An auction seems to have developed in Scottish politics to determine who will increase income tax by the highest degree. This is puzzling since, of all the remedies required by the Scottish economy, higher personal taxation does not spring to mind.
I offer a cautionary tale. Frank Doran, my former colleague who died last week, was elected in Aberdeen in 1987 and lost his seat five years later. (He subsequently returned in 1997). Frank never doubted that his enforced absence was due primarily to then Shadow Chancellor John Smith’s redistributionist “alternative budget”. Frank knew how the wind was blowing when he visited an oil platform and assured the workers nobody earning below £21,000 (in 1992) would be affected. He was bluntly advised they were all earning above that, lived accordingly and did not fancy paying more tax.
At least John had a massive UK pot to redistribute. Hitting the better-off in the wallet should have been a saleable policy. The problem was that not only those who were going to be affected, but many who thought they might be one day, decided to err on the side of caution, and voted accordingly.
By contrast, the striking feature of the Scottish tax base is its narrowness. Two million adults pay no income tax at all. Only 20,000 Scots are in the top tax bracket, earning more than £144,000, and they already contribute 20 per cent of the income tax take. While many of the two million might cheerfully see the 20,000 squeezed till the pips squeak, that would not solve the problem. In order to raise any significant sum, the Scottish Government needs to impinge upon the goodwill of those who are earning a bit more than average but would certainly not consider themselves rich. Incidentally, £21,000 in 1992 is worth £42,000 today, so that is an indicator of where voter resistance might begin, perhaps lower.
The SNP-run Scottish Government has launched a consultation around four options which would bring in between £83 million and £230m extra. Other political parties are invited to contribute. A lang spune is advisable as confirmed by last week’s First Minister’s Questions when Jackie Baillie, for Labour, sought to probe the issue.
For her trouble, she was subjected to a dose of petty, partisan snash, the delivery of which remains the First Minister’s undoubted talent. She and her colleagues are not remotely interested in a “consultation”. Rather, they are seeking political cover for whatever they decide to do and I see no obvious reason why this should be granted to them.
Holyrood elections are not due until 2021 and if, in the meantime, the SNP and their little Green helpers want to increase income tax, they should be left to get on with it. The sensible position for any other party is to call for a Comprehensive Spending Review rather than joining any rush to increase Scottish income tax.
The Labour Party has particular reason to exercise caution. My strong suspicion is that if the SNP go ahead and increase income tax, there will be precious little to show for it by 2021. The tax-paying section of the electorate will rightly feel that it has been browbeaten into paying more for no very obvious reason.
At that point, it should be the party of government that takes the rap. But if Labour allows itself to be manoeuvred into a position where its only answer is to say the tax take should be even higher, then they should not expect the gratitude of the people. My scepticism about higher Scottish taxation is not just on grounds of economic impact. I also object to the intellectual laziness. Raising more from tax in order to add to what the government spends can only be justified after scrutiny of existing budgets, down to micro level. The challenge of radical politics should be to do things fairly and effectively, which is far from synonymous with simply spending more.
No matter who was running Holyrood, a Comprehensive Spending Review would be essential. Devolution has been operating for 20 years. The budget has increased dramatically – this year it will be £37 billion. Hardly a day goes by without another initiative with eye-catching numbers attached to it. Politics should be the language of priorities – not of simply taking what already exists and adding on. If even the most radical of the four options was implemented, it would bring in well under one per cent of the current Scottish budget with absolutely no guarantee of what that money would be spent on. At present, we have £1,400-a-head higher spending in Scotland than the rest of the UK. Is another 50 quid, which is what the top-end tax option equates to, going to make any critical difference?
A retired headmaster in Edinburgh this week pointed out that, over the past five years, the city’s budget has been reduced by £240 million with another £140 million cut in the pipeline. That’s Edinburgh alone. The attack on local government has been wildly disproportionate to anything suffered by the Scottish Government itself, a reflection of Ministerial priorities which does not require a tax increase to correct. For a decade, the council tax freeze has brought the poor nothing other than reduced services while cosseting the better-off. How does this sit with a new orthodoxy that Scottish income tax must increase, without any guarantee a penny of it will go to relieving the deprivation which the same geniuses in St Andrew’s House inflicted on council services? Then there is the sheer opaqueness of Scottish Government spending. I recently commented on a £500m Growth Fund which Sturgeon announced a year ago with nothing so far having happened. The newspaper cuttings, if anyone bothered to look, are littered with these nebulous announcements.
Is this how extra revenue would be spent? Shouldn’t someone find out before endorsing any tax increase? Opposition parties at Holyrood should spend the next few years coming up with creative policies that do not rely on the assumption of spending more.
Meanwhile they should stay well clear of the spider-fly relationship inherent in a tax-raising auction while relearning “the language of priorities”.