Hansard

I want to outline briefly, mostly from memory, what took place in summer 1999 when I was appointed as the first finance minister in the new Parliament and the new Scottish Government. I should probably say by way of a preface that I had throughout the 1990s been involved in the design of the legislation that created the Parliament, and specifically in the discussions about the tax power. I therefore had some experience in advance of May 1999 of why the power had been created and the democratic purpose for which it was designed.I was appointed Minister for Finance shortly after the election in May 1999 and was immediately notified by officials. I am afraid that I do not have dates because there do not appear to be any papers on the Scottish Government file that relates to this period—certainly none has been provided to me in advance of this inquiry.However, I recall very clearly that there were two immediate issues that needed my attention. One was the creation of the new financial procedures for the Parliament, which later became the Public Finance and Accountability (Scotland) Act 2000. The second issue was the decision on what to do about the infrastructure for the tax varying power. The United Kingdom Government—I think that the minister involved was Henry McLeish—had put in place an infrastructure in advance of the 1999 election in anticipation that at least one party might propose using the tax power, so there had to be a state of readiness.Some time in early June 1999, within a fortnight or so of my becoming Minister for Finance, there was a meeting between me and Donald Dewar—I think that Jim Wallace might also have been involved, as Deputy First Minister—at which I made a recommendation on the way ahead. Officials had provided me with options that ranged from one extreme, which was to maintain a full infrastructure and would be quite expensive, to the other, which was to abandon all the infrastructure. That was the cheapest option, of course, but in my view it was undemocratic. I made a recommendation to the First Minister and Deputy First Minister, which they accepted, and the recommendation was subsequently communicated to, and accepted by, the Cabinet. I informed the Parliament in a parliamentary statement on 24 June.It is worth saying that in my mind—and in the minds of Donald Dewar and Jim Wallace, in my memory—there was never any question of not having some basic infrastructure in place for democratic reasons, and there was never any question of not communicating that decision to Parliament as quickly as possible.The statement on 24 June covered both issues: the bill that became the Public Finance and Accountability (Scotland) Act 2000 and the tax-varying power. Members of the committee might not have seen the statement among the paperwork for the meeting, so I will mention two or three points that I made. I made it clear that we had made a decision that would“take account of the possibility that a future Scottish Executive might decide to use the tax-varying power”,and that we had“concluded that it would be financially irresponsible and politically unacceptable to abandon all the implementation work that has already been done.”I said that we did not want to deny any party the opportunity, should they succeed in forming an Administration, to use the power during the four-year session or subsequently. At the time, the Scottish National Party was the main Opposition party and was proposing to use the tax power, so that was the example that I used, but it could have been any party.I also told the Parliament that we had“devised an option that would allow the tax to be introduced in the financial year immediately following a Scottish election”—that is, if the election was held in May the tax could be introduced in the following April, should the Scottish Government choose to do that. That was the option that I had recommended to the First Minister and Deputy First Minister and which had been accepted by them. It was based on advice that changes could not be introduced mid-financial year, so we had devised a system that would allow the changes to be made as quickly as possible.I told the Parliament that the option would have an annual running cost of about £2 million to £2.5 million. David Davidson MSP, who was then the Conservative finance spokesperson, asked the second question following the statement, which was to ask why we would not scrap all preparation, because no one would ever use the power. In response, I said that it was a matter of democracy. I said:“We will keep a basic infrastructure in place. That is right because it is democratic.”—Official Report, 24 June 1999; c 811, 815.That is where the matter was left that day. Following that day, over a long period there seemed to be a cross-party consensus that we had done the right thing. I do not think that there were ever any votes in Parliament or challenges on the issue.