Holyrood 'loses tax varying power' for next three years

image captionHolyrood administrations have had a tax raising arrangement since 1999

Holyrood has temporarily lost its tax raising powers after the Scottish government stopped paying the fee to keep the collection system updated.

The deal which allowed Scotland to raise or lower income tax by 3p in the pound was allowed to lapse in 2007.

Scottish Secretary Michael Moore explained that any incoming administration would now not be able to use the power again until 2013/14.

Finance Secretary John Swinney said the tax power was "unusable and expensive".

But Labour's finance spokesman Andy Kerr said the move could jeopardise the plans of future Scottish governments.

A Scottish government spokesman confirmed that the agreement with HM Revenue and Customs (HMRC) ran until 2007 at which time revenue bosses announced they would have to install a new IT platform and that "further discussions would be needed regarding additional multi-million investment requirements to operate the 3p tax power".

The Holyrood administration told the Westminster coalition in August it was not going to pay for HMRC to work on the PAYE systems to allow the power to be used after next May's election.

Mr Moore said: "It is now clear that because the system has not been maintained at the previous 10-month readiness, HMRC would require two years' notice to invoke the SVR (Scottish Variable Rate).

"I am conscious that the various political parties will be considering their policy programmes for next year's Holyrood election.

"I felt it was imperative to inform them that this tax power, which formed part of the original devolution settlement, is not available to whoever forms the next Scottish government."

The Scottish government spokesman said that it did not advocate increasing income tax for people in Scotland and "spend yet more millions on a limited tax power which none of the major parties wanted to use".

He added: "What Scotland needs is not an unusable and expensive limited power - we need full financial responsibility."

A spokesperson for HMRC said the computer payment system still existed but it would require an upgrade.

People voted for Holyrood to have tax-raising powers in a specific question which was part of the 1997 referendum on devolution, but the Scottish variable rate has never been used by any administration.

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