John Swinney's Statement Today (Look, I started writing it before midnight and finished it after midnight, okay?)

I thought John Swinney did a good job in Holyrood today. I think he gave us all the facts we needed, and explained how the current SVR situation came about. He was right to express regrets about his handling of the situation, although I think anyone looking at it fairly can see how events just conspired to turn some of his judgements into ones which, in hindsight, were the wrong ones to make. Sometimes you make a decision based on a few assumptions, but in the end, circumstances change and you can't do what you intended to do. The SNP knew they wouldn't be using SVR this parliament - this was a correct assumption. They also assumed HMRC were following their wishes to get SVR working for the next parliament session - this turned out to be an incorrect assumption, and if there's one thing John Swinney should learn fromthis whole episode, it's that you cannot trust HMRC to do anything that they're meant to do, or on time.

Anyway, here are the main points from Swinney's speech, points which I think everyone should know and which I don't think the media coverage has so far adequately conveyed (shock there, then):

• The SNP Scottish Government allowed the Scottish Variable Rate tax varying power to lapse - this is false. The powers are contained in the Scotland Act, and remain so
• All that was required to carry the power forward was £50,000 per year. This is false. Labour/Lib Dem paid HMRC £12,000,000 for their IT system to accommodate SVR, and £50,000 per year for HMRC to keep track of Scottish addresses for the system. This contract ended on 14th May 2007, before the SNP entered government. When they entered government, they were advised that to invoke SVR, the earliest possible implementation date was April 2009 - halfway into the new parliament. This is exactly the same timescale that prompted Michael Moore's letter last week
• In one of his first briefings as Finance Minister, John Swinney was informed that in 2000, SVR had been (and he says this is a quote) "mothballed". He was presented with three options:
  1. If SVR was applied from April 2008, the implementation would be sub-optimal. The yield to Scotland from SVR would be £10 million - £26 million short, and would require further IT costs of £3.4 million to upgrade the system
  2. If SVR was applied from April 2009, the first reliable date of implementation, they would have to pay IT costs of £2.9 million
  3. The option that Swinney asked his officials to pursue with HMRC, was that if SVR was not applied during this government, costs of £1.2 million would be incurred, to allow the system to be in a 10 month state of readiness thereafter

So, here is the first very important point: in 2007, the SNP did NOT inherit a system that allowed SVR to be applied at 10 months notice. The £50,000 fee was to keep the database of tax payers up-to-date ONLY - not the system itself. Paying the annual fee would have kept the database up-to-date, but it would still not be usable without the system upgrades. By not paying this annual fee, the SNP Government has saved us £200,000 over four years - not a massive amount, but more than enough to raise accusations of governmental waste if this story had gone a different way. In 2007, John Swinney took steps to ensure there would be a viable system in place in time for the next Scottish Election.

In early 2008, government officials sought clarity from HMRC regarding the delivery of the £1.2 million system upgrade for the next parliament. On 28th May 2008, HMRC informed the government that progress was slower than expected (shock there, then), sparking a long period of communications between government and HMRC officials to obtain answers. Finally, on 28th July 2010, HMRC asked for £7 million for the work to be undertaken for the system upgrade, which would allow the system to be ready by 2012/2013. If the government did not agree to this, the system would not be ready until the following year 2013/2014, and after three years of prolonged talks, they required an answer in just three weeks.

So, as you would expect when money's too tight to mention, the government was not going to throw money about willy-nilly, so they asked for consultation on the matter (which we know from Alex Salmond's letter to have been an offer of talks on 20th August 2010). In September, the government reminded HMRC of this offer, and was given only an acknowledgement and a promise about a call that never came.

Here's an important point Swinney makes about the IT upgrade: they were neither consulted about them, nor advised of the costs beforehand. You can't do that. The Scottish Government is effectively a client of HMRC in this situation, and no company I have worked for would get away with telling clients "oh, we've decided to change your system without asking you, and we expect you to pay £7 million for the privilege."

Swinney then went on to explain why he had not informed parliament of the SVR problems until now.

1. In 2007, Swinney had no intention of using SVR, and he had instructed his officials to deal with the problems of the system he had inherited. If he HAD made a statement in parliament, others (and let's not beat around the bush here, we're talking about Labour) would have criticised him for using parliamentary time to highlight "the woeful record" of his predecessors
2. In 2008, he believed the protracted talks between government officials and HMRC were leading to a productive conclusion, and didn't believe he should take the matter "into the political sphere"
3. He chose not to come to parliament after 20th August 2010 because he believed talks were still under way, and didn't want to breach the confidentiality of those talks, a confidence requested by - among others - the Secretary of State for Scotland

Iain Gray stood up afterwards, and rattled off a bumbling incoherent mess that had clearly been written without any of the relevant facts at hand (witness his stumbling around 15:30 into the Democracy Live coverage when he says "and, and not to meet the other, err, requests" when he tries to remember one of the several costs Swinney had mentioned in his statement), focussing entirely on the £50,000 annual fee, a figure which Swinney booted into touch minutes into his statement by revealing that even a continuation of this fee would merely have kept the database in a working state, but not the actual system that would use the database. This is typical of Iain Gray, the exact type of behaviour one has come to expect from this rank amateur politician, a man who agrees with freezing public sector pay, and yet stands outside parliament joining in a protest against those very same pay freezes. He also goes on about the cost of the system upgrade, saying "£1.2 million, or £7 million, or £26 million, or another of the figures that have been thrown around like, erm, erm, erm... SNOWSTORM!!!!" (yes, that's a direct quote from the man who thinks he should be Scotland's next First Minister) Ah yes, £26 million for the IT upgrade. I remember that. Oh wait, no I don't, because that was the figure Swinney quoted for how much we could expect to lose if we took the early version of the upgrade. What a plonker. Besides, if Swinney HAD mentioned £26 million for the IT upgrade, is Iain Gray seriously suggesting we should have paid it? That tells you a lot about Iain Gray in itself.

Several opposition MSPs gave examples of parliamentary questions which mentioned varying income tax, and said that Swinney could have brought up the inability to vary income tax on these occasions. The fact is government officials had been trying to resolve the SVR issue up until Michael Moore's letter, and I think that the earliest time Swinney could realistically have brought up the inability to vary income tax was this year, when HMRC asked for £7 million to have the system ready for 2012/2013. Up until that point, it seems to me that the government was under the impression that SVR was being sorted out by HMRC, and therefore would be usable.

MSPs who made good speeches today: Christine Grahame, Patrick Harvie, and of course, John Swinney.

I'd just like to mention something I've brought up in various blog comments. 1.5 million Scots certainly DID vote "YES" to tax-varying powers. Powers. POWERS. PowerSSSSSSSSSSSSSSSS. SVR is one power (and it's not a very good one). Where are the rest? Or is this why we're getting Calman thrust upon us without being asked?

Incidentally, how come Pauline McNeill (presumably a supporter of Patrick Thistle) is the only person who knows that the leader of the Greens has changed his name to Partick?