Those of a certain age might remember 1978’s Give ‘em Enough Rope, The Clash’s second album perhaps best known for Tommy Gun. While using the phrase “give them enough rope to hang themselves” might not be politically correct these days, it’s still heard in unionist arguments for giving the Scottish Parliament more power to raise and control its own revenues. More common is the view that if the SNP Government is given more financial rope, it will hang us all.
The dilemma was illustrated on Thursday, when Scottish Finance Secretary Kate Forbes was arguing in the Scottish Parliament for her Government to be given the power to borrow an extra £500m while her foot soldiers on Edinburgh Council were extolling the virtues of a policy which could cost at least £38bn a year in Scotland alone while Scottish councils as a whole face a £0.74bn shortfall.
Ms Forbes has been arguing for more borrowing powers for some time and was given more ammunition in the snappily titled Towards a robust, resilient wellbeing economy for Scotland paper, aka the Higgins Report, a set of loose recommendations to frame the recovery from the Covid-19 crisis produced by a team chaired by former senior banker Benny Higgins.
Entrepreneur Sir Tom Hunter led a tepid reaction, criticising the lack of focus on the importance of small/medium enterprises (SMEs) in the jobs market, with 60 per cent of the Scottish workforce, and indeed there is a new recommendation for UK Government to create a £15bn UK recovery fund for SMEs through borrowing at a time of rock-bottom interest rates. At the end of the week, the Fraser of Allander Institute reported that around one in seven of Scotland’s 350,000 private firms are in deep financial trouble, so the need is there.
Instead the Higgins Report concentrated on a high-level “investment-led” recovery powered by increased Scottish Government borrowing to give Holyrood “greater autonomy to use targeted fiscal measures to stimulate demand or incentivise behavioural change in the recovery period”. Behaviour change and the role of small businesses is where the £38bn comes in, the estimated cost of the Citizens Basic Income (CBI), a universal system to replace benefits payable to everyone regardless of income, if it was set at the same level as the old-age pension, currently a maximum of £175 a week.
CBI is the policy du jour in left-wing circles since the UK Government launched the furlough scheme, estimated to have been used by over a million businesses to bankroll 8.5 million laid-off workers at a cost to the UK Treasury of £14bn a month. Extending widespread government work subsidy to every adult was, according to First Minster Nicola Sturgeon, an idea whose time had come. “As one of the many things that we should rethink, this should be up there, quite close to the top of the list,” she said last month and a pilot scheme is still under development.
The argument in favour is replacing benefits removes stigma and complex, costly bureaucracy, and is not a disincentive to work because it is only a basic. The simple argument against is, how on earth can a country with a weak economy before the crisis possibly find £38bn a year, the equivalent of the three national health services and more than the Scottish Government’s entire current budget.
Helpfully, the former Edinburgh SNP MSP and local government minister Marco Biagi has done some sums, calculating that rolling in all benefits currently paid out in Scotland would cover £19bn and on the basis that the Scottish Government won’t stop spending £19bn on schools, hospitals, police and all the other services for which it is directly responsible, the rest of it would have to come from higher tax, almost all on income. It doesn’t sound too bad when you say it quickly enough; a bit more income tax and everyone gets £9,000 a year with no strings attached. The rich can easily afford it, so what’s not to like?
What’s not to like is the scale of the tax rise. Most appraisals of CBI presume the £12,500 tax-free personal allowance would go and National Insurance would be paid by everyone, and Mr Biagi’s calculations produce a basic income tax rate of between 42 and 44 per cent. The Office for National Statistics estimates average gross earnings in Scotland to be £470 a week, £25,000 a year give or take a quid or two, and income tax at 40 per cent would mean the average worker paying £10,000 a year in tax and getting £9000 in return.
Benny Higgins is nothing if not astute and in being asked to produce his report while bound by an extremely narrow remit from Economy Secretary Fiona Hyslop, he delivered something the Scottish Government wanted. But nowhere did it advise taxing our way out of the crisis.
Asked by the Herald newspaper about CBI, Mr Higgins was typically forthright. “We’ve really got to use all of our resources to get people back to work, rather than support them out of work,” he said. “The biggest issue is the levels of unemployment. To be distracted by universal basic income now, at a time when actually it would be very expensive and it would detract from the focus on unemployment, I think it’s just not the right time.”
The left-of-centre Joseph Rowntree Foundation, which is helping to run Edinburgh’s Poverty Commission, agrees with Mr Higgins. “It increases poverty unless modified beyond recognition,” said a report two years ago. “Rather than continuing to be distracted by it, we should focus on improving the social security system... and ensure benefits are enough for people to keep up with the cost of essentials.”
Allowing more Scottish Government borrowing might be the right thing to do, if it is used in the right way, particularly protecting key services like education and using Scottish Enterprise’s Pivotal Enterprises Resilience Fund model to support SMEs, but ploughing on with a pilot scheme for something so obviously ruinous and ultimately a political non-starter?
In any case, CBI is only possible if full control of income tax and national insurance is devolved to the Scottish Government and this did not feature in Kate Forbes’ shopping list on Thursday alongside the authority to increase borrowing. While not ruling out the borrowing request, Prime Minister Boris Johnson has already made opposition to the citizen’s income concept clear. The suspicion is CBI is not so much a distraction but a means to portray London Conservatives as blocking a policy which aims to help the poorest. The SNP always want more rope, but unlike the subject in Tommy Gun they won’t sacrifice themselves to make a political point.
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