Tax powers promise as 'English backlash' grows

In a significant move, the UK government has asked HM Revenue and Customs (HMRC) to set up a panel of advisers to help with the "technical and practical implementations" of handing more tax powers to Scotland.

Making the announcement, Scottish Secretary Jim Murphy said giving greater powers to the Scottish Parliament – part of the recommendations from the Calman Commission – would help to grow the economy while protecting jobs and businesses.

His move came just hours before a study, published today, suggested that a "devolution backlash" is growing in England as a result of voters' perception of a democratic and financial deficit within the devolution settlement in the UK.

The study, for the Institute of Public Policy Research (IPPR), showed that 40 per cent of English people believe Scotland gets more than its fair share of Treasury funding.

Last night, experts and politicians claimed that the introduction of the Calman plans to give Holyrood control over almost half Scotland's income tax would take some of the heat out of growing English nationalism.

On a visit to Edinburgh yesterday, Liam Byrne, the Chief Secretary to the Treasury, joined Mr Murphy to announce that HMRC had been asked to work out how the proposal to give Scotland control of 10p of the basic rate of income tax could be done.

The proposal from the Calman Commission, set up in 2008 to look at how to progress devolution, was seen as a crucial in making the Scottish Parliament more accountable in raising money.

But it was also put forward as a means of dealing with English concerns about the Barnett Formula, the mechanism by which UK funding is decided, and which critics in England and Wales believe is too generous to Scotland.

While Labour is committed to keeping the Barnett Formula, Mr Byrne's announcement on new tax powers for Holyrood came with a warning that Scotland should expect less money.

"There are difficult decisions ahead," he said. "That is what a lot of people find troubling about the SNP's position. Too often, they want to paint the future as a never-never land where there aren't any difficult decisions about spending."

He added: "We have to stop pretending the debate about finance is about how more money can come from Westminster to Scotland. The reality is we need a more sophisticated debate."

The report by the IPPR revealed that 40 per cent of people in England now feel that Scotland receives more than its fair share of government spending. This compared with just 22 per cent in 2003. Support for an English parliament has grown to 29 per cent, an all-time high while, for the first time, fewer than half agree that England's laws should continue to be made by the UK parliament.

The report's author, Professor John Curtice, of Strathclyde University, a research consultant to NatCen, which carried out the survey, said: "It is too strong to speak as yet of a widespread English 'backlash'. But the research does suggest there has been a marked growth in resentment about the level of funding Scotland enjoys."

However, he went on to claim that the Calman proposal would go a long way to deal with any English anger. "This is why Calman saw his proposal as a win-win situation.

"It gives the Scottish Parliament the greater responsibility people in Scotland want, while it allows parties to point out to English voters that any increase in the Scottish budget has to come from Scotland," he said.

However, he warned that Treasury officials appear to be against the idea. With the Conservatives proposing changes to the white paper this could allow renewed Treasury objections, should David Cameron's party take power.

Prof Curtice's analysis is shared by the Liberal Democrats, who believe that unless the present system changes, the Union is under threat. Lib Dem shadow Scottish secretary Alistair Carmichael said: "After ten years of devolution, we have now come to the point where the Scottish Parliament is established enough to take control of most of its own budget."

He suggested that giving the parliament greater power over raising tax would "assuage" English anger, but insisted it "must be accompanied with a review of the Barnett Formula".

The IPPR report was also taken as evidence that attacks by some "little Englander" Conservatives is having an effect, stirring up anti-Scottish resentment. But the Tories rejected this claim, as well as allegations that they intend to abandon the Calman proposals.

A spokeswoman also restated the party's position on a need to look at the Barnett Formula. "What is required is a full assessment of the different needs of the different parts of the United Kingdom. Then a proper debate on a fair funding settlement for the future can begin," she said. "If we replace the Barnett Formula with a needs-based formula, Scotland has very great needs and Scotland will get very great resources."

Meanwhile, the SNP, which opposes new tax-raising powers as it believes that will leave Scotland worse off with little real extra influence, argued the IPPR report was based on a false premise and that in reality Scotland was more than paying its own way.

A spokesman for First Minister Alex Salmond said: "Fiscal autonomy is in Scotland's best interests, and independence and a relationship of equality with England serves the interests of both nations, where we share a social union, including the Queen as our head of state."

But he added:"Scotland is in a stronger financial position than the UK as a whole – the flow of resources is from north to south. The GERS report demonstrates that Scotland ran current budget surpluses in the three years to 2007-8, worth 2.3 billion, compared to the UK recording a deficit of 24bn over the same period.

"We also know that 50bn of North Sea oil revenue will flow to London over the coming six years – more than during the previous six, and 10bn up on the Treasury's previous forecast. The UK is only being kept afloat at all by Scottish oil."

IN NUMBERS

40%

Of people in England now feel that Scotland receives more than its fair share of government spending.

22%

The comparative figure for 2003.

29%

Support an English Parliament – an all-time high.

49%

Agree England's laws should continue to be made by the UK Parliament – for the first time, less than half.

62%

Of MPs think the current distribution of funding received by the nations of the UK is unfair.

10%

Of MPs favour the status quo as the answer to England's future governance.

Related articles:

Economic growth is turning people back to Labour, claims minister

UK is mired in 'significant debt' and bumpy road awaits, says Mandelson

Pound takes battering on fears of uncertainty in hung parliament

Rights and responsibilities: Calman's tax proposal