The “return to sender” government

The “return to sender” government

by Murdo Fraser
article from Friday 10, May, 2019

IT IS SOMETHING of an article of faith for the current SNP Government that it continually demands more powers to be transferred to Holyrood from Westminster. Whatever the issue, the economy, the public services, or the environment, there is no problem that cannot be solved, in SNP-land, by transferring a power from London.

In a week when we have been celebrating 20 years since the first elections to the Scottish Parliament, it is worth reflecting on how devolution has developed in that period. There has been substantial enhancement of Holyrood’s fiscal powers, through the Scotland Acts of 2012 and 2016, and in addition legislation in areas such as air weapons and abortion, and policy control over aspects of welfare, have also been transferred northwards.

One tax which was agreed would be devolved was Air Passenger Duty, or Air Departure Tax (ADT) in its devolved state. This was in response to SNP demands for a reduction in ADT in Scotland, as it argued that current rates were acting as a deterrent to airlines establishing new routes to and from Scottish airports. Not without some reservations, that is a policy position Scottish Conservatives agree with, although in view of the environmental consequences of these tax cuts we would focus these on long-haul routes, rather than domestic or short-haul where there is a surface travel alternative.

The devolution of ADT hit a legal problem, as the current exemption for passengers flying from Highlands and Islands airports might well have fallen foul of EU State Aid rules. The UK Treasury has proposed a number of potential workarounds, none of which so far have satisfied lawyers within the Scottish Government. 

The legal hiccup is politically convenient for the SNP government, as its ministers know that trying to get a budget passed with Green support for an ADT cut would be impossible. But that has not stopped them making the right noises, telling those in industry, and particularly in tourism, that they remain committed to an ADT reduction. Indeed, just two weeks ago, the Public Finance Minister Kate Forbes MSP gave Gordon Dewar, Chief Executive of Edinburgh Airport, her “personal commitment” that this policy would proceed as soon as was practical.

That was two weeks ago. This week the ground suddenly shifted. In response to what the First Minister declared a “climate emergency”, and facing a Motion from Scottish Labour at Holyrood demanding the ADT policy be ditched, the SNP caved in. In a dramatic U-turn, the Finance Secretary Derek Mackay announced that the policy was now ditched.

To say that this was all down to concerns over climate change is somewhat implausible, to put it mildly. Concern over climate emissions did not suddenly appear as an issue in the last two weeks. Back in 2016, when the SNP affirmed its policy in its Scottish Parliament election manifesto, the need to reduce carbon emissions was well known (although perhaps not leading the news to the same extent).

The reaction from Scotland’s business community to the SNP’s policy U-turn has been furious. Understandably, Edinburgh Airport raged about the Scottish Government’s hypocrisy. Liz Cameron, Chief Executive of Scottish Chambers of Commerce stated: “This decision will do nothing to reduce emissions. Instead it will cut Scotland off at the knees, in terms of connectivity in a competitive playing field”.

Even if the devolution of ADT now proceeds, and the outstanding legal issues are resolved, there will be no change in the overall tax rates. All that pressure for this power to be passed to Holyrood, all that demand that Scotland should go its own way when it comes to setting this tax rate, will have been pointless.

What makes matters worse for the SNP is that the very day after the ADT U-turn was announced, Derek Mackay was in front of the Finance Committee telling us he was “minded” to ask the UK Treasury for deferral of VAT assignment to the Scottish budget, a policy change due to take effect from April next year. This was a provision of the 2016 Scotland Act, as a consequence of a recommendation by the all-party Smith Commission.

Derek Mackay claimed that concerns around the robustness of the data on which VAT assignment would be based, founded on estimates from Scottish households, would lead to a degree of volatility and uncertainty in the Scottish budget that would be unacceptable. But this concern is nothing new; it was well-known to the Smith Commissioners that VAT assignment would have to be based on estimates. And in their submission to the Smith Commission, the SNP negotiators were clear that they wished to see VAT assignment at that time. Surely it is not the case that they simply hadn’t done their homework?

On the back of the welfare powers which were devolved in the 2016 Scotland Act and will not be taken up in full by the Scottish Government until well into the next decade, this adds up to a hat-trick of hand-backs by the SNP government. And this is a Party which consistently complains about “power grabs” from Westminster, but now seems to spend more time returning powers to the sender than it does actually implementing devolution.

Let us never forget this is a party that claimed it could set up a fully independent country within 18 months, at a cost of a mere £200 million. After this week, how will anyone ever take them seriously again?

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