Tartan tax plot thickens

The plot thickens in the Brown v Salmond saga over the new tartan tax. The Times which has offered the most ambitious analyses of the game now sees Brown’s proposal as a move to appease English grumbling at having to shell out £30 billion a year to the Scots while also appearing to accede to Scottish demands for more devolved powers. Simon Jenkins, that vocal champion of local government writing in the Guardian, welcomes the idea of a genuinely local tax but pours scorn on Salmond’s version.

“Even the most favourable analysis suggests that 3p on incomes will leave a £750m gap after the removal of the council tax. The requisite level would be about 4.5p. That is above the Edinburgh parliament’s discretion, and London is unlikely to move on this. Nor will London continue to send £400m north of border that previously financed council tax rebates for the poor.” Won’t London? Maybe London has more leeway to be amenable than Jenkins has considered.

The block grant is already being squeezed year-on-year by Barnett formula convergence. Over time the expenditure per head across both Scotland and England will converge and eventually become identical. The bogey of the English subsidy to the Scots is much exaggerated, whipped up by English jingos. ” The faster the increase in public expenditure in England, the more the convergence effect of Barnett operates on Scotland, Wales and Northern Ireland.” The financial turndown slows down convergence but doesn’t halt it.

Ideas up Whitehall sleeves include plans for a Barnett formula replacement, whereby taxes raised in Scotland Wales and Northern Ireland would be supplemented by equalisation payments and conditional grants from London. Unlike the Barnett formula which is totally opaque, these grants would be openly negotiated. Labour would use them to guarantee UK national policy standards which the SNP mighn’t always like with but might have to tholl, while the Conservatives would put the squeeze on the devolved governments to keep their spending down. Quite a good way for Westminster to keep a large measure of control. Even if Brown is out, this issue will not die!