclusions on Thursday.

Until very recently, Labour was way behind the other two parties in terms of readiness to devolve tax powers – you see the three main parties’ submissions to the Smith Commission (published only last month) by clicking right here.

Labour’s plan was to devolve 75 per cent of the basic rate to Scotland. Gordon Brown in the referendum campaign repeatedly proclaimed this as a great offer but his rhetoric fed the notion that Labour (and the other pro-unionist parties) were offering something bigger.

Jim Murphy Mp Formally Launches His Campaign For Scottish Labour Leader

Gordon Brown, just as the referendum campaign was ending, sounded grimly aware that the agenda may well have raced ahead of Labour’s position. The excitement around the narrowing polls, his own “home rule” language and SNP quick wittedness had contributed to expectations of new devolved powers racing past Labour’s original offer.

The Smith Commission looks like coming up with proposals close to the Tory ones originally authored by Lord Strathclyde’s commission. That proposed devolution of income tax including the power to set rates and the thresholds between bands, as well as some smaller taxes. (It also proposed devolution of some welfare including housing benefit and attendance allowance.) Sources close to that review chuckled at the time it was published that they’d found a way to shoot Labour’s chances of running Westminster in perpetuity. Gordon Brown has said these plans are a “Tory trap”.

But the UK leadership and Jim Murphy (pictured above) have decided that the risk of losing Scottish Labour MPs at Westminster as a result of consequential constitutional changes is as nothing to the more immediate threat of SNP candidates marauding across once safe Labour seats in Scotland and threatening to monster Labour in the general election.

In yesterday’s FT the man who led the Better Together campaign, Alistair Darling, said full-scale tax devolution could end in “floods of tears” as the Scots suffer from unstable income that can’t support their welfare budget in bad times and London struggles to sell government bonds when the markets aren’t sure it is in charge of income tax. He didn’t say, but plenty of other senior Labour figures will, that they worry that full-scale tax devolution could feed disagreement or friction zones with Scotland which will serve the SNP’s cause in the longer term.

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