My simple amendment would allow the Scottish Parliament to set tax thresholds, as any good Parliament should be able to do, and is a genuine attempt to elicit from a Minister the reasons why the
Scottish Parliament is not currently allowed to set the personal allowance. I am a lawyer, but I do not claim to be a tax expert or an economist. [Interruption.] Well, it’s just the truth. I am not an expert tax lawyer or economist. This is a probing amendment to help us investigate a complex issue, to which we can always return on Report.
The House of Commons Library has illustrated the complexity of the issue:
“The Bill as it stands would allow the Scottish Parliament to set the bands of income at which different Scottish rates of tax would apply. Clause 12(3) states that where there is to be more than one Scottish rate, the resolution which sets these rates ‘must also set limits or make other provision to enable it to be ascertained…which rates apply in relation to a Scottish taxpayer.’”
That is not immediately terribly clear, but it continues:
“So, if the Scottish Parliament wished to, it could set a zero rate of tax over a specific band of income, in effect increasing the personal tax allowance to all Scottish taxpayers.”
Importantly, in its briefing on the Smith commission, the Institute for Fiscal Studies asked why the power to set the allowance was to be reserved. That is the question I am asking. The IFS, a reputable body, has asked it, and I am simply using the amendment to ask it again. I think most people would agree that setting tax and then spending the money raised is a prerequisite of a responsible Parliament.
It is not necessary to go over all the arguments I used on Second Reading or in Committee two weeks ago—they are on record—but suffice it to say that power breeds responsibility. The Scottish Parliament must take responsibility for its own destiny in the firm conviction that it is ready and able to do so. So why are we devolving bands and rates, but not thresholds? Is not setting the threshold at which people start to pay tax—the personal allowance—vital to the decision-making process? Setting a band or rate but not a threshold is like being willing and able to leap the bar in high jump without having any control over where the height is calculated from. It does not make any sense. What we are giving the Scottish Parliament is only half a power. Are not thresholds much the most interesting part of the equation? We spent a lot of time last Parliament debating that point in relation to the UK economy.