Unformatted text preview: sh Parliament elections, there was a mistaken but widely accepted view that the
tartan tax is regressive because it only applies to the basic rate, not extending to the higher rate.27 The difficulty in using
the tartan tax is essentially political, and there would be much manoeuvring regarding whether the Scottish Executive or
the UK Government took the blame. One practical concern is that, given the Treasury’s control over data and scoring,
recourse to the tartan tax might be neutralized by a reduction in the assigned budget. However, transparency about the
assigned budget calculations would be the best safeguard.
Perhaps one of the most significant aspects of the tartan tax is that this proposal explicitly linked the legislative and
executive power of the Scottish Parliament to revenue raising. Although the referendum on the basis of two questions
(one about the Parliament, one about the tartan tax) was widely interpreted as an attempt by the Labour Government to
backslide on the revenue-raising power, the practical impact was to highlight the link in a way which had not previously
been done, despite the commitment of the (Scottish Constitutional Convention, 1990, 1995) to this proposal.
Subsequent to the referendum, some of those who had forecast dire economic consequences arising from a modest
proposal then switched to a position advocating that the Parliament should raise all its own money. 23 24 25
26 27 This commitment, widely believed to have been imposed upon the Scottish Labour Party by the London leadership, was accompanied by a campaign
against the SNP’s ‘Penny for Scotland’ (ie the use of 1p of the 3p power), which forecast economic doom and mobilized business persons and
celebrities (eg football managers), in a way highly reminiscent of the No campaign during the 1997 Referendum.
In order to establish its economic credentials before the 1997 General Election, the Labour Party promised to hold to the pre-existing public
expenditure plans for 1997-98 and 1998-99, which it would inherit from the Conservative Government. The public expenditure process was moved
from an annual Survey (looking three years ahead on a rolling basis) to a biennial Comprehensive Spending Review (looking three years ahead, but
with some reconsideration of the third year at the next CSR). The public expenditure settlements announced in July 1998 and July 2000 (Treasury,
1998, 2000c) were unprecedentedly generous, especially to public services such as health and education. These fed through the Barnett formula into
the assigned budgets of the devolved bodies.
Timmins and Beattie (2001a,b) reported that the Institute for Fiscal Studies has calculated that the Treasury has funds within its plans which would
allow public spending in 2001-02 to increase by more than 10% in cash terms (the forecast GDP deflator is 2.5%).
The March 1999 Budget restructured tax bands, replacing the existing 20% band (£0-£4,300 of taxable income) with a starting band of 10% (£0£1500), with the net effect that...
View Full Document