Scottish Variable Rate of Income Tax

– in the Scottish Parliament at 2:04 pm on 24 November 2010.

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Photo of Alex Fergusson Alex Fergusson None 2:04, 24 November 2010

The next item of business is a debate on motion S3M-7477, in the name of John Swinney, on the Scottish variable rate of income tax. I advise members that time for the debate is very tight.

Photo of John Swinney John Swinney Scottish National Party 2:05, 24 November 2010

Members will recognise that I normally take a number of interventions when contributing to parliamentary debates. Today I must place complex detail on the record, so I will take no interventions during my opening speech. However, I will respond to points and take as many interventions as possible during my closing remarks.

Photo of Lord Jack Wilson McConnell Lord Jack Wilson McConnell Labour

On a point of order, Presiding Officer. This is a debate rather than a ministerial statement, which must be a matter of regret to some of us. Will you clarify whether the initial speaker in a debate should behave as if it is a debate or as if it is a ministerial statement, as the two are entirely different in respect of the interventions, questions and points that might follow?

Photo of Alex Fergusson Alex Fergusson None

I am sure that, like other members, Lord McConnell is aware that it is entirely for the member who has the floor to decide whether to take interventions. I have no ruling on the matter—it is not a point of order for me.

Photo of John Swinney John Swinney Scottish National Party

In the past few days, a number of criticisms have been levelled at the Government on the issue of the Scottish variable rate of income tax. First, it has been said that we have allowed the tax-varying powers to lapse. That is wrong—the powers are contained in the Scotland Act 1998, and they are there still. Secondly, it has been said that all that was required to operate the Scottish variable rate was for the Government to pay £50,000 per year to HM Revenue and Customs through a service-level agreement, as our predecessors did. That is not the case.

When the Parliament was established in 1999, the Scottish Executive paid £12 million to create information technology systems for the SVR. In addition, the then Inland Revenue agreed to maintain a database of addresses for £50,000 a year. That agreement ended in 2007. When this Government was elected in May 2007, we were advised that if we wanted to invoke the tax-varying powers, the earliest reliable date for implementation of the SVR was April 2009—two years into the session. That would correspond to using the powers in the next session from April 2013—exactly the same timescale that prompted the Secretary of State for Scotland to write to party leaders last week.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

Will the member take an intervention on that point?

Photo of Alex Fergusson Alex Fergusson None

The cabinet secretary has made it clear that he is not taking interventions.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

On a point of order, Presiding Officer. Correct me if I am mistaken, but that does not imply that we cannot try to get Mr Swinney to take interventions.

Photo of Alex Fergusson Alex Fergusson None

That is correct, but the cabinet secretary made it clear to you that he was not taking your intervention.

Photo of John Swinney John Swinney Scottish National Party

In May 2007, in one of the first briefings that I received, I was informed that the SVR project was "mothballed" in 2000, and I was presented with three options. Option 1 said that if the Scottish variable rate were applied from April 2008, implementation would be sub-optimal; yield to Scotland from the SVR would be £10 million to £26 million short and we would be required to pay further IT costs of £3.4 million to upgrade the system. Option 2 stated that if the Scottish variable rate were applied from April 2009—the first reliable date for implementation—we would be asked to meet IT costs of £2.9 million for system upgrades. Option 3—the option that I asked my officials to pursue with Her Majesty's Revenue and Customs—recognised that if the SVR were not applied during this session, IT costs of £1.2 million would be incurred to ensure a 10-month state of readiness thereafter.

Given the fact that the Government, like all the main parties that are represented in the chamber, had made a commitment not to invoke the tax powers, we considered that the work could be undertaken over the lifetime of this parliamentary session, enabling political choices to be made in the next session.

This information is crucial to today's debate. When this Government came to power, we did not inherit a functional IT system that was capable of delivering the tax power at 10 months' notice.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

Will the minister take an intervention on this point, if I try again?

Photo of John Swinney John Swinney Scottish National Party

The £50,000 a year that was paid by the previous Scottish Executive kept the database of taxpayers up to date, but not the IT system. It would have cost the Scottish taxpayer millions of pounds to get it back to a condition in which it was useable, for a 10-month state of readiness. There would have been no point in paying £50,000 per year to update an address book that could not be used. Consequently, in 2007, I took steps to ensure that there could be a viable system available for use when this session came to an end.

I give way to Mr Rumbles.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I thank the minister for finance for giving way. Can he tell Parliament today why it has taken him three and a half years to address this point to Parliament? Why has he kept it secret?

Photo of John Swinney John Swinney Scottish National Party

If Mr Rumbles will forgive me, I am coming to that matter, and I will address it at the right point in my remarks.

Scottish Government officials undertook to work with HMRC to ensure that the upgrades could be made. In early 2008 there was further discussion about the option that I wished to pursue: that of paying £1.2 million to achieve a working system for the next parliamentary session. Officials sought clarity from HMRC regarding costs and timescales for making the necessary changes. On 28 May 2008 HMRC advised Scottish Government officials that the process was progressing, but more slowly than had been expected. That sparked a prolonged period of communication by my officials to obtain answers.

Finally, on 28 July 2010, HMRC set out a proposition for further IT work at an indicative cost of £7 million—on top of the millions that had already been paid by our predecessors—to enable the SVR to be exercised by the beginning of 2012-13. Were we not to agree to that approach, the earliest that the SVR arrangements would be available to us would be the following year—2013-14. After dialogue lasting three years, HMRC required an answer within three weeks.

Photo of Lord George Foulkes Lord George Foulkes Labour

The finance secretary will remember that I specifically asked him on 9 September what was preventing him from introducing 1p, 2p or 3p of additional tax. He did not answer that question with what he is telling us now. Why did he not tell us then? He knew it then, but instead he said to me that I could advocate such a measure. He was quite wrong: I was not able to advocate it, because he had ruled it out.

Photo of John Swinney John Swinney Scottish National Party

Lord Foulkes will forgive me—. I am thankful that I am not the script writer for his speeches.

To be clear, HMRC was asking for an additional £7 million to re-establish an IT system that had already cost £12 million. The same HMRC that has just messed up the tax accounts of 10 million people wanted the Scottish people to fork out millions of pounds more to upgrade their computer system. I took the view that, in the current spending environment, paying out £7 million required further consideration.

We asked for a further meeting with HMRC to clarify why it wanted us to spend millions more pounds of taxpayers' money to update its IT systems. In September, we again reminded HMRC about our suggestion of a meeting, but we received only an acknowledgement and the promise of a call that never came—that is until last week, when the First Minister received a letter from the Secretary of State for Scotland.

Let me dwell for a moment on the secretary of state's intervention. First, as I have made clear, there is no question of the tax powers lapsing. They exist in an act of Parliament, and this Parliament does not have the powers to revoke such an act—unfortunately. Although Scottish ministers have powers to vary the tax rate, HMRC has a duty to administer it. The Scottish Government cannot be held responsible if HMRC cannot operate timeously or efficiently.

Secondly, if the secretary of state is going to make interventions in such debates, they should at least be complete. There was no mention in Mr Moore's letter or in his press briefings that we had been asked for an additional £7 million at three weeks' notice in order to meet HMRC's demands. After all, £7 million would pay for 275 newly qualified nurses for a year.

Thirdly, Mr Moore did not mention the fact that Westminster was asking for millions of pounds to put its computer system back into the state it was in before the decision to replace it. Although Westminster expected us to come up with the funding, we were not consulted about the replacement, and nor were we told the costs until the end of July.

Fourthly—and perhaps most crucial—the Secretary of State's letter and briefings made no mention of the linkages between the SVR and the United Kingdom Government's income tax proposals in the planned Westminster bill. Indeed, in subsequent media briefings, Mr Moore's spokesmen have described them as "quite separate things". That is simply not the case. I quote the Calman Commission on Scottish Devolution, which recommended:

"the Scottish Variable Rate of income tax should be replaced by a new Scottish rate of income tax, collected by HMRC".

The Secretary of State for Scotland says that he intends to legislate to implement the commission's recommendations. From my reading of the draft Scotland bill, the Scottish variable rate is going to be abolished. What we do not know is when the Secretary of State will replace the SVR, what that will cost and who he thinks should pay. Therefore, far from being separate things, the SVR and the forthcoming Scotland bill are closely related.

I have been accused of misleading Parliament by my statement last Wednesday that the Scottish Government would not use the tax-varying powers. In every budget document since 2005-06, the finance minister has included a statement as to whether the Scottish Government intends to use the Scottish variable rate of taxation. I continued that convention and was merely making a factual comment for the record.

There is always a judgment on the part of ministers on when is the correct time to advise Parliament of developments on any issue. I have clearly made judgments on that question that I need to explain to Parliament. I could have come to Parliament in 2007 to explain the position then. I chose not to do so, as I had no intention of using the Scottish variable rate and I had asked my officials to remedy the problems that I had inherited. If I had come to Parliament at that time, I am sure that some members would have criticised me for using parliamentary time to highlight the woeful record of my predecessors—[Interruption.]

Photo of John Swinney John Swinney Scottish National Party

As the process of dialogue with HMRC became more and more protracted between 2008 and 2010, I could have come to Parliament and explained the difficulty. I did not do so, as I believed that a process of discussion between officials on operational issues was under way and that I should not take the issue into an inevitably political sphere. This Administration has, of course, faced that charge before.

Finally, I could have come to Parliament after 20 August to explain our reasoning for not agreeing to the £7 million proposal from HMRC and for our requesting further discussions with HMRC. I wanted to understand why the cost had gone through the roof and how the proposed Scotland bill would impact on the SVR. The Scottish and UK Governments have been discussing those matters for some months, in confidence. I judged that to come to Parliament while those discussions were under way would breach the confidentiality that the Secretary of State for Scotland, among others, had requested.

Photo of Alex Fergusson Alex Fergusson None

No. The cabinet secretary should be winding up.

Photo of John Swinney John Swinney Scottish National Party

Those judgments have been called into question. I made those judgments in good faith, for the reasons that I have set out, but I express my regret to Parliament that, in retrospect, I clearly did not get all those judgments correct. In terms of sharing information with Parliament, I have today placed relevant documents in the Scottish Parliament information centre.

At all times in my term of office as Cabinet Secretary for Finance and Sustainable Growth, I have sought to fulfil my responsibilities to Parliament and to the people through effective management of the public finances. I have tried to do that in an open and transparent way, and I have done that by challenging whether spending on specific projects was appropriate at times of great financial constraint. When it comes to making the judgment between spending millions of pounds on HMRC computer systems that have never been used or spending on front-line services to protect the welfare of our citizens, I will always take the side of the people.

I move,

That the Parliament notes that the Scottish variable rate (SVR) remains a power in statute; further notes the substantial investment required to make the SVR operate in a way compatible with HM Revenue and Custom's IT system; believes that such expenditure requires careful consideration at a time of huge public spending pressures; further believes that this expenditure requires to be assessed in the context that the SVR is due to be replaced by a new taxation system; calls on the UK Government to specify the costs of its Calman taxation proposals so that the Scottish Parliament can judge whether these costs should be met and that the Scottish Parliament should be informed of these costs before considering whether to give approval to the proposed UK legislation, and records the fact that such costs, under the HM Treasury's own statement of funding policy, should be borne by the UK Government, all of which demonstrates the need for the Scottish Parliament to have full financial responsibility.

Photo of Iain Gray Iain Gray Labour 2:19, 24 November 2010

The Government has lodged an extraordinary motion. It seeks to justify the deliberate and—as it turns out—secret disempowerment of this Parliament. Our claim to be a Parliament rests on two powers: the power to legislate and the power to tax. Mr Swinney has chosen to allow the capacity for this Parliament to vary taxes to fall into abeyance.

The finance secretary made it clear in his statement today that, when he decided not to sign off the £50,000 annual cheques from 2007 and not to meet the other requests for a contribution, he knew that the consequence would be that our tax-varying powers would fall into abeyance. Three former finance secretaries on the benches behind me well understood that when they signed those cheques, it was to maintain the power year in, year out. The consequences of failing to carry out that duty are straightforward.

Photo of John Swinney John Swinney Scottish National Party

Would Mr Gray reflect on the point that I have put on record today—that when I came into office the Scottish variable rate power was not operable because the IT costs had not been fully put in place, as required by the HMRC systems?

Photo of Iain Gray Iain Gray Labour

The point is—[ Interruption .]

Photo of Iain Gray Iain Gray Labour

The point is that the £50,000 annual payment had been made year in, year out in order to sustain the system. As for the argument that the choice was made only because of an inability to find £1.2 million, £7 million or £26 million—or another of the figures that have been blown around like a snowstorm to hide what has happened—surely the correct thing to have done, if Mr Swinney's view was that the payments should be withheld, would have been to seek the agreement of the Parliament.

This is not simply an operational decision. To not sustain the capacity to vary taxation is not a choice that Mr Swinney had the right to make. He said that he would always take the people's choice, but the point is that the choice to give Parliament the power to vary taxation was made by the people of Scotland—1.5 million of them, who all put their crosses to say yes to giving the Parliament tax-varying powers. They did not mean some hypothetical power that exists in statute but has been rendered unusable; rather, they meant a real, practical choice that would be available to the Parliament. No Government may simply abrogate either of the two fundamental powers of the Parliament without abrogating the will of the people as well.

Photo of Iain Gray Iain Gray Labour

No.

The Scottish Government says that no party has any intention of using the tax-varying power, but that is not true. The SNP itself has sought to use it in the past. The Liberal Democrats in this Parliament have sought to use it to reduce the tax rate, and Green MSPs have argued that it should be used this year to avoid cuts. In any case, Mr Swinney's decisions have rendered the power impossible to use for the next Parliament too, thus binding a future Administration in a way that can be described only as undemocratic. No matter the policies or mandate of that Government, it will not be able to use the tax-varying powers in effect for the course of the next parliamentary session. This Government has failed in the stewardship of this Parliament and has breached the confidence of the people who supported the power in the 1997 referendum.

The only possible justification for the decision would have been that it was taken with the Parliament's agreement. Even then, such a move would have been open to severe criticism. However, the decision was, in fact, taken not just without Parliament's agreement but without Parliament's knowledge.

If Mr Swinney was involved in such an assiduous attempt to ensure that the tax-varying power was available, why did he not inform us of that and allow us to share the burden of his difficulty in ensuring that the Parliament had the power? Yesterday, he explained in committee that he did not want to burden us with the information, lest our briefcases became too heavy for us. So far, so flippant.

However, Mr Swinney did not just omit to mention the decision—he hid it behind references to the SVR. In his budget statement last week, he said:

"We have been mindful of the need to consider the effect of the significant tax rises that the UK Government has announced ... I therefore confirm that we will not raise the Scottish variable rate of income tax."—[Official Report, 17 November 2010; c 30463.]

That was clearly meant to imply that he had such an option, which he now tells us he knew he did not have.

In answers to parliamentary questions in January this year, Mr Swinney said that the SVR could have raised £1 billion in 2009 and 2010, yet he knew that it could not have done so. No hair-splitting between what is on statute and what could actually be done can be allowed to confuse the issue.

When Mr Swinney said to the Equal Opportunities Committee in May—

Photo of Iain Gray Iain Gray Labour

I am sorry—I will not give way.

Mr Swinney said to the Equal Opportunities Committee in May this year:

"We could use the tax-varying powers—for example, we could increase the basic rate of income tax by 3p in the pound ... It is clear that that is an option for any Administration".—[Official Report, Equal Opportunities Committee, 4 May 2010; c 1630.]

Those words were simply not true. [Applause.]

Photo of Iain Gray Iain Gray Labour

That was not an oversight or careless words; they were carefully chosen to give a false impression. A deliberate and systematic attempt has been made over years to cover up the situation and the decisions that meant that the SVR was not an option. A deliberate and systematic attempt was made to mislead Parliament and wider Scotland into believing that the Government still had the option of varying the SVR. To be frank, no matter whose fault that was and no matter when it occurred, to fail to tell the Parliament and to continue to pretend that the option was available is simply unacceptable.

That we must listen day in and day out to Mr Swinney's demands for more powers for the Parliament when we now know that he failed to maintain the powers that the Parliament had is unbelievable. That by doing so, he thwarted the will of the people as expressed overwhelmingly in a referendum is unacceptable, but that he conspired to hide the decision from the Parliament and from Scotland is unforgivable.

The explanation that Mr Swinney has given today is disingenuous and his apology was grudging and unacceptable.

Photo of Alex Fergusson Alex Fergusson None

I must ask you to close, please.

Photo of Iain Gray Iain Gray Labour

Mr Swinney must apologise fully or consider his position.

I move amendment S3M-7477.1, to leave out from first "notes" to end and insert:

"considers it an abuse of power for the Scottish Government to abandon the Scottish variable rate of tax without the approval of the Parliament and by consequence preventing the Parliament from using this power until 2013-14 at the earliest; further considers it unacceptable for ministers to mislead the Parliament over the existence of these powers; believes that it is wrong that a power given to the Parliament by the people of Scotland in a referendum should be taken away by the action of a minority government without reference to or endorsement from the Parliament, and calls on the Scottish Government to admit responsibility for the lapse of the tax varying powers and to apologise to the members of the Parliament and people of Scotland to whom it has conveyed the impression that these powers are still capable of use."

Photo of Alex Fergusson Alex Fergusson None

I call—[ Applause .]

Order.

I call Annabel Goldie.

Photo of Annabel Goldie Annabel Goldie Conservative 2:29, 24 November 2010

I am still not clear whether this fiasco is an SNP mess-up, an SNP Machiavellian conspiracy or both, but one thing is clear: there has been a cover-up. This is not some minor administrative slip by a junior official, nor is it some academic exercise about fantasy powers. There has been a systematic, concerted and conscious cover-up lasting more than three and a half years.

When the people of Scotland voted for our Parliament to have the power to vary income tax, that power was not given to the SNP or to any other party; it was given to the Scottish Parliament. It is the people's power, not Mr Swinney's or Mr Salmond's, yet Alex Neil admitted on radio this morning that Mr Swinney chose to stop updating the HMRC system in 2007, which Mr Swinney has confirmed. Why was the Parliament not told of that decision? It is totally irrelevant what Mr Swinney thought about whether to use the power. It is fundamental that he neutered the power, made it inoperable by any other party and did not tell the Parliament.

Photo of John Swinney John Swinney Scottish National Party

Will Ms Goldie reflect on my point that when I became a Government minister, the clear advice that I was given was that the earliest date for a reliable implementation of the SVR was April 2009? The power could not be operated at that time.

Photo of Annabel Goldie Annabel Goldie Conservative

Forgive me, but we are in the middle of 2010 and are approaching an election in 2011. Is not that precisely why the finance minister has been negligent in not informing the Parliament of what was going on? To argue, as the SNP has done over recent days, that none of this matters, that the power was never going to be used and that that was made clear at every budget is to completely miss the point. That attitude is grossly misleading and blatantly hypocritical.

Here is why. It misses the point because no minority party in this Parliament of minorities has the right to shackle the other parties. To neuter the ability of the next Parliament to exercise its rights under the Scotland Act is a betrayal of democracy. As we now know, when the SNP rendered the tax-varying powers unusable, it knew what the consequences would be for the next Parliament, but it did not let anyone else know.

It is grossly misleading and blatantly hypocritical to claim that none of that mattered. Unless I have missed something, time after time over the past three and a half years, the SNP has trumpeted a local income tax. Unless it was conning the voters and never really intended to introduce a local income tax, why did Mr Swinney say in July 2008:

"We propose that LIT is collected through the existing PAYE system and self assessments. The Scottish Government will pay Her Majesty's Revenue and Customs to administer and collect the tax"?

He went on to publicly praise HMRC's cost efficiency, while the SNP was making those procedures unusable.

In 2008, the SNP's consultation on local income tax said:

"the SVR could, in principle, be introduced relatively quickly."

It went on to praise the HMRC as being the most efficient means of delivering a local income tax, given that it already held the relevant data and had all the experience and systems that were necessary to collect such a tax. In 2008, the SNP told the world that the HMRC was cost effective, efficient and quick, that it held the relevant data and had the necessary systems, and that it was just a question of pressing the button, because it was all ready to go. How could that be when the SNP had stopped updating the records? It does not add up.

Let me tell you what else does not add up. Whenever the UK Government does or says anything that could be construed as doing Scotland down, who is the first to shout blue murder? Let us take the example of prisoner transfer and Alex Salmond's outrage at the possibility of being cut out of a deal. He was incandescent. As it happens, he was correct to be, but can you imagine the hullabaloo from Messrs Salmond and Swinney if the Westminster Government by act or omission denied this Parliament the right to exercise a power? Alex Salmond and the SNP would take to the streets in protest. What happens when this Parliament is denied the effective use of a Scotland Act power by the SNP? There is deafening silence and cover-up.

Just when did the SNP plan to come clean? Was it really going to produce a manifesto for next May that promised a local income tax, while still keeping quiet? Every word that has been uttered today by Mr Swinney, by his colleagues around him and by the First Minister and their minders will be scrutinised over the coming hours and days. Answers need to emerge about just what happened, who knew what and when, and who ordered the cover-up. Someone somewhere orchestrated a cover-up to deny the people of Scotland the truth. That is the charge that the SNP faces today.

Photo of Tavish Scott Tavish Scott Liberal Democrat 2:35, 24 November 2010

When this nationalist Government is in a hole, two things happen, as we have seen before. The SNP dissembles, shouts, screams, throws mud, makes it up and blames anyone else it can. Then it wheels out Alex Neil. I had thought that ministers had to behave, but not any more—not after last night. There is only one more step that the SNP can take: Mike Russell will be next.

This morning, we were treated to the SNP's spin to the broadcasters. We were told that the nation would receive contrition about the process, not an apology. Today, we got no apology. We were told that the cabinet secretary could not tell us, because it would have meant putting the matter into the political sphere. The SNP did not want to put something into politics—what a joke that is!

The facts of this disgraceful episode are simple, and they show either SNP deceit or incompetence. The first fact is that the Parliament was given the power to vary income tax by the people of Scotland in a vote. That power was given not to a party, a minority Government, a First Minister, or a finance secretary but to the Parliament. Mr Swinney's speech today showed that he does not seem to get that point.

Fact: there is a cost to retaining the mechanism to allow the tax-varying power to be exercised, and how much that is now is nothing more than a political slanging match on which Mr Swinney has poured smoke, smoke and more smoke. The point that matters is that the SNP has stopped that constitutional power being used not only now but by the new Government that will be elected next year. That was not the SNP's decision to make.

Fact: at no stage since 2007 have Mr Swinney or any of his ministerial colleagues—most certainly not Mr Salmond—informed, debated or discussed the decision with Parliament. Was that deceit or incompetence?

Fact: yesterday, Mr Swinney said that MSPs were "too busy" to be told about that 2007 decision. Since 2007, the Cabinet Secretary for Finance and Sustainable Growth has had 110 separate opportunities to present his position. He has presented four budgets, published eight budget revisions, participated in 15 budget debates, made 24 appearances in front of the Finance Committee, and delivered 29 ministerial statements to the Parliament. There have also been a debate on strategic budget scrutiny, two debates on the strategic spending review, and six debates on the Scottish Government's programme. There has also been a debate on improving accountability, but he did not take part in that one—too busy? Too busy to find ways to explain the Government's decision to the Parliament. Was that deceit or incompetence?

Fact: when it proposed the local income tax, the SNP Government said that it would use the tax-varying powers to make it happen. The Government statements on how LIT would be implemented misled the Parliament and any voter who supported LIT on that basis. At no time when they were explaining why the SNP had dropped LIT did Mr Salmond or Mr Swinney explain that they could not implement it because the tax-varying power could not be used. On the day of the ditch, Mr Salmond looked me in the eye at the back of the chamber and explained why local income tax was being dropped. As always, Mr Salmond did not give the truth that day. Was that deceit or incompetence?

Members:

Withdraw! Apologise!

Photo of Tavish Scott Tavish Scott Liberal Democrat

Fact: before the budget debate that was held exactly a week ago, the finance secretary's budget document said:

"Our opportunities to vary taxes are limited to the Scottish Variable Rate, which no Scottish administration has chosen to use since Devolution, and some discretion over non-domestic rates. We confirm that we will not use the Scottish Variable Rate power".

When addressing the Parliament last Wednesday, the finance secretary implied that he had considered using the tax-varying power and dismissed it. If that is not misleading the Parliament, what the heck is? Was that deceit or incompetence?

Are the Parliament's tax powers available to use? No. Was the Parliament told that in 2007, 2008, 2009 or this year? No. Can the local income tax be implemented? No. Has Parliament been misled? Yes. Has the finance secretary had 110 separate occasions to tell us what is going on? Yes. Has a minority nationalist Government misled the Parliament? Yes. Has the SNP treated with contempt the people of Scotland, who gave the power to the Parliament? Yes.

Although Mr Swinney is put up today, the blame for this is not his alone. It sits next to him. We have had one sanctimonious lecture after another—[Interruption.]

Photo of Tavish Scott Tavish Scott Liberal Democrat

We have had one sanctimonious lecture after another from Alex Salmond on the respect agenda. Today defines Mr Salmond's respect for the Scottish people and the Parliament. Respect is something that one earns. No one will respect Mr Salmond again on the constitution, on Scotland's future and on the government of our country. After the way in which his Government has handled local income tax and after his finance secretary's speech a week ago, Mr Salmond expects to pass a budget and negotiate with other parties. There is no one else to blame. This is the Salmond Government, and it has shown its true colours today. What Mr Salmond and his Government have failed to do today is explain whether all this is mess, deceit or incompetence. Deceit and incompetence are the two words for which his Government will now be known. Respect? Not a chance.

Imagine for a moment what would have happened if the nationalists had been in opposition. What would they have said about a Government giving up powers that people had given to Parliament? Many would have howled, full moon or not. Some would have shed tears. A few ambitious back benchers might have gone on hunger strike until the powers were returned. These are the people who make a constitutional crisis out of the museum that houses the Lewis chessmen, yet the SNP signs away the choices and powers of Scotland's Parliament. The wishes of 1.5 million Scots are discarded without a murmur. Some respect, that.

Photo of Stewart Maxwell Stewart Maxwell Scottish National Party 2:42, 24 November 2010

Shakespeare got it right when he said:

"sound and fury, signifying nothing."

That was Tavish Scott's speech and that is the view of the Liberal Democrats. We have had noise but no clarity. As is often the case, there is a lot of smoke but no fire. Despite much Opposition fuss and fury about what happened between 2007 and 2010, there have been no answers about the revelation that Labour and the Lib Dems mothballed the SVR system before 2007. Tavish Scott was a minister at the time, but he said nothing to Parliament.

Photo of Tom McCabe Tom McCabe Labour

On a point of order, Presiding Officer. The member has misled Parliament. His statement is totally and utterly untrue.

Photo of Alex Fergusson Alex Fergusson None

As Mr McCabe knows well, that is a matter for the member to correct if he wishes to do so.

Photo of Stewart Maxwell Stewart Maxwell Scottish National Party

There is nothing to correct. What I said is true. The Labour Party mothballed the SVR system. That is a fact. Tom McCabe was a finance minister in the Administration at the time. When did he come to Parliament and tell it that his Administration had decided to mothball the SVR? That is what happened. At no point, did that Government tell Parliament. [ Interruption .]

Photo of Stewart Maxwell Stewart Maxwell Scottish National Party

The UK Government made demands for sums of money that varied between £50,000, £1.2 million, £2.4 million, £3.9 million and £7 million. Despite the best efforts of the Scottish Government, we are still no clearer about what that money was for. There were discussions and letters were exchanged. For all I know, there were e-mails and phone calls, too, but in the end all we got was a refusal by the UK Government to answer legitimate questions and, finally, a £7 million demand with three weeks to pay. Other parties seem keen to hand over millions of pounds without giving answers to legitimate questions, but no competent minister would agree to that.

The first question that the Opposition needs to answer is what budget it would have cut to pay millions to Westminster. It has never been keen on having 1,000 extra police officers, so perhaps it wants to cut a couple of hundred police officers—maybe that is what it would have done—or does Labour want to do what Glasgow City Council has done and cut hundreds of teachers from the education of our children?

Photo of Stewart Maxwell Stewart Maxwell Scottish National Party

The second question that Labour members need to answer is why they want to waste millions of pounds on a system that is about to be replaced.

Photo of Alex Fergusson Alex Fergusson None

Order, Lord Foulkes. The member has made it plain that he is not giving way. I am sorry.

Photo of Stewart Maxwell Stewart Maxwell Scottish National Party

Next week sees the publication of the proposals that will make SVR redundant, yet Labour wants to spend millions of our pounds on a redundant system. The Opposition's position is that we should spend millions on a soon-to-be-redundant system and millions more on the Calman tax proposals—perhaps tens of millions, given that Michael Moore refuses to tell us and perhaps does not even know how much those proposals will cost us. That is an untenable position.

Throughout the debate, Opposition spokespeople have been claiming that the SNP Government has given up the power and that the power is somehow lost. That is nonsense. The power remains and, prior to the past week, the UK Government had never stated that the power was lost. In fact, as far as we were concerned, the power was there and could be used post-2007 in the same way as pre-2007. The UK Government made that absolutely clear in its budget documents.

In 2007, the UK budget document, on page 211, talked about the SVR, its use and the Government's view on that. In 2008, the budget document, on page 113, made the point that the SVR was available and talked about how it could be used. In 2009, on page 156, the budget document stated that the SVR existed and talked about how it could be used. In 2010, on page 123, the budget document mentioned it again. Those were four Labour Party budgets and at no point did the UK Labour Government say that the power was not available, although it had been mothballed.

In case the Lib Dems and Tories think that they are being missed out, I point out that, only a month ago, in "Funding the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly: Statement of Funding Policy", which is among the comprehensive spending review documents, at paragraph 6.1 on "Self-financed spending", we were told:

"The devolved administrations ... have responsibility for spending financed from some other sources of revenue, for example ... in Scotland, were this to be used, the Scottish Variable Rate of Income Tax."

There is no mention of the fact that the SVR was not available. Every budget statement since 2007 has said the same thing. Their position is, frankly, untenable on that point.

I will finish on the important point of who should pay for what. The Calman tax proposals make that an imperative question. Despite attempts to rewrite history in the past week, the rules that govern that are very clear and the UK Treasury's statement of funding policy for the devolved Administrations has made the position very clear.

Photo of Stewart Maxwell Stewart Maxwell Scottish National Party

If the UK Government's decision costs the Scottish Government or the Welsh Assembly Government money, the UK Government should pay for it.

I want to quote Hansard

Photo of Alex Fergusson Alex Fergusson None

Mr Maxwell, I am sorry, but you do not have time. We must move on.

Photo of David Whitton David Whitton Labour 2:48, 24 November 2010

I speak in favour of the amendment. Mr Stewart Maxwell has just asked for some clarity and perhaps I can help him in that regard. The briefing note for permanent secretaries and ministers on the implementation of the Scottish variable rate says:

"HMRC has recently undertaken detailed feasibility work on the SVR which shows that the earliest date for reliable implementation would be April 2009."

So far, so Swinney. However, it goes on to say:

"SVR could be implemented a year earlier"— that is, by April 2008—

"but such a decision would need to be taken by 5 June 2007 and the resulting timescale would be tight and bring with it increased delivery risks and costs."

Why did Mr Swinney not take the decision at that time, and why did he not come before the Parliament to tell us that that was what he was going to do?

The reasons for the debate and much of the justification for its actions will do the SNP Government no service at all. The fact is that this is a serious matter that came to light only because a minister from another Government put it in the public domain. That undermines the sovereignty and superiority of Scotland's people over this Parliament.

As Tavish Scott said, the ultimate decision on whether powers should be devolved from Westminster to Scotland—powers to be exercised by a Scottish Parliament—was made by Scotland's people. This Government knows as well as anyone that an intrinsic part of the mandate was the power to vary the basic rate of income tax if the Government of the day chose to do so. That power is not the plaything of this Parliament or any Government, SNP or otherwise.

Yesterday, Mr Swinney appeared before the Finance Committee and told us that the issue of the Scottish Parliament's ability to introduce a variable rate of tax, capable of being introduced within a 10-month period, went back to the briefing that he received from his civil servants when he became a minister.

It was then that he made his first mistake. He ordered the civil service not to pay—it was a ministerial direction—and so began the trail of deception that leads us here today. His second, and most crucial, mistake was not to tell the Parliament what he had done and why—something that he says he now regrets, but only because he has been found out. It is also worth recalling that the new SNP Government was in a habit of making non-payment decisions at that time, over which it got into disputes with Westminster, such as when it did not pay its contribution to the G20 conference or the Shanghai expo. Those issues were made public, so why was the issue that we are discussing today not made public?

We should recall why the Parliament has a tax-varying power in the first place. Former Prime Minister Tony Blair insisted that there should be a referendum on it. The SNP tells us that it is fond of referenda, and it campaigned alongside Labour to ensure a yes vote—I have seen the photographs. Then, having campaigned for a tax-raising power, the SNP became the first political party to ask the people of Scotland for permission to use it. Who can forget the penny for Scotland campaign? I do not know whether the party's defeat in that election soured its attitude towards the SVR. What I do know is that the First Minister has, on many occasions, talked of the sovereign rights of the people of Scotland. In response, I would say that it is the sovereign right of the Parliament to raise or lower the rate of income tax—a right that was voted on by the people of Scotland—and no minister should have removed that right by refusing to pay a bill without bringing the matter before MSPs representing the people of Scotland in the chamber. That is the key issue, and no amount of bluff, bluster or attempts by the First Minister, Mr Swinney or Mr Neil, in his many television performances, to throw up a smokescreen by talking about the more recent demand for £7 million to upgrade the HMRC computer can disguise that fact.

In his letter to the Scottish Secretary, the First Minister says:

"If HMRC choose to replace their IT systems that is clearly a matter for them."

It is also clearly a matter for us as well, as it is that same IT system that would allow the SVR to be introduced within a 10-month period.

However, the fundamental questions before us today are why Mr Swinney refused to pay the money in 2007 and why he has kept that decision secret ever since and, in so doing, undermined the ability of the Parliament to introduce a tax-varying power. As has been heard, he has had plenty of opportunities to explain. He could have explained the position, for example, in May, when talking to the Equal Opportunities Committee, or on September 9, during a debate on the independent budget review when, as can be seen at column 28354 of the Official Report, my colleague George Foulkes asked him what was preventing him from using the power to increase income tax. Mr Swinney replied to Lord Foulkes that the Government's decision was not to use the variable rate. When Lord Foulkes asked, reasonably, "Why not?", Mr Swinney's answer should have been, "Because I told my officials in 2007 not to pay for the upgrade to the HMRC computer so that it would be kept in a state of 10-month readiness." However, instead, he chose, as usual, to attack the UK Government.

It is worth noting that paragraph 2.41 of the IBR report says:

"In practical terms, however, the SVR could not be used to relieve budgetary pressures in 2011-12 as there would be a lead-in time of at least one tax year before the powers could be used."

That shows that not only MSPs but the three wise men were kept in the dark.

Because Mr Swinney refused to pay this bill, the Parliament is damaged, as are Mr Swinney and the SNP. For that, they will pay a penalty next year. We also heard that there was no point in spending the money because, according to Stewart Maxwell, the system will be redundant next week. I do not think that he was listening to his own cabinet secretary, who said quite clearly that we do not know when the financial provisions of Calman may come into force. It is clear to anyone who has read the Calman document that they cannot and will not be implemented straight away. To say that the system will be redundant next week is simply not correct or credible.

Photo of Gavin Brown Gavin Brown Conservative 2:54, 24 November 2010

The cabinet secretary has been criticised today for suggesting in the chamber last week that the SVR had been considered but was not going to be used. What troubles me slightly more, however, is the written word in the budget document itself. On page 63, under the heading "Scottish variable rate", it clearly states:

"In accordance with the agreement between the Scottish Government and the Parliament's Finance Committee on the budget process, the Scottish Government confirms that it will not use the existing tax varying powers in 2011-12."

The document does not just allude to those powers but clearly suggests that they are "existing" and, specifically, that they exist for the financial year 2011-12. It is evident that that is not the case. I will take an intervention at any point from the cabinet secretary if he wants to explain that statement and tell us why the budget document states specifically that those powers are "existing" in 2011-12 when we know that they are not.

Photo of John Swinney John Swinney Scottish National Party

That gets to the nub of one of the accusations that have been made. Those powers exist in statute; they are there and have not been removed. That is the point that the budget document makes.

Photo of Gavin Brown Gavin Brown Conservative

They exist in statute, but they clearly do not exist for 2011-12, which is the matter that is under debate.

Photo of Gavin Brown Gavin Brown Conservative

We hear SNP members mutter that it is no different from 2007; I will tackle that head-on too. The cabinet secretary said that the Government in 2011 will find itself in exactly the same position as the Government that took over in 2007: it would be two years before it could implement the tax powers. Mr Swinney said that it would be April 2009, as he was told in an initial briefing, and he made the same point rather angrily to Annabel Goldie during her contribution.

In his own speech, however, Mr Swinney suggested that an implementation date of April 2008 could have been met. Page 2 of the HMRC document that was released during this debate clearly states:

"April '08 could be substantially met".

It does not say that it might be met; it says that it could be substantially met. It states that it would be "sub-optimal", and that the overall yield would not be as high as in future years. However, with the 3p in the pound rate, the overall yield would have been more than £1 billion. The sub-optimal yield—the lower amount that would be collected, according to HMRC—would be in the region of £10 million and £26 million less. That may well be sub-optimal, but £10 million less than an amount of more than £1 billion is some definition of sub-optimal from the cabinet secretary today.

I will deal with some of the other points that members have raised. One reason that the SNP gives for not proceeding with the SVR is that it would have wasted £7 million, for which we could have had more employees on the front line. The important point, however, is that that was a decision for the Parliament and the Scottish people, not for the SNP Government alone.

It is simply not correct to suggest that the SNP Government could have taken money only from the front line to pay for the SVR. The Government has spent millions on a national conversation. It wants to spend £4.3 million on a central strategic communications budget this year, and it spent £4.8 million on the same budget last year. That amount would have covered the £7 million quite easily, with a little bit left over for strategic communications.

Photo of Lord George Foulkes Lord George Foulkes Labour

Has Murdo Fraser told Gavin Brown that the Auditor General for Scotland told the Public Audit Committee this morning that the Scottish Government had an underspend of £253 million in the last financial year?

Photo of Gavin Brown Gavin Brown Conservative

Murdo Fraser has not said that to me, but I welcome George Foulkes's intervention anyway.

A number of courses were open to the cabinet secretary. There were many occasions on which he could have come to the Parliament to tell us what was happening before the decision was made. As a worst-case scenario, the Scottish Government could easily have paid the money at the time to protect the position of the Scottish variable rate and argued about the cost later. It is regrettable that it did not do so.

Photo of Elaine Smith Elaine Smith Labour

On a point of order, Presiding Officer, I wonder whether you can keep us right on material for debates. I asked the Scottish Parliament information centre outside whether we could have the material that the cabinet secretary said in his opening speech he had laid in SPICe. I was told that it was available in the coffee room. I asked whether it was available in the chamber and was told that no, on the instruction of the Minister for Parliamentary Business's office, it was not to be put in the chamber. I took the few copies that were there and put them out in the chamber, but I would like your advice on what should and should not be available in the chamber as material for debates.

Photo of Alex Fergusson Alex Fergusson None

I will reflect on that, if I may. I think that it is a matter for the parliamentary authorities rather than the minister, but I will reflect on that and come back to the chamber later.

I call Mike Rumbles, to be followed by Patrick Harvie.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat 3:01, 24 November 2010

There are two issues that need to be addressed in the debate—first, whether the Scottish Government will take responsibility for the lapse of the tax-varying powers back in 2007, and secondly, whether the Government will apologise for what others have termed the cover-up that it seems to have maintained on the issue for the past three years.

The Government's strategy in the debate seems to be to try to muddy the waters by conflating the issue with the Calman powers in the Westminster bill to be published next week. As far as I am concerned, that approach is simply not acceptable. All the Opposition MSPs are agreed that what has happened is, as the amendment states, an "abuse of power" by the Scottish Government—an abuse that ended the Parliament's ability to use the tax-varying powers, and a further abuse of power for three and a half years to maintain the falsehood that the powers were available to us if we wished to use them.

It is not a defence for the Government to say that none of the Opposition parties wanted to use the powers. That is simply not true. On 12 November 2008, there was a debate about the state of the Scottish economy. I said to Mr Swinney:

"The measures that the cabinet secretary has mentioned were taken before the credit crunch and the downturn. I think all members agree that decisive action to cut taxes is important and that the cabinet secretary could use the powers that are available to him to cut income tax."

Mr Swinney's reply to me was:

"I look forward to Liberal Democrat members' speeches on their amendment. Mr Rumbles and his colleagues must explain to Parliament"— that is a nerve, is it not?—

"where the consequential reductions in the budget would come from to pay for their proposed tax cuts."—[Official Report, 12 November 2008; c 12231.]

We now know that Mr Swinney's reply to me was a simple trick. He knew then that he had already abandoned the ability to reduce income tax and had failed to alert us to it. The fact that the Parliament was misled on the matter is now absolutely clear to everyone.

Just seven months ago, in response to Derek Brownlee, the cabinet secretary said:

"he will know that ... we are required to make a statement about whether we intend to use the Scottish variable rate. I confirmed during the budget process that that would not be the case. Obviously, the Government considers the question in every budget and we will consider it in the ordinary fashion".—[Official Report, 15 April 2010; c 25388.]

Some ordinary fashion. Mr Brownlee was clearly misled, and so was everyone else, because the SNP had already given up the option to use the powers.

On the subject of misleading Parliament, I want to focus on the words of another Scottish minister, Alex Neil, who, on the radio this morning made the quite outrageous comment that the SNP had made it clear in its 2007 manifesto that it would not use the Scottish variable rate. The interviewer did not pick him up on this, but Mr Neil knew that the SNP had said that in order to implement its abolition of a council tax and its replacement with a local income tax it would use the variable rate of income tax. Someone is not telling the truth here.

Of course, we now know the real reason why the SNP failed to introduce its bill to abolish the council tax and replace it with a local income tax. It had nothing to do with failing to gain support in Parliament and everything to do with the fact that as soon as the bill was published we would have known that the power to raise income tax had already been abandoned. The SNP could not have done it even if it had wanted to.

This Government is a discredited Government. As we have heard, after being found out after three and a half years, it wants to blame everyone else but itself for getting rid of these tax powers. There is a pattern to all of this.

This is clearly the very worst example of an abuse of power by this minority Administration. I sincerely hope that when we agree to the amendment, as I am sure we will, the Scottish Government will do what Parliament has asked of it: first—I am looking at the finance minister as I say this—to accept responsibility for what it has done and, secondly, to apologise to the people of Scotland to whom it continues to give the impression that these income tax powers are still capable of use.

The Government is in the process of failing the test of responsible government. Although there is still time to bring things back, I am quite frankly worried about the prospect. I do not think that the Government realises what is happening. As Tavish Scott said, this was either deceit or irresponsibility—and I believe that it was deceit.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

I am sorry, Presiding Officer. I thought that Patrick Harvie was to speak next, hence my confusion.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

I apologise—I did not hear the Presiding Officer call Mr Harvie. I am quite prepared to take him next. I call Patrick Harvie, to be followed by Linda Fabiani.

Photo of Patrick Harvie Patrick Harvie Green 3:07, 24 November 2010

I have a lot of time for John Swinney. Regardless of political party, not everyone who takes a central part in any Government can gain the respect of people in all political parties, even when differences arise. As every member knows, I have not always voted the way John Swinney would have liked and there have been times when, to his regret and mine, I have tried and been unable to reach agreement with him. I hope that he understands the respect that he has gained during his time in office. If we were to ask people to list the decent and capable people in the current Administration, we would find John Swinney at the top of many of those lists. However, in conveying the respect that he has gained over the past few years, I also state my hope that, by the time this debate is over, he understands the anger that even some of those who have respected him bring to this debate as a result of his actions and, indeed, inactions.

I do not want this debate to be seen as a debate between the Labour Party and the SNP; it is, most centrally, a debate between Government and Parliament. Both sides in the debate have a detailed narrative about which Governments said what or did what at what time, but I am clear that, soon after coming to power in 2007, the current Scottish Government understood very clearly that this situation was developing and was not being resolved. Why was I, as a member of Parliament, not told at that time? Earlier, Stewart Maxwell said that everyone in the Opposition parties should have said which budget the money was to come from if we wanted it to be paid. I would have been delighted to have the opportunity to say what I think ought to have been the priority—but I was not told.

Regardless of political parties, I would have expected any finance secretary in any new Administration in 2007 to have kicked up a storm of anger in explaining that the Scottish Parliament and Scottish Government were unable to exercise the Scottish variable rate power within the expected time period. That should have been put into the political sphere, and it is outrageous to be told now that it was inappropriate for it to be in the political sphere. The issue should have been debated in the political sphere, among MSPs.

If the cabinet secretary is still listening, I will contrast his response in his opening remarks with Nicola Sturgeon's response when she was under pressure to apologise for a misjudgment. She apologised sincerely, calmly and constructively. I would like the cabinet secretary to reflect on that in his closing remarks, to acknowledge calmly and sincerely that some of the judgments were wrong, and to say sorry.

However, I would like more than that. This is not just about blame, about who said what, or about who was responsible; it is also about solutions. It is about ensuring that, in future—not just when an Administration is formed in May by whoever—the powers that exist on paper under the current legislation or under the new Scotland bill that we expect to be introduced soon at Westminster are exercisable in practice. I want there to be a series of practical steps that the cabinet secretary will take over the next few weeks and a commitment from him to report back soon to Parliament on the progress that he is making in turning a paper power into a practical power as soon as possible.

I was not a politician in 1997, when we were all asked to vote on whether the Parliament and this dysfunctional industry of ours should be set up. I was not even a member of a political party when I was asked to vote. Like around two thirds of the electorate, I voted yes and yes. I did so not because I thought that the SVR power was the only or even the best financial power that we could have; rather, I wanted a Parliament that had at least the potential to defend Scotland against attacks on the public sector from a hypothetical, future right-wing Government, for which I was confident Scotland would not have voted. That situation is not hypothetical any more; we are in it right now.

Photo of Patrick Harvie Patrick Harvie Green

I want a Parliament that has the political will and the practical ability to defend Scotland against savage attacks on public spending. I do not really want to hear whether the United Kingdom Government or HMRC is to blame, or whether Alistair Darling should have said something different to Parliament years ago. I am not interested in that. I want to know what will be done now.

Obviously, the Greens have a different position on the use of the SVR. We believe that, in combination with an empowering approach to allow local authorities to raise more of their revenues, limited use of the SVR could be made now in a progressive way to allow Scotland to protect the public services that are under attack. It would be disgraceful to have an election next year in which Scotland's public are offered five different ways to hand on Liberal-Tory cuts to Scottish public services. The Greens will continue to advocate an alternative to that agenda—at the moment, it seems that it is the only alternative. In the meantime, I want the current Government, which serves us and is supposed to serve Parliament's interests, to tell us what it will do to make the powers in question practically exercisable right now.

Photo of Linda Fabiani Linda Fabiani Scottish National Party 3:13, 24 November 2010

I would like to consider two points of clarification.

First, the reason that we are having this debate is that the Opposition parties have no real response to John Swinney's excellent budget statement last week. It was particularly clear that the Labour group had no real response to it. Labour members' contributions showed a lack of real understanding or acceptance of the need for unity for the benefit of Scotland.

The second point that requires to be clarified yet again is that tax powers have not been removed from the Parliament, as some have suggested. They are in the Scotland Act 1998, which only the Westminster Parliament can amend. I suspect that suggesting that they have been lost would be close to misleading Parliament. That is why I have real issues with Labour's amendment. It says that the Scottish Government has abandoned the Scottish variable rate of tax, but it has not. It goes on to express outrage that

"a power given to the Parliament by the people of Scotland in a referendum should be taken away".

It has not been taken away. Why, all of a sudden, are the Labour Party and those who support the amendment, their friends the Lib Dems, so concerned about referenda? Why is that suddenly so important when they are willing to shove through the proposals of the Calman commission, which are a major constitutional change, with no referendum? It seems that Labour and the Lib Dems have selective principles on display.

There is a concentration on process and a fuss about the cabinet secretary not reporting a change to Parliament. Why then did Labour not tell us that HMRC had mothballed the project? Why did the finance ministers Mr McConnell, Mr McCabe and Mr Kerr not tell us that? In fact, given all the manufactured outrage of Tavish Scott and the collective responsibility that the Lib Dems had for eight years, why did they not tell us that there was a non-functional IT system, which was inherited by John Swinney? Why did they pay £50,000, year in and year out? It seems to me that they had no understanding whatever.

The first mention to Parliament of the costs of the system was when Andrew Wilson of the SNP asked in 1999 about administration costs. Jack McConnell's answer—

Photo of Linda Fabiani Linda Fabiani Scottish National Party

Is he not? That is a shame. His answer included the phrase

"reductions will be made in forward years to reflect the Executive's decision to scale back planned work by the Inland Revenue and the Department of Social Security on preparing for implementation of the Scottish Variable Rate."—[Official Report, Written Answers, 10 November 1999; S1W-2195.]

So Labour and the Lib Dems were scaling back implementation work then and actively colluding in the mothballing. I presume that that was because they had no intention of ever using the power.

The SNP Government stated in its manifesto that it had no intention of using the power, and rightly so, because it is a regressive tax. Lower-paid workers would be hit hardest. The tax bill of someone on the minimum wage would increase by 15 per cent, while the tax bill of someone earning around £50,000 a year would go up by only 8 per cent.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

No, thank you.

That is why I was surprised to see my friend Patrick Harvie calling for the tax to be imposed, especially as he said in a debate in September that he regretted

"that a form of tax-varying power was designed that makes it very difficult, although perhaps not impossible, to justify using it."—[Official Report, 9 September 2010; c 28401.]

For the life of me, I cannot see how it is easier to justify using it two months later.

Patrick Harvie is not alone. The Calman commission's independent expert group said that

"arrangements for implementing the SVR are not in place" and that

"the operational detail required to implement the SVR ... remains unresolved".

The group also pointed out how using the system would create revenue risks for the Scottish Government because of its inherent instability. The system is expensive, too. The fees that have already been paid and the £7 million that is demanded are only for maintaining the system in a state of readiness.

So the question is not why John Swinney refused to pay £7 million to update a system that will not be used, but why Labour and the Liberal Democrats frittered away so much on it. What was bought for Scotland with the £12.4 million? The Inland Revenue gave estimates on the start-up costs for Scottish employers. There would be massive costs to the Scottish budget and to Scottish businesses, all to impose additional taxes on Scottish workers with those on the minimum wage being among the hardest hit. We have been paying fees for the maintenance of something that no one would use because its effects are unpredictable and probably damaging. That seems a bit daft to me. It is the fiscal equivalent of Trident—massively expensive and utterly useless.

Let us have a look at reality. The SNP does not wish to raise the basic rate of income tax to the disadvantage of the poorest in our society. However, the Green Party and some members on the Labour benches want to do that. There are those who support the Calman proposal, but that would not help anyone either, and the worry is that it would make things worse. The only thing that would work is full fiscal responsibility for Scotland. I ask members to reject the Labour amendment and support the SNP motion.

Photo of Pauline McNeill Pauline McNeill Labour 3:19, 24 November 2010

As a former member of the campaign for a Scottish Parliament that set up the Scottish Constitutional Convention and the claim of right, I can safely say that I have fought for devolution all my life. Like Patrick Harvie, I am angry about how John Swinney has handled the SVR question and undermined our Parliament.

Those of us who fought for devolution understood the significance of the claim of right and how the Scotland Act 1978—an act without tax-raising powers—was later put right in a referendum with a yes-yes vote when the people of Scotland voted to have tax-raising powers. That is what the people wanted.

Photo of Pauline McNeill Pauline McNeill Labour

It is on the second answer, to the question on tax-raising powers, that the cabinet secretary will be held to account for his part in undermining the will of the Scottish people. John Swinney came to the chamber today to say that he inherited a tax system that could not exercise that tax-raising power. I listened to what he said. He and he alone had a clear duty to put things right. He had a duty to bring the matter before the Scottish Parliament, but instead we have had an admission in his own words that he chose not to come to the Parliament. No one other than John Swinney had the power to put this right.

Photo of Pauline McNeill Pauline McNeill Labour

We heard the mothball defence from Linda Fabiani—is she deliberately ignoring the point that has been made by every other Opposition party in the chamber? The matter cannot be put right easily because, in effect, John Swinney has temporarily suspended our powers. The damage has been done and I am afraid that a lot of trust has been broken.

For a nationalist Government with a whole constitutional department devoted to winning independence and more power for Scotland, how can anyone understand how the cabinet secretary could square off his decision? It is out of character for the SNP that John Swinney did not complain about HMRC's behaviour and express outrage at its position. I am at a genuine loss to understand that. Moreover, given John Swinney's clear political experience, I would have thought that a nationalist Government would be a little more careful about being trusted with the devolution—

Photo of Pauline McNeill Pauline McNeill Labour

I feel that I am being harassed now.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

The member seems to be coping with it. [ Laughter .] Mr FitzPatrick, I think that it is clear that the member is not giving way.

Photo of Pauline McNeill Pauline McNeill Labour

Thank you, Presiding Officer.

There is all the more reason why a nationalist Government that might not be trusted with the devolution settlement should have insisted on transparency, openness and accountability. That is today's central point. Did Mr Swinney not have confidence in his ability to come to the Parliament and argue his case? Instead, he has treated the matter as trivial when it is much more important. He took a unilateral decision not to pay HMRC or not to resolve the issue. He has failed in his duty and, as Annabel Goldie said, he has bound future Governments.

Among the political charges this afternoon is that Mr Swinney must have known that the issue would be raised again in the context of the budget debate. After the subject had been kept silent for three and a half years, I would have thought that some consideration would be given to it during the budget debate. We know now that, on numerous occasions, Mr Swinney decided not to reveal his hand. At the Equal Opportunities Committee, when Marlyn Glen and Elaine Smith asked him whether he had considered using other levers in the budget, he did not reveal that he could not use that power.

If Michael Moore had not put his letter in the public domain, I wonder whether the cabinet secretary was ever going to tell the Parliament about the matter. Yet another opportunity arose when Patrick Harvie got to his feet during the budget debate and asked the cabinet secretary to raise taxes—many of us disagreed with him—the cabinet secretary could have said to Mr Harvie, "I'm sorry; I forgot to tell you that we can't actually exercise that power in any case." I find it concerning that paragraph 2.40 of the Beveridge report says:

"There is no reason ... why the Scottish variable rate of income tax ... could not be used".

That report was made to the cabinet secretary's Government. Did he tell the Beveridge panel that he could not use the tax-raising power? I am sorry to say this, but I think that that was misleading.

I have cited four occasions on which the cabinet secretary had the opportunity to say, "Well, we've had a problem with HMRC" but chose not to say it.

Surely he must have anticipated the current situation. Blaming everyone else here will not get John Swinney through the day. I am afraid that belated accountability is not accountability, and a half-hearted apology is no apology at all.

This afternoon the Calman alibi has been used. Let us be clear: this issue has nothing to do with the Calman Scotland bill. The SNP motion states

"that the SVR is due to be replaced by a new taxation system".

That is true. However, in 2007—when, as we have heard, Mr Swinney chose not to resolve the issue with HMRC—he could not use the Calman defence, so he cannot use it now.

Nothing rings true about John Swinney's defence today. He owes the Parliament a proper, sincere apology for withholding this important information, which would have informed the debates that we have had and will inform those that we are still to have.

Photo of Christine Grahame Christine Grahame Scottish National Party 3:25, 24 November 2010

I want to get some clarity. I think that all of us agree that HMRC, in its words, "mothballed" SVR in 2000.

Members:

No.

Photo of Christine Grahame Christine Grahame Scottish National Party

That is what is stated in the briefing note that was given to the permanent secretary and ministers in May 2007. It is a fact.

Paragraph 4 of the note states that, following the Labour-Liberal Administration's

"decision not to invoke the power in 1999 a Memorandum of Understanding ... was agreed between the Inland Revenue (now part of HMRC), the Department for Work & Pensions (DWP) and the Scottish Executive 'to maintain the [then] existing tax infrastructure in the period that the SVR is not being used; and to introduce the tax should the Scottish Executive decide to use the power'."

I would like to know what else the memorandum of understanding said. Was the Labour-Liberal Administration aware that, effectively, the power had been mothballed, on a care-and-maintenance basis? Labour members say that the arrangement is news to them but, apparently, it was known about in 2000. I presume that there were discussions between the Treasury and the finance department.

Photo of Christine Grahame Christine Grahame Scottish National Party

I will take some interventions at the end of my speech.

I turn to the silly suggestion that the power has somehow been lost and that, consequently, the constitution of the Parliament has been entirely undermined. That is utter nonsense. We are dealing with a contractual matter between the Treasury and the Scottish Government that relates to payment for the facility. The power is not lost—we are dealing with a contract, not the constitution.

This morning Andy Kerr said as much when pressed during an interview on "Good Morning Scotland". He said that John Swinney had

"given away the major power that the Scottish Parliament has without coming to the parliament".

The interviewer, Aileen Clarke, responded:

"To be fair though Mr Kerr, it's not gone away forever. This isn't irreversible."

Photo of Christine Grahame Christine Grahame Scottish National Party

Let me finish. Aileen Clarke went on to say:

"If you're willing to stump up the seven million, then you can get it back."

Andy Kerr replied:

"The power remains in statute, but your ability to use it is gone".

The power is still there. I am sorry if that is too simple a constitutional question for those who are trying to rabble-rouse on the back benches. The contract still exists, if members want to pay £7 million for nothing—unless the breaking news is that Labour, the Liberal Democrats and the Conservatives intend to raise tax if, sadly, they get into power next year. Why would they pay money for a system that they could bring into activity within 10 months, which is not a big deal?

Photo of Christine Grahame Christine Grahame Scottish National Party

No.

It is a complete nonsense to say that Calman is irrelevant. Why on earth would we pay Westminster money for an IT system for something that will be abolished within months, that we will not use and that will cost us nurses and teachers? I say to Gavin Brown that the example that was given was illustrative of what the funding could provide, instead of buying fresh air.

Why should Scotland pay money for something that Westminster has brought about? Let us look at the terms of HM Treasury's statement of funding policy. It says:

"the devolved administrations will meet all the operational and capital costs associated with devolution from within their allocated budgets".

Fair enough. If we want to introduce free personal care, we have to pay for it. If we want to pay up-front fees for students, that is fine. If we want to have concessionary fares, that is fine. We must bear the costs. However, in this case, the system has been introduced by Westminster without consultation and without discussion, and it therefore does not fit within the contract that has been agreed.

Photo of Christine Grahame Christine Grahame Scottish National Party

I have sat listening long enough. We have heard not a squeak out of Mr Brownlee so far—or from others on his party's benches, or the Liberal benches. It is they who are now in power.

The Treasury keeps £40 million a year because we introduced free personal care. That is a one-way flow of money. The Treasury takes and takes, even when we do something that saves it money.

Photo of Christine Grahame Christine Grahame Scottish National Party

I am on a roll.

I understand that, during the previous eight years, hundreds of millions of pounds that the Executive did not use went flowing back to Westminster.

In answer to George Foulkes, the money that he mentioned is being put into capital projects, because we use Scotland's money for the right things, not for a system that nobody will use—it will be abolished, and there is no purpose to it unless it is intended to raise tax.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat 3:31, 24 November 2010

Most commentators thought at the time that the performance was assured, measured and sincere. The remarks that Mr Salmond made here in the chamber on his coming to office were meant to be words that could fit into bound volumes in university libraries, so that academics could look back on them in times to come and marvel. He said:

"no one party rules without compromise or concession."

He stated that there would be

"no arbitrary authority over this Parliament" by the Government. He gave a solemn pledge:

"My pledge to the Parliament today is that any Scottish Government that is led by me will respect and include the Parliament in the governance of Scotland over the next four years."—[Official Report, 16 May 2007; c 24, 36.]

He did not add—as the finance secretary said to the Finance Committee yesterday—that that would only be in areas where the Government did not think that the Parliament would be too busy, or in areas that were not too political. Ministers would not, of course, wish to trouble MSPs who were busy in their day-to-day work with information relating to a key constitutional power of the institution of which they are members.

Alex Salmond said that morning:

"The days of Scottish Government imposing its will on the Parliament are behind us, although I daresay that there might be days in the near future when I come to lament their passing."—[Official Report, 16 May 2007; c 25.]

He did not need to wait long, and he need not have lamented. What we heard from the finance secretary today was, unfortunately, an apology ruined with excuses. In an attempt at contrition, he blamed others. True remorse is never just a regret over consequence; it is a regret over motive.

There was none of that from Alex Neil, the Minister for Housing and Communities, this morning. He said that in 2007, the Government had made it clear that it would not use the tax varying power. No party had used it and no party was going to use it. The Government thought that the £7 million would be better spent on health, education and housing. The issue was not about the previous Executive or Calman or any of the other smokescreens that the Government has raised on this issue.

Nowhere in the start of his speech did the finance secretary mention that HMRC was not simply updating IT—it was not like buying a new version of Excel—it was combining regional national insurance and pay as you earn databases to make one national one. At no stage did the Scottish Government oppose that. In fact, public bodies in Scotland have welcomed that move, which makes things more efficient.

John Swinney also did not say that the Government had wanted to use the mechanism of the SVR. The SVR was the mechanism of choice for implementing local income tax—it was going to be the method used. He today condemned HMRC for being chaotic and shambolic over the past three years, yet two years ago he commended it for its effectiveness and cost efficiency. We know that the SVR was going to be the mechanism of choice, as the Government's proposals stated it categorically. They said:

"the Government believes that earlier preparations made by HMRC for the SVR at the time of devolution should provide a basis for the arrangements that will be needed to implement a local income tax."

I met the cabinet secretary on 11 September 2008 to discuss a local income tax, and it appears that he chose at that time, as well as on many other occasions, not to let me know that operability of the SVR had not been carried on by the Government—[Interruption.] I heard the Minister for Parliamentary Business say, from a sedentary position, that operability had already gone. In its proposals on a fairer local tax for Scotland, in March 2008, the Scottish Government said:

"the SVR could, in principle, be introduced relatively quickly."

If operability had already gone, why did the Scottish Government say that? The minister is welcome to intervene to respond to that point, rather than comment from a sedentary position. If the Parliament was not misled today, was it misled in 2008?

There was no mention of the fact that the Scottish Government considered the mechanism to be a waste of money when it said that it had no intention of using it. When the Government ditched the local income tax, it said that it would campaign on the issue in 2011 and that it would be for the people of Scotland to decide. What the Government did not say was that it had chosen not to maintain the power that would be needed to implement a local tax. We have learned that in 2010, shortly before the election.

To mislead people once might be considered careless; to do so a second time is surely a conscious act. We know that the SNP got rid of a power that it had wanted to use and we know, from today's HMRC briefing, that the SNP inherited an operable system. However, the Cabinet Secretary for Finance and Sustainable Growth could not explain why, over the years, he did not tell the Parliament about the issue. That was the biggest error. In 2007, 2008, 2009 and 2010 he had the ability to inform the Parliament and he had just cause to do so.

During the passage of the Scotland Bill through Westminster, Mr Swinney was an MP. He made powerful speeches in the debates. He said:

"First, the power to raise at least part of its finances is a basic requirement of any Parliament. Secondly, the people of Scotland still have discretion on how the powers should be used ... The people of Scotland have a choice on whether the powers are exercised."—[Official Report, House of Commons, 23 February 1998; Vol 307, c 52.]

There is no question that the power was removed unilaterally and undemocratically. For that, there requires to be a full apology.

Photo of Derek Brownlee Derek Brownlee Conservative 3:37, 24 November 2010

During the past few years under a minority Government, we have learned of many examples from previous parliamentary sessions of the roles and responsibilities of the Parliament and the Government becoming conflated, because in practice the Government of the day commanded a majority in the Parliament. Of course, there is an important distinction between the role of the Executive and the role of the Parliament. That is not a constitutional nicety but the foundation of the authority on which the Scottish Government sits and the foundation of how the Scottish Parliament operates.

The issue that we debate today is perhaps the most glaring example of ministers' ability to take decisions over which the Parliament might properly think that it should have oversight, although it has become apparent that in practice there is no parliamentary oversight.

The Scottish Government is a minority Government. When it was formed, many people expected it to fall quickly. It could have fallen at any point, and could still fall relatively easily. Ministers should not lightly take decisions that have far-reaching consequences, because they might not remain ministers even during the current parliamentary session.

When we consider the background to the powers on the standard variable rate, it is interesting to consider the rules that apply to the Parliament. It is clear—and I do not dispute—that nothing in the standing orders of the Parliament, the Scotland Act 1998 or any of our written procedures requires the Government to tell us about the decision that it took in 2007. However, that is odd, because there are detailed rules in standing orders about tax-varying resolutions. For example, only a member of the Scottish Government may lodge a tax-varying resolution, which must be approved by the Parliament, and if it is the foundation of a budget bill and is voted down, the budget falls.

A written agreement in 2005 between the Scottish Government and the Finance Committee, which clearly has the locus on the SVR, covers the budget process but is silent on the SVR. We had a review of the budget process earlier in this session of Parliament, and the issue never arose. Why? Because no one ever thought that the decision that the Scottish Government took could be taken. It was never a prospect. It is perhaps unfortunate that we did not think about that, but it is regrettable that the Scottish Government did not tell us what was happening.

Patrick Harvie, who rather spoiled his speech towards the end when he laid into the UK Government, made a valid distinction about the power to exercise the SVR in practice. I accept that the provisions in the Scotland Act 1998 have not changed, but the referendum was on the power and, in practice if not in law, surely that power must be retained by the Parliament unless the Scottish people determine otherwise. There is a clear distinction between the legislation and the power, just as there is a clear distinction between the political decision on whether to exercise the power and its availability.

The thing that troubles me most about the issue is why Parliament was not told at the beginning of the session about the cabinet secretary's decision. I still do not understand that; perhaps the cabinet secretary will explain it better when he concludes.

If the cabinet secretary had come to Parliament to explain the position, and if the Parliament had had the opportunity to debate the issue and take a view on whether the payments should be made or HMRC was acting unreasonably, the current mess would not have arisen. We would have had our say and taken a view, and the Government would have kept Parliament informed.

I am struck by the timeline—although I must say that I do not know whether this is a partial timeline. The First Minister's letter of last week refers to the establishment of the system and payment of £12 million in 2000. The letter from HMRC dated 27 April 2007, which has been released today, refers to a project board that met "last month", which is March 2007. That indicates that certain decisions needed to be taken in 2007. The First Minister's letter talks about decisions in 2007 and states that in 2008 HMRC sought further money. The timeline then goes to July 2010, when, the First Minister says, the Government was asked for £7 million, and it finally ends on 20 August 2010, when, the First Minister says, the Scottish Government offered talks about which it has heard nothing.

I would like clarity from the cabinet secretary. Given that we now have from the First Minister details of what happened in 2000 and 2010, and we have one letter and a briefing note for ministers from the permanent secretary from April 2007, is the cabinet secretary prepared to release all of the correspondence and project board minutes in the timeline? Until we see the full timeline and every piece of correspondence, we cannot be sure that we are not being given simply a partial story. Given the Parliament's lack of faith in the Government's decision, the clarity and transparency that would be provided by publishing the information in full would be helpful.

I say to Christine Grahame in passing that the Calman commission was established by a vote of the Parliament. She may not like that fact, but it was the will of this Parliament that the Calman commission should exist.

I end simply on one point. Other members have called for an apology, and the cabinet secretary can consider whether he wants to give one more fully than he did in his opening speech. Much more important to me than an apology is that we get some answers. We need to get to the bottom of the issue, some clarity on who took decisions and when, and the full publication of all the correspondence in the public domain, so that we and the public can draw conclusions.

Photo of Andy Kerr Andy Kerr Labour 3:43, 24 November 2010

We have all listened carefully to the cabinet secretary in this debate. Let us remind ourselves that this debate is happening only because someone else from another Parliament drew the matter to our attention. I certainly believe that the cabinet secretary has offered no defence for what has been and will remain the greatest act of political sabotage in the post-devolution period.

The situation began with an initial decision, a cover-up and then a series of deceptions throughout the lifetime of the Parliament that bring us to this difficult position. I share Patrick Harvie's view: I believe that I got on personally very well with Mr Swinney. He had a choice today about how he came to the Parliament to explain the situation, and I think that he made the wrong choice about how to resolve the matter with us.

Some documents have been released, and I share Derek Brownlee's view: we want to see all the documents that are available. However, the documents do not help Mr Swinney much—they condemn him even more for his lack of action and lack of clarity to the Parliament. In effect, they say that, if the Government had paid £50,000, it could have collected perhaps £890 million out of £900 million.

The previous Administration maintained the power. Pauline McNeill was correct to refer to the mothball defence. We made it clear to the Treasury that we would not use the power, but we mothballed it and we ensured that we could have it back within 10 months. John Swinney has decided to drive a coach and horses through that policy.

Photo of Andy Kerr Andy Kerr Labour

If members care to read the document further, they will see that it shows that release 1, which would have cost £227,000, could have kept the whole situation running. [ Interruption .]

Photo of Andy Kerr Andy Kerr Labour

John Swinney chose to take a different decision. That must be cast in the light of what he has told us throughout his time as cabinet secretary. The draft budget, which I presume that he signed off, says:

"Our opportunities to vary taxes are limited to the Scottish Variable Rate".

They are not, because he has given away the effective power.

Much has been said about statute. There is no point in having the power in statute when the Government and the Parliament have no capability to use it.

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party

Andy Kerr asserts that the previous Labour-Lib Dem Government mothballed the power. When was that decision taken and why was it not brought to the Parliament? Was he aware of the state of unreadiness of that mothballed system?

Photo of Andy Kerr Andy Kerr Labour

The state of readiness is clarified in the policy document that we have received today, which says:

"The advice from HMRC's IT partners is that even if the decision is not to invoke SVR during the life of the coming Scottish Parliament it is recommended that the work associated with the Define period ... be undertaken".

Who decided not to do that work? Mr Swinney. That is, sadly, the heart of the debate. The cabinet secretary made that conscious decision. As has been said, the Government would go to battle for the Lewis chessmen. However, when the Scottish Parliament's single biggest power has been removed from us, we hear not a squeak from the cabinet secretary, because he knows that the decision was the wrong one at the wrong time. [Interruption.]

Photo of Andy Kerr Andy Kerr Labour

We are now on day 6 of this fiasco. It began with excuses about letters from Michael Moore not revealing the truth and continued with the claim that it was Calman's problem. Then we heard that our briefcases were not big enough to take the information. Today, we have got some documents—not all—that in no way support the cabinet secretary's position.

John Swinney told the Equal Opportunities Committee:

"We could use the tax-varying powers—for example, we could increase the basic rate of income tax by 3p in the pound."—[Official Report, Equal Opportunities Committee, 4 May 2010; c 1630.]

That simply is not true for 2011-12—it could not be done. That is the nub of the issue.

We need not only contrition from Mr Swinney about his role and an apology for not informing the Parliament but an understanding that he made the wrong decision. One and a half million Scots said that they wanted the power in the Scottish Parliament, but he and his colleague Mr Salmond have taken it away. That has been done by the unilateral decision of a minority Administration. All that we have heard from other members about sovereignty and the Parliament's rights was laid aside by Mr Swinney.

We move into the cover-up period—the deceit and misdirection. That misdirection was perpetrated by none other than Mr Salmond, too. He always goes on about how

"We in the Scottish Government believe that sovereignty in Scotland lies with its people", but he did not trust the 129 people who are elected by our people in Scotland enough to tell us about the decision that had been taken.

Photo of Andy Kerr Andy Kerr Labour

Perhaps Alasdair Allan can explain why we did not know about the decision.

Photo of Alasdair Allan Alasdair Allan Scottish National Party

I merely ask Andy Kerr whether he can confirm which minister decided to mothball the power.

Photo of Andy Kerr Andy Kerr Labour

There we have the mothball defence again. We ensured—[ Interruption ]—the information is in the documents if members care to read them. For the sake of £50,000, at the drop of a hat, and within 10 months, the Parliament could have used the power. [ Interruption .]

Photo of Andy Kerr Andy Kerr Labour

The cabinet secretary removed that power from the Parliament. He thought that he was better—he knew better—than 1.5 million Scots. How many of his Cabinet colleagues agreed with the decision? Why do they not simply tell us that the main perpetrator of the deception was the Scottish Cabinet?

The Administration is a minority Administration. We were promised better, and we have not had it. This Government and all Governments are entrusted with power, and I believe that the SNP has abused its power. The stewardship of our nation deserves better, and the cabinet secretary must account for his actions.

As many members, including Patrick Harvie, have said, the relationship between Government and Parliament has been put under huge strain by the cabinet secretary. Since 1999, there have been Scottish ministers who, to put it bluntly, have gone for less, either because they decided to do so or because they were sacked. Mr Swinney needs to reflect on his actions. He should not say that it was someone else's problem or that it was all about taxation and who foots the bill; it was a decision for which he must be held accountable. Before the debate, I said to other members that what Mr Swinney should do was make life easy for us all by admitting to Parliament that he had got it wrong and that he owed us an apology for the initial decision, for the deception and cover-up that took place, and for his removal from the Parliament of one of its key powers. The decision was his decision, for which he must be held accountable.

Photo of John Swinney John Swinney Scottish National Party 3:51, 24 November 2010

I have listened carefully to the debate and I intend to respond with care to members' comments. I am grateful to Mr Harvie for the kind remarks that he made in the opening part of his speech, because throughout my parliamentary career—both as a member of the House of Commons and as a member of this institution—I have endeavoured to live up to the obligation to act with honour and openness in all that I do, and it is in that spirit that I will conclude the debate.

Let me correct one point that Mr Kerr just made, which was that if the £50,000 payment had been sustained, that would have delivered 10-month operability for the system. That is not the case, as the document that I have released today—and I will certainly give consideration to the publication of further documentation—makes clear. If I had wished to exercise the Scottish variable rate in April 2008, I would have had to pay an extra £3.4 million to make that happen. If I had wanted to do it at what is described as the most reliable moment—April 2009—it would have cost £2.9 million.

Photo of John Swinney John Swinney Scottish National Party

I will try to respond to the points that have been made as helpfully as I can, if members will give me the opportunity to do so. I will proceed in that fashion.

I had no intention of exercising the SVR in 2008 or 2009, because I had stood on a manifesto commitment not to do so. The mistake that I made at that time was not to come to Parliament with that information, and I regret the fact that I made that mistake.

Photo of John Swinney John Swinney Scottish National Party

If Mr McMahon will allow me to develop my points, I will give way in a moment.

There was a third option in the advice that I was given, which was that I could establish 10-month readiness for the SVR if I spent £1.2 million over the course of the session to enable that choice to be made by the next Parliament, and that was the option that I instructed my officials to pursue. To my regret, that position did not advance as quickly as I would have liked it to. I am not making a comment that is designed to blame someone; I am simply expressing a reality that I think we are all familiar with, which is that sometimes HMRC does not get the systems work under way as quickly and effectively as it might do. I am not blaming HMRC; I am accepting responsibility because it has not proved possible for an option that I preferred, which I set out to take forward, to make as much progress as I would have liked it to.

Let me quote from the briefing that I was given when I became a minister:

"If the decision is not to invoke SVR during the life of the Scottish Parliament it is recommended that the work associated with 2 phases, at a total cost of £1.2m, should be undertaken to maintain the current 10 month state of readiness."

That is the option that I went for—that is what I wanted to happen, but it has not materialised, and I regret the fact that progress has not been made.

Photo of John Swinney John Swinney Scottish National Party

If Margo MacDonald will forgive me, I want to put some more comments on the record.

Pauline McNeill asked me two critical questions during her speech. She said that I had a duty to put right the problem that I inherited, and that I had a duty to bring that to Parliament.

Photo of Johann Lamont Johann Lamont Labour

It is a problem that you created.

Photo of John Swinney John Swinney Scottish National Party

Johann Lamont mutters that I created the problem, but I ask her to look at the briefing note that I received, which said that there would be an additional cost to making any of the systems operable.

In relation to the first of Pauline McNeill's points, the decision that I took to opt for option 3 at a cost of £1.2 million to establish the 10-month readiness was my attempt to put the situation right. That is what I tried to do. I also had a duty to bring that to Parliament, and on that point I made a misjudgment. I should have come to Parliament at the very beginning, when we did not make the progress that we thought we would make with HMRC, and after the discussions in August, which were designed to ensure that we made as much progress as we could.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

On that very point, I go back to my first intervention. The point is that the minister has had three-and-a-half years and more than 100 opportunities—[ Interruption .] "Oh shut up"?

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

The minister has had 100 opportunities to inform Parliament about the situation. He has not made one mistake, he has made more than 100 mistakes. Is his regret for being found out rather than for not informing us?

Photo of John Swinney John Swinney Scottish National Party

I am trying to make some progress towards resolving the issue to Parliament's satisfaction. With the greatest of respect, I am not sure that that was the most helpful contribution.

I have accepted in front of Parliament today that I made a number of wrong judgments. On a number of occasions, I made decisions in good faith to ensure that the 10-month readiness would be in place during the next session of Parliament, and I did not come to Parliament to explain those decisions. I apologise to Parliament for that error of judgment in not coming to Parliament to ensure that those issues were addressed.

In working on this situation, I aimed to ensure that the problem that I inherited was properly and fully addressed during my term in office. Unfortunately, not enough progress has been made to enable that to happen, and I regret that.

In the work that the Scottish Government has undertaken to address the issue, I have focused on how we can take steps to ensure that it is resolved. Clearly, as the information that I have published shows, any amount of money can be spent to upgrade IT systems and ensure that they are operable. That can be done. No power has been lost for all time. If the Parliament is prepared to spend a sum of money to upgrade an IT system to ensure that the 10-month operability is available, it can make that choice. I have not taken that choice away from Parliament; it is still available.

Photo of Patrick Harvie Patrick Harvie Green

I am grateful. Will the cabinet secretary support an amendment to the budget to that effect?

Photo of John Swinney John Swinney Scottish National Party

That is a choice for Parliament to make in the context of the choices within the budget process. Parliament has the opportunity to take a decision to spend money and invest in the IT systems if it wants to exercise the SVR powers. I simply make the point that the difficulties and challenges of public expenditure cannot be ignored when we are making such judgments.

Photo of John Swinney John Swinney Scottish National Party

I have to conclude my remarks.

I hope that what I have said has helped to resolve the difficulties that Parliament faces with the issue. I have apologised to Parliament for the fact that I did not share information with Parliament as I should have done. I have learned that lesson, and I hope that Parliament accepts that today.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

That concludes the debate on the Scottish variable rate of income tax.

I have something to say in relation to a point that Elaine Smith raised earlier about documents.

The issue has been looked into briefly in the limited time available. There does appear to be some confusion over the documents to which Elaine Smith referred. The Presiding Officers are going to try to ensure that the situation does not happen again.