John Swinney apologises for not explaining tax lapse

Finance Secretary John Swinney has apologised for not explaining to the Scottish Parliament his decision to allow the ability to vary tax to lapse.

Opposition parties are angry that Mr Swinney decided to abandon the power to raise or lower tax by 3p in the pound.

However, during an emergency debate at Holyrood, Mr Swinney told MSPs that the powers had already lapsed before the SNP came to power in 2007.

He said he had inherited a system which needed a £7m computer upgrade.

But opposition party leaders reacted furiously to Mr Swinney's comments and accused him of covering up the issue.

Rival MSPs combined their votes to pass an amended parliamentary motion accusing SNP ministers of "an abuse of power" by failing to sustain Holyrood's tax powers and misleading parliament over the issue.

After the vote, Labour, the Lib Dems and the Tories called on Holyrood's finance committee to investigate the issue and for full disclosure of all information by Mr Swinney.

The public voted for the Scottish Parliament to have tax-varying powers in a specific question which was part of the 1997 referendum on devolution, but the power has never been used by any administration.

However, it emerged last week that the Scottish government had declined to pay £7m to HM Revenue and Customs (HMRC) to upgrade its IT systems.

This meant the ability to use the Scottish Variable Rate (SVR) had lapsed and it now could not be made available for at least another two years.

It subsequently emerged when the SNP administration had refused from 2007 to pay a fee for the upkeep of the IT system.

Mr Swinney told MSPs he had been informed when he entered government that it would take two years to invoke the SVR.

He said the SNP administration "did not inherit a functional IT system capable of delivering the tax power at 10 months' notice".

Mr Swinney added: "The £50,000 a year paid by the previous (Labour-Lib Dem) Scottish Executive kept the database of taxpayers up to date but not the IT system; that would have cost the Scottish taxpayer millions to get back to a condition where it was usable on a 10-month state of readiness."

In August this year Mr Swinney told HMRC he was not going to pay £7m to upgrade the computer system which would allow the tax-varying power to be activated.

The finance secretary said he entered into a discussions with Revenue and Customs, whereby the tartan tax could be held in a 10-month state of readiness, incurring costs of only £1.2m and allowing the power to be used after the next election.

But Mr Swinney said the move had not progressed quickly enough.

He added: "To be clear, HMRC were asking for an additional £7m to re-establish an IT system that had already cost £12m.

"So the same HMRC who have just messed up the tax accounts of 10 million people wanted the Scottish people to fork out millions more to upgrade their computer system.

"I took the view that, in the current spending environment, paying out £7m required further consideration."

On providing information to parliament, Mr Swinney said he could have explained the issues at an earlier date, including after the decision on 20 August, but accepted he had made "wrong judgements".

"I've tried helpfully to resolve the difficulties that parliament faces on this question," said the finance secretary.

"I have apologised to parliament for the fact that I did not share information with parliament in a fashion that I should have.

"I have learned the lesson of that and I hope that is accepted by parliament today."

Mr Swinney's apology came in his concluding remarks in the heated debate, which he opened by expressing "regret" over the problems.

Scottish Labour leader Iain Gray had earlier said Mr Swinney "must apologise fully or he must consider his position".

"That he conspired to hide that decision from this parliament and from Scotland is unforgivable," said Mr Gray.

"The explanation he has given today is disingenuous and the apology he has given is grudging and also unacceptable."

Scottish Tory leader Annabel Goldie added: "No minority party in this parliament of minorities has the right to shackle the other parties.

"To neuter the ability of the next parliament to exercise its rights under the Scotland Act is a betrayal of democracy."

Scottish Liberal Democrat leader Tavish Scott asked: "Has the parliament been misled? Yes. Has the finance secretary had 110 separate occasions to say what's going on? Yes.

"Has our minority nationalist government misled parliament? Yes. Has the SNP treated the people of Scotland, who gave this power to this parliament with contempt? Yes they have."

The Greens' Patrick Harvie said: "The Scottish government, the current Scottish government, soon after coming to power in 2007, understood very clearly that this situation was developing and was not being resolved."

The MSP asked: "Why wasn't I told as a member of this parliament at that time?"