To ask the Scottish Executive for what reason it decided not to pay HM Revenue and Customs to carry out the work required to allow the operation of the scottish variable rate.
As was made clear in the parliamentary debate on the Scottish Variable Rate (SVR) on Wednesday 24 November, the Scottish Government has been in dialogue with HM Revenue and Customs (HMRC) since 2007 about the work required to re-establish the capability of HMRC''s systems to operate the SVR following the mothballing of the SVR from 2000, and about the costs and timescales associated with that work.
After providing, in 2007, initial cost estimates ranging from £1.2 million to £3.4 million, HMRC on 28 July 2010 sought a payment of £7 million from the Scottish Government in order for the work to be undertaken. HMRC indicated that if agreement to pay was reached by 21 August, work would go ahead to enable the Scottish Parliament returned in May 2011 to exercise the SVR powers in the Scotland Act 1998 with effect from the tax year beginning 5 April 2012. This timescale could be achieved provided that the decision to vary the tax rate was made and communicated to HMRC by the end of May 2011.
The Scottish Government''s response to HMRC drew attention to a number of legitimate concerns, including questions about value for money given the UK Government''s planned introduction of new income tax provisions set out in the report of the Calman Commission which would lead to the replacement of the SVR, and sought a meeting at which these concerns could be examined. Despite a reminder, no meeting was arranged. Since the Parliament debated this important issue on 24 November, HMRC and Scottish Government officials have met and further work is now in hand on costs and timescales associated with returning the SVR systems to an operable condition.
A Service Level Agreement (SLA) was in place between the then Scottish Executive and its predecessor organisations from 2000 to 2003, and from 2003 to 2007, when the agreement expired. Under the SLA that expired in 2007, an annual payment of £50,000 was made to HMRC in return for maintaining the database of Scottish taxpayers. The existence of an up to date list of Scottish taxpayers was a necessary but not a sufficient condition for operating the SVR. Operable IT systems were also required. The work required to return the IT systems to a fully operable condition was much more significant and many times more expensive than the annual cost of the SLA.
On 24 November I apologised for not informing or consulting Parliament about the unavailability of the SVR systems either in 2007, when the condition of the SVR systems first became known, or this summer, when it emerged that only by spending a substantial amount of public money could the capacity of the SVR systems be restored in time for use in 2012-13.