To ask the Scottish Executivewhat its position is on preparations to enable the Parliament to invoke the power to use the Scottish variable rate.
In considering this important issue I have sought and received information from David Gauke MP, Exchequer Secretary to the Treasury and Minister responsible for HM Revenue and Customs (HMRC), about likely costs and timescales associated with updating HMRC''s systems to enable them to support a decision to exercise the Parliament''s power to vary the Scottish variable rate (SVR). Mr Gauke has advised that HMRC is not able to prepare the systems required to enable powers to vary the SVR to be exercised with effect from 2012-13, but that it would be possible to prepare systems for use from 2013-14 if initial work is commenced now. The preliminary estimate of the cost of preparing SVR systems is £7 million. A copy of the letter providing this information was sent to the Finance Committee and to leaders of each of the opposition parties.
I have also sought and considered carefully the views of parliamentary party leaders on these issues, in the light of information provided by Mr Gauke. I have in addition considered the report of the Finance Committee on the SVR, published on 25 February. The Finance Committee in its report asked that I update Parliament on SVR issues, and I am pleased to have this opportunity to do so.
As indicated, the Exchequer Secretary has advised that preparatory work needs to start right away to ensure that systems are ready for use with effect from 2013-14. The first step is to undertake a Viability Study, expected to cost around £135,000. This needs to begin no later than April, and a report would be expected within 2 months. The key outcomes would be greater certainty about the costs and timescales associated with making the necessary systems changes, and a programme for doing so. Mr Gauke has confirmed that if a decision on whether to commission the Viability Study was held over until after the Scottish elections on 5 May, HMRC would be unable to provide certainty that the systems could be ready for use with effect from 2013-14.
In the light of this information, and after consulting other party leaders, I have asked HMRC to undertake a Viability Study. I have accepted that the costs of this study will fall on the Scottish Government. The study report will enable the Scottish Administration returned after the election to reach a decision, in the light of better estimates of costs, on whether to commission HMRC to undertake the substantive work required to prepare SVR systems for use. It would be consistent with the report of the Finance Committee for the administration then in power to consult the Parliament before reaching a decision on whether to commission this further work.
The position of this administration is clear. We do not intend to ask the Parliament to agree that the Scottish Government should exercise the power to vary the SVR, nor do we intend to exercise it. We do not agree that any costs incurred in returning HMRC''s systems to a condition that would support exercise of the power to use the SVR should fall on the Scottish Government. And we note that the UK Government intends in the Scotland Bill to scrap the SVR power with effect from 2015-16, replacing it with a Scottish Rate of Income Tax. We have made clear that we regard these proposals as flawed, not least because the UK Government expects the costs of making the required changes to HMRC systems “ estimated at £45 million “ to fall on Scotland.
Finally, we note that when this administration was elected by the people of Scotland in 2007, HMRC''s SVR systems were not in a state of readiness. They would have required substantial investment to restore them to such a state, and this work would not have been able to deliver reliable operation of the systems until 2009-10. This Administration therefore inherited the same position in May 2007 as the next Scottish Administration will take on after May 2011.
I have arranged for a copy of my letter to the Finance Committee in response to their report on the SVR to be placed in the Scottish Parliament Information Centre (Bib. number 52549).