Kezia Dugdale: Doctoring with a cudgel...

Can Scottish Labour "reverse" Tory tax credits cuts, like-for-like? That's a money question, and an administrative question, but it is also a legal question. Scottish devolution is subject to an increasingly complicated set of founding documents and diktats. I sympathise with the bamboozled public. I sympathise with the bamboozled commentariat too -- at least to some extent. Much of the detail of the Scotland Bill has escaped without analysis - except in the most general terms - because the detail of the thing seems simply too complicated and too dreary. 

This aversion to detail has serious drawbacks. We are left with a population, unable to discern where power - and responsibility - sits. But we are also left with a public discourse in thrall to lazy misconceptions and downright ignorance. Microeconomists like to point out that information asymmetries inevitably empower some people and disempower others. What you don't know not only can hurt you: it can screw you over mercilessly. That's one of the reasons I try to shed a little light on tricky-seeming areas of law here. Ignorance, and maintaining public ignorance, is fundamentally a conservative impulse. Trust me, it says. I'm in the know, and I know best. I reject this outlook entirely. 

Understanding the politics of devolution increasingly demands that we understand the law of devolution. Regrettably, most of our key commentators and opinion formers still haven't the nearest, foggiest clue about how the powers and reservations of devolution are delimited. And more frustratingly still, they tend not to stir themselves to find out. Instead, they spend their time discussing political tactics, impressions, aspirations, court politics -- and as a result, allow politicians to peddle guff unchallenged. 

You can understand why. It is quicker, zestier - and simply more fun - to ask whether policy X knocks Kezia Dugdale off course, or if policy Y puts Nicola Sturgeon in a tough spot - than doing the dogged, drearier work of asking: is there any legal basis for this policy, and how the hell do we fund it? This isn't a partisan point. Nationalists have used press and public ignorance of the limits of the Scotland Act to pull a trick or two in their time. But we're poorly served - misled, really - if we allow it to continue.

This lamentable tendency is much in evidence in the reporting of today's speech from Kezia Dugdale, pledging to "restore", "cancel" or "reverse" Tory tax credit cuts. The first question you might ask is a simple one: are tax credits devolved now? No, they're not. And is the new Scotland Bill proposing to devolve decision-making on either the child or the working tax credit to MSPs? No, it isn't. So how the deuce is this flagship Scottish Labour policy to be delivered? 

Here we have to go back one step further, and consider a couple of even more basic questions -- "what are tax credits anyway? And how is George Osborne proposing to change them?" Administered by HMRC, introduced by the Labour government in 2003, working tax credit is paid to the low-paid to alleviate in-work poverty. Child tax credit is also available, on top of child benefit. But isn't Osborne proposing to abolish tax credits? Not quite. As he set out in his summer budget, the Chancellor's plan hinges on reducing the overall spend on tax credits by increasing tapers and restricting entitlements. The key passage:

"From April 2016, the government will reduce the level of earnings at which a household’s tax credits and Universal Credit award starts to be withdrawn for every extra pound earned. In tax credits, this point (known as the income threshold) will be reduced from £6,420 to £3,850 ... The government will also increase the rate at which a person’s or household’s tax credit award is reduced as they progress in work, by increasing the taper rate in tax credits from 41% to 48%."

Decode that a bit. Say you earn £6,420 per annum this year. You are entitled to your full award of tax credits. But what happens if you earn £7,000? For every £1 you earn beyond £6,420, your maximum entitlement to tax credits will be reduced by 41 pence. If Osborne's summer budget plans ever materlise in the spring of 2016, this means a sharper taper of 48 pence in the pound applying to income above the income threshold, which will bite a far more modest levels of earnings. It is this new calculation which will strip out appalling sums of money from the industrious poor. 

What should immediately strike you is: this isn't a straightforward clawback of benefits by the Treasury. Gavin Kelly is good on this. "Restoring" tax credits from Holyrood isn't a question of popping an extra £200 into the balance for each qualified applicant. Each individual case will have to be calculated on its merits. This is gruesomely complicated. Someone would have to do the calculations. And under the general principles of the Smith agreement, the bean-counting money would have to come out of the Scottish budget. 

And worse, Holyrood will have only the crudest tools to begin to mitigate this impact -- even if the money could be found to begin to do so. Whatever Labour hope to be able to do -- it can't be to "cancel" or "reverse" the effect of tax credit cuts. The Scottish Parliament just doesn't have the power. So what will the Scotland Bill let Holyrood do? Well, for starters, it gives MSPs power to make provision about some disability, carers and industrial injuries benefits, maternity, funeral costs and cold-weather payments - subject, albeit, to unjustifiable restrictions. The Bill will also give MSPs some power over income tax. They will be able to establish and vary a Scottish basic rate of tax, and the higher bands. What they will not be able to do, however, is to set the personal allowance or other more nuanced forms of tax relief.

This is all well and good -- but there is nothing here which would let First Minister Dugdale pursue the scheme she has outlined today. Instead, she would have to rely on section 21, which proposes to give the Scottish Parliament power to "top-up" reserved benefits with discretionary payments. However, this power only allows Holyrood to funnel funds to those who are already "entitled to a reserved benefit". It doesn't allow MSPs to create new entitlement schemes. And critically, those whom Osborne pushes beyond the scope of the social safety net cannot be caught by a Scottish policy intervention under the Scotland Bill. Nor is David Mundell proposing to give the Scottish Parliament power to devise and administer its own welfare schemes, following its own lights. Ebeneezer Scrooge lives.

As devolution expert Alan Trench observed on Twitter earlier today, this means that Holyrood could devise some kind of "income supplement" and foot the bill, but this couldn't be administered through the tax system as credits are at present. This Scottish income supplement would inevitably be subject to different rules, criteria and thresholds. Jehovah only knows what it would cost to introduce. Jehovah only knows where the money is supposed to materialise from. We can make a shrewd calculation, however, that any wheeze to mitigate the impact of Tory tax credit cuts, penny for penny, in every individual case, would be impractical and ruinously expensive.

The chancellor's tax credit changes are brutal, but surgical. At best, the Scotland Bill will give Holyrood a club to doctor to the injury Osborne's reforms will create. "What do I care?" says the hard-pressed worker, glad of any mitigation for their situation, and their lost tax credits. Quite so. But whatever this is, it isn't ""restoring", "cancelling" or "reversing" the Chancellor's unjust, disproportionate and unfair tax credit policy. Holyrood doesn't have the power. And it's pure fiction - political spin - to claim otherwise.