Less than a month ago, Jeff wondered whether any of the parties would be brave enough to consider using the tax-varying powers of the Scottish Parliament. I held off commenting because I hoped the Scottish Greens would vote at Conference to back revenue-raising to block the worst of the cuts, and indeed we did this weekend, overwhelmingly so.
The UK Government, has, we believe, made the wrong decisions with their deficit plans and spending cuts. They are enthusiastically regressive in the detail – a return to the work-house? – and economically illiterate in their overall effect.
Greens don’t want to see massive deficits pile up and have taxpayers’ money wasted on interest payments, but neither do we believe the payback should be made by the poor.
A massive clampdown on tax avoidance, a Robin Hood tax, a one-off wealth tax on the richest, these are the ways in which a progressive UK Government would act. But we do not have such a thing, any more than we had one prior to May.
UK Ministers have three dimensions to consider. Revenue, expenditure and borrowing. Scottish Ministers have only the first two (which is probably a good thing given the perverse desire of the other four parties here to blow billions on the Alex Salmond Additional Forth Bridge).
Without significant borrowing powers for the Scottish Government, John Swinney can only look at revenue and expenditure. Yet the SNP have themselves ruled out revenue changes. The tax varying power is “impractical”, despite having campaigned for it to be used not so long ago as the old Penny For Scotland. Council Tax will be frozen too, despite the regressive nature of the freeze as well as the tax itself.
The Labour leader has done the same, telling the Today Programme two weeks ago that:
“the debate in Scotland is about managing the reduction in the finances that we’ll have available”.
Both the SNP and Labour are terrified of frightening the rightwing press who have cheered on the coalition, and neither party feels they can afford the other slamming them for some “tax bombshell” or similar. In Jeff’s post he said he thought the Nats would be the most likely to be brave, but I never believed that. Their political proximity to the Tories has been striking, as has their growing terror at being evicted from office having achieved not much.
Neither the Conservatives nor the Lib Dems could credibly take a position which criticised their London colleagues’ cuts, either. Again, Jeff had the Libs down as second most likely to take a progressive position: that struck me as impossible too.
Contrary to the Scotsman headline, Scottish Green Party conference didn’t pass a call for a 3p increase in income tax. We voted for a manifesto which would find progressive ways to raise revenue, within the limits on Holyrood to do so, including Land Value Tax and the Scottish Variable Rate. The detailed proposals will go through the party’s Council, but I’ll eat my hat if they recommend the full 3p.
Every other party in Holyrood is now apparently committed to passing on the Westminster cuts in their entirety. The only debates for them are about where they fall. Should they hit health or housing harder? Should capital budgets be cut for roads or schools? (not a hard one, that)
So here’s the dividing line. The election will be about the cuts above all, and the Scottish Greens will be the only party in the next election offering an alternative to them.
Here’s how Patrick had it yesterday.
“Labour and the SNP are just bickering about how to implement the Coalition’s cuts. This vote today means the Scottish Greens will provide the people of Scotland with a pragmatic alternative, the only alternative to those cuts. When the Scottish public voted in 1999, they voted not just for a Parliament but also for that Parliament to have tax-varying powers. The options are limited, but they are there. If they remain unused during the gravest threat to public services in the post-war era, when will they be used?
“In May, the public will have a choice. They can vote for one of the four parties who either relish the cuts or are too afraid to challenge them. But they will also have an alternative – to vote Green, to boost the green economy, and to protect the public services we all rely upon.”
I’m proud of our position, and I’m looking forward to fighting an election on this basis – who’s with me?
Incidentally, the March 2010 UK Budget said what the powers would bring in: around £400m a year in 2011-12 (pdf, see A9) for a 1p increase.
#1 by cynicalHighlander on November 8, 2010 - 6:42 pm
I’ll try and find the link but as far as tax raising powers are concerned it is in the treasuries power to deduct any monies raised from the block grant, not a wise course of action.
#2 by James on November 8, 2010 - 6:59 pm
Citation needed there I think. Someone raised this without any evidence last time we discussed it.
The politics make that irrelevant, though. If Holyrood sought to raise tax and then the Coalition proposed cutting the block grant so there was no effect, there’d be uproar from every supporter of devolution.
In one sense, Westminster can do what it likes – Holyrood currently exists only thanks to legislation from there – but it’s also limited by the politics. Any mood at Holyrood to raise more in order to limit the cuts would be pragmatically impossible for London to overturn.
#3 by cynicalHighlander on November 8, 2010 - 7:53 pm
http://www.bbc.co.uk/blogs/thereporters/briantaylor/2010/11/history_matters.html#P102624533
‘The closest to that seems to be in Section 64 which says: “The Secretary of State shall from time to time make payments into the Fund out of money provided by Parliament of such amounts as he may determine.”
And if that is the case…
How can anyone guarantee that a reduction in the Block Grant wouldn’t happen if the tax rate was increased? ‘
Are the Green’s going to risk it and hope nobody notices?
#4 by James on November 8, 2010 - 9:10 pm
I’m not convinced that a comment, even on BT’s splendid blog, is really substantiation.
#5 by cynicalHighlander on November 8, 2010 - 9:46 pm
http://www.legislation.gov.uk/ukpga/1998/46/section/64
(2)The Secretary of State shall from time to time make payments into the Fund out of money provided by Parliament of such amounts as he may determine.
Thats why the Green party will struggle to gain any foothold until they get up to speed in facts rather than wishful thinking. We are at Westminster’s ‘generosity’ who can open and shut the tap at there whim.
#6 by Jeff on November 9, 2010 - 1:05 pm
I’m sorry CH but that’s just nonsense; you’re reading between the lines and picking your preferred conclusions.
Scots paying more tax than south of the border and not reaping any financial benefit is a nonsensical situation and, whatever one may think of the coalition, it is simply not a plausible situation.
#7 by Gaz on November 8, 2010 - 7:24 pm
Sadly, the Green position is pretty naive and smacks a bit of desperation – just as the Penny for Scotland policy did in 1998/9.
#1 hits the nail on the head. Anything raised over and above the block grant will just be clawed back the following year, leaving Scotland facing exactly the same choices but with everyone paying more tax too.
This position has been spelled out with respect to the fossil fuel levy already. Although the money has already been gathered from Scotland, the treasury has said it will deduct any monies released from the fund from the block grant. You have to remember that the reducing the deficit is cover for reducing public expenditure – that is the ideological goal of this government – and it will be forced upon us come hell or high water.
And, by the way, this is exactly the principle that the Calman Commission propsals would force upon Scotland’s financial settlement by forcing the use of tax rises to make up for a diminishing block grant.
On the Council Tax, I am afraid you are quite wrong to say the freeze is regressive. The Council Tax itself is regressive (totally unrelated to ability to pay) and therefore a freeze is progressive by definition since it prevents futher relative disparity.
Don’t fall for the Labour propoganda that the rich benefits most from the freeze. Firstly, that is only true in absolute terms but in relative terms (by which any meaningful measurement must be made) the money saved at the bottom of the scale represents a far bigger proportion of disposable income than the money saved at the top of the scale. Secondly, Labour slagged off a local income tax because it would mean ‘hard working families’ (ie those earning money) paying more.
So, according to Labour, the Council Tax freeze is wrong because those earning more money save more and the Local Income Tax is wrong because those earning more money would pay more. Classic double-facing that even Nick Clegg would be proud of. And I think we are still waiting to hear what their alternative to Council Tax is…
As long as we are subject to the fiscal and monetary decisions made at Westminster, we simply have to live with whatever settlement we get. I find it incredible that people in Scotland are prepared to put up with that situation for their country when they would never allow themselves to be put in that position personally.
The only answer is full fiscal autonomy and a complete overhaul of the entire taxation system in Scotland that is designed to be progressive and generate wealth.
#8 by Jeff on November 9, 2010 - 1:11 pm
Gaz, there’s a clear difference between the fossil fuel levy and Scots paying tax. There is a painfully obvious unfairness in Scots paying more tax and receiving no discernible benefit as a result, the fossil fuel levy is more complicated (though still has the result that Scotland should get the cash). You seem meekly settled on the view that Westminster would ‘claw’ any extra money back but seemingly on little basis.
Why did the SNP campaign for tax-varying powers if it never thought it could use them? Is the SNP so scared of the Greens that it would pessimistically interpret the Scotland Act (or even just make stuff up) to try to stymie their arguments?
#9 by Richard Thomson on November 9, 2010 - 3:30 pm
“Why did the SNP campaign for tax-varying powers if it never thought it could use them?”
Because however flawed the power was, if it had been rejected, just think how much harder it would have become in the future (ie now) to win meaningful fiscal powers.
The 3p tax power is a complete and utter waste of time. But it was still necessary to campaign for it to aid the passage of independence/further devolution further down the line.
#10 by James on November 9, 2010 - 3:46 pm
That’s an odd argument for a referendum position, but an even odder one given that the SNP pledged to use the powers previously.
#11 by Richard Thomson on November 9, 2010 - 3:58 pm
Not at all, James. What would have been odd was arguing for a ‘Yes, No’ vote to try get something better which simply wasn’t on offer. I can hear the jibes now… “why do you want fiscal autonomy? You had your chance in 1997 and didn’t even take what you were offered then…”
That’s the basis on which I campaigned for a second ‘Yes’ vote, and I know plenty of others in the SNP who thought likewise c. 1997. The decision of the SNP to campaign in 1999 for ‘a penny for Scotland’ is a whole different story…
#12 by Jeff on November 8, 2010 - 7:31 pm
I’m with you James, but that won’t come as too much of a shock. I think it’s bold but eminently sensible and it being a ‘non-green’ policy you may well pull in many voters to consider you who would have otherwise discounted you as just those barmy environmentalists, not that they should do, of course.
One risk for you that does concern me is this:
People may theoretically be in favour of increased ‘revenue’ (aka taxes, I like your word choice) but there is deep scepticism that existing budgets are not being spent properly so there will be inevitable concerns that extra revenue will just lead to increased wastage.
Although I hope this isnt the case, and nor do I believe that it is, may this be another ‘nice idea’ from the cuddly Greens, the party that everyone likes but not many vote for?
The irony is that yours is the only party that has not been in power in Scotland or UK over the past decade so it’s not your fault that this cynicism exists!
Great idea though and a potential vote rainmaker.
#13 by James on November 8, 2010 - 7:34 pm
Yes, just as certain other parties to whom I’ll give a brief break have recently undermined both the principle of coalition and that of the publicly signed pledge.
This will mean nothing without a comprehensive plan. And others have gotten over the hump of “you’ve never had a chance to be in office so how do I know you’ll be competent at it?”, both Greens elsewhere, and here, more recently, the SNP.
#14 by Debra on November 8, 2010 - 9:07 pm
As a councillor trying to see where the axe will fall on local government, the one thing I am pretty certain about, is that local government cuts will be far more damaging to the poorest and most vulnerable in society that the relatively well off.
On that basis, I believe that cuts will be far more regressive than an increase in Council Tax. It’s not a good tax – it wasn’t designed as a progressive system and we need a better mix of tax powers in Scotland. But the SNP’s populist freeze does nothing for the independence and good governance of Councils.
#15 by Stuart on November 8, 2010 - 9:33 pm
Agree with you Debra. Councils are already up against it, and have been for a long time. I’ve heard rumours that one LA is looking at over 30% forced redundancies(!!!)
And that is sadly what you get with “efficiencies”- job cuts. People will argue that efficiencies like top salaries being capped etc. (which I welcome), will do the trick, but it simply won’t be enough to protect LA’s against cuts. I also hate the idea that efficiencies ultimately mean people who get to keep their jobs find themselves having a less and less enjoyable work environment because their workload will increase.
As always, most politicians don’t want to talk about tax increases, but if I was in the public sector and a 1p increase on income tax was the difference between having or not having a job, I know which one I would go for. And the same thing would apply to the private sector worker who relies on the public sector for work…
Of course that brings me to that other myth from the Coalition. You can’t really separate the public and private sector.
#16 by CassiusClaymore on November 8, 2010 - 9:28 pm
James
So, you want to hike taxes on Scottish households in the teeth of a recession and you think that those who disagree are “economically illiterate”?!
I’m afraid that’s student politics. Straight out of Citizen Smith. Even the Labour party understand this very basic point.
Count me out, and count out the 90+ percent of others who don’t support the Greens. Quite understandably, when you come out with this sort of poorly thought out rubbish.
CC
#17 by Debra on November 8, 2010 - 9:43 pm
CC – just tell me where to take £25-40m out of my council’s budget that a) won’t impact poor and vulnerable people b) cut jobs locally … and thereby feed into the contraction of the economy.
We’ve had cuts year on year … there isn’t fat in the system.
There is no way council tax rises could fill that gap … but it might make some of the pain better spread.
#18 by Stuart on November 8, 2010 - 10:17 pm
I’m sorry Gaz, but that nationalist excuse for the cuts does not stand up. If you accept them then you are as bad as the Tories and the Lib Dems. Scotland can do something about these cuts and should.
Same goes for Cassius. If you think this is such a bad idea, what’s your idea for stopping the cuts hitting Scottish people.
Party over country?
Pingback: Green things grow on trees | Set In Darkness
#19 by Andrew BOD on November 9, 2010 - 1:29 am
Debra
How about merging LA’s? I’m guessing this has already been mentioned in your own council area. And at the same time, how about larger council wards and less councillors? That would save a good deal of money, perhaps a bit more than £25 – £40 million.
We are probably the most over-represented people, what with MPs, MSPs, MEPs and Councillors. It’s ironic that this type of representation has led to little real action, each group reverting to their own ideological position and blocking real change.
In times like these, real change is what is needed to get things moving, I may not agree with coalition policies, but I agree with the principle of collaboration to get things moving in tough times, ahead of political dogma.
#20 by Chris on November 9, 2010 - 9:35 am
There is a problem that the additional tax would be very difficult to collect. You are not obliged to tell HMRC where you live so it will be complex to collect from people living in Scotland working for companies based in the rest of the UK and people working for Scottish companies, but based elsewhere.
And of course, every company will face administrative costs of reconfiguring/upgrading their payroll system or making manual changes to it. As it is a change in the tax rate, it can’t simply be put through by a change in the tax code.
#21 by Jeff on November 9, 2010 - 9:48 am
Chris,
I don’t buy this argument that it will be complicated for companies to reconfigure or upgrade their payroll systems. It was used against LIT back in the day and it sounded as bogus then as it does now. Similarly, given the myriad of tax codes that already exist, it is surely not outwith HMRC’s capabilities to work out a new one for those north of the border. A bit of can-do attitude and a solution shouldn’t be too difficult to find.
I’ve audited a few HR offices in my time and they can stay on top of processes considerably more complicated than this. Adding a simple ‘tag’ for employees who live in Scotland and using a standard PAYE code supplied by HMR&C sounds very straightforward to me. Indeed, a variant already exists for graduates paying back their student loans.
And just think about countries on the Continent and US/Canada? There must be a standard approach to this issue that can easily be cherry-picked.
Of course there’ll be issues and complications at the margins, people who have two jobs (one in Scotland, one in England) e.g., but that is inevitable with any change and it shouldn’t stand in the way of implementing a good idea that will save jobs, protect the poorest and sustain worthwhile devolved policies.
#22 by CassiusClaymore on November 9, 2010 - 9:47 am
Debra
Since you ask the question, I’d merge the 32 authorities into 6-8 new councils and ensure that all efficiency savings/headcount reductions were made in the back office rather than on the front line. I’d also institute a recruitment freeze to naturally reduce headcount over time, which would save a fortune. I’d institute a pay freeze. I’d scrap final salary pensions for new employees (not existing employees), like everyone in the private sector did 15 years ago. I’d do my very best to not get scammed out of six-figure sums by Nigerian e-mail scams. And so on.
In summary, I’d suggest running councils as efficiently as possible first, before trying to hit the hard-pressed working taxpayer for more cash.
Stuart – party before country? From your post, you are not a nationalist, and so are presumably quite content to hand all of our national revenues and resources over to London and then beg for some of it back every year. Who’s putting party before country in that scenario?
CC
#23 by Indy on November 9, 2010 - 10:50 am
It’s a rather pathetic point to say that you oppose the Scottish Government having borrowing powers because every political party other than the Greens supports a new Forth crossing. Newsflash – more people voted for the other politcal parties than voted for the Greens. If you are serious about trying to stop a new Forth crossing you should be trying to persuade people of that case, which you have signally failed to do, instead of revelling in the fact that Scotland does not have the same borrowing powers as other nations and therefore is effectively straight-jacketed.
#24 by Jeff on November 9, 2010 - 11:19 am
Not that James can’t speak for himself but a few points on your points Indy:
1-You’ve neatly skirted around the main point of James’ post. Is that because you know in your heart of hearts that using the tax-varying powers is the right thing to do?
2-James didn’t say he was opposed to the Scottish Govt having borrowing powers, merely against their being used recklessly.
3-Your suggestion that the 2007 election was a referendum on whether to build a new Forth Road Bridge is, to use your own word, “pathetic”.
4-The Greens did win the argument on the bridge with a poll showing 50+% against the building of the bridge, preferring to wait to see if the cabling could be fixed for a fraction of the cost.
However, I wouldn’t want to end up talking about bridges when the main point of the post is using the tax varying powers for revenue raising. I recently thought the SNP would be in favour of such a move and I still hope they will be as I can’t think of a strong argument against such an approach and you Indy, so often so strong and persuasive with the rebuttal, can’t seem to provide one.
#25 by James on November 9, 2010 - 1:33 pm
To be clear, I’m not against the Scottish Government having borrowing powers – I support independence, for goodness sake, so why would I?
However, if Scottish Ministers had borrowed billions to spend on the bridge during a capital squeeze from London then Scots would have paid for it for a generation.
#26 by Dan H. on November 9, 2010 - 11:12 am
A Robin Hood tax and one-off taxes on the rich are both quite amazingly bad ideas; only a complete buffoon can possibly think that either makes any sense at all. Robin Hood taxes, or windfall taxes basically send the message that the juresdiction in which they occur cannot be trusted to play by the rules which they themselves have set out and agreed to. Similarly, attempting to tax the very rich is once again dishonest thievery, and a major disincentive for rich people to reside in Scotland.
If you do enact these measures, all you’re doing is demonstrating for all to see that you cannot ever be trusted. Scotland’s main claim to fame is having a workforce which whilst skilled will work for relatively low wages and is in the periphery of the EU economic zone. The same can also be said of the Eastern European countries; you’re directly competing against them and some of these places use flat taxes and other fiscal lures to make financial life there much easier.
A company therefore has a choice: accept the language and training problems of Eastern Europe and trade this against sane economic regulation, or get a leg up in terms of language and training in Scotland, but run the risk of getting mugged by marauding Lefties. Most companies think long-term and avoid countries with dodgy politics, and merely by even mentioning Robin Hood taxes, you’re putting off your potential investors.
#27 by pozorvlak on November 9, 2010 - 4:21 pm
Robin Hood taxes, or windfall taxes
James isn’t talking about windfall taxes, he’s talking about a Tobin tax, ie a permanent tax on financial transactions. More here.
This is outwith the Scottish Government’s powers, of course. But it’s still a good idea, and the kind of thing that a progressive government would seek to do.
#28 by CassiusClaymore on November 9, 2010 - 11:42 am
Jeff
At the risk of repeating myself, the primary argument against raising basic rate income tax by 3% is that this would take money out of the pockets of every working household in Scotland, thus further reducing spending capacity and demand in the productive part of the economy. The opposite of a stimulus, in other words.
Even if I was a tax-and-spend enthusiast (which I am certainly not), I wouldn’t be advocating this at this time, whilst economic growth is so weak. I appreciate that the Greens aren’t terribly interested in economic growth, but it is quite important to those of us inhabiting what I would describe as ‘the real world’.
CC
#29 by Jeff on November 9, 2010 - 12:08 pm
Cassius (just lost a massive comment in reply so I’l try again!)
While you are of course correct that families paying more tax will mean less disposable income for the economy and less of a stimulus, that is only one side of the argument.
The alternative is Swinney having to make thousands redundant and more money having to go towards redundancies and welfare, not to mention those unemployed having significantly less disposable income than they would have if employed. Furthermore, what if policies such as free tuition were to be replaced with £6k/year fees. Families would have to save a fortune to put their kids through college/university so saving such policies, albeit with a small tax rise, could be argued as actually being relatively stimulating.
The key here is jobs and the main argument for me is that those that have safe jobs paying a little more tax in order to safeguard the jobs of those that are not so safe is worthwhile.
I’m not saying it’s clear cut and it is a least worst option rather than a clear solution but, I want to ask, are Sweden and Finland part of your “real world”, where sustainable growth, high taxes, low unemployment and high standards of living are the norm? This suggestion from the Greens takes us closer to that reality. I’m all for it.
#30 by CassiusClaymore on November 9, 2010 - 12:08 pm
Here is my comment on Jeff’s tartan tax thread, cut and pasted. My view hasn’t changed, although I appreciate that it makes me a bit of an outlier in SNP terms. Still, it’s a broad church. Thanks to the Greens, the very first line has been proved to be entirely incorrect! I was referring the major parties, I suppose.
“There is no chance of any of the parties standing on a platform of raising tax – and quite right too. It would be calamitous for the Scottish economy were Scotland to become the most highly taxed part of the UK. Every pound taken in tax is a pound not spent in the real economy (I was delighted to learn that we paid for 26 BBC folk to go to Chile, for example, all on £5K business class airline tickets no doubt).
We should be doing the reverse – cutting tax, and encouraging an inflow of talented people rather than the reverse. Scotland runs a budget surplus. It’s time we stopped subsidising England. Under fiscal autonomy I will be expecting tax to be cut, not raised.
If we want to spend more on frontline services that actually matter to people, perhaps our beloved governmental and municipal penpushers could try not constantly wasting our tax money – bearing in mind procurement debacles such as the Parliament building and the Edinburgh Tram, try to imagine how much money they’re wasting on the million little things which don’t get scrutinised in the public eye!
If our civil servants and council officials were acknowledged as being experts at getting value for (our) money, then folk would be happier to pay tax. At present, the reverse is true.
I reckon that, once indirect taxes are factored in, I pay the Government over half my income in tax. I ask them for virtually nothing, and I am happy to pay as much tax as I need to in order to make sure that my fellow citizens are fed, sheltered, clothed, educated, kept healthy and protected from crime. My issue is with how profligate they are with our money (which of course, they regard as theirs rather than ours). If they’re going to take it from us under threat of imprisonment, which is what they do, they could at least do us the courtesy of not pissing half of it up the wall!
All non-essential spending should cease, immediately, and the proceeds returned to the people by way in an increase in the personal allowance, thus favouring the poorest most.
CC”
#31 by Jeff on November 9, 2010 - 12:18 pm
Thanks for this CC, it is a strong argument.
I believe I may have been thinking of this very comment when I warned James in an earlier comment that many people believe there is too much current wastage in the system to justify more taxes.
You won’t be alone in your views and James won’t be alone in his so at least it looks like Scotland will get the debate it deserves, (assuming the Greens get invited to each of the TV debates of course!)
#32 by Indy on November 9, 2010 - 12:36 pm
1. No I don’t think using the tax varying powers is the right thing to do for the reasons already given – the equivalent amount would almost certainly be removed from the block grant in succeeding years so we would end up paying more tax but not having any more money to spend. It is true that no-one can prove that this is what would happen but politucally it is by far the most likely outcome. Rather than looking to use the parliament’s tax raising powers (which are of course limited only to income tax) we should be looking at building a cross-party and civic consensus for full fiscal autonomy, including borrowing powers, which is the only realistic way to steer an alternative route through this economic crisis.
2. James said that it was probably a good thing that the Scottish Government does not have borrowing powers given that every party represented in the Scottish Parliament, other than the Greens, supports a new Forth crossing. That is making support for the Scottish Government having borrowing powers conditional on them using those powers in a way that he approves of. That is not a serious political argument and it lalso acks democratic credibility.
3. I did not say that the 2007 election was a referendum on a new Forth crossing – that is a silly suggestion. It is however a fact that the parties who support a new Forth crossing have more support than the Greens and the Greens have signally failed to make a credible case against a new Forth crossing, mainly by giving the impression that they would not be all that bothered by the economic carnage that would result from a partial or complete closure of the current crossing. I understand that is quite a logical position from the Green perspectivebecause they do not believe in economic growth as a driver of the economy but it is also an extremist position, which is why it has been rejected by every other party.
4. The Greens quite patently have not won the argument on a new Forth crossing. They have lost it. I do not know what opinion poll you are referring to, perhaps you could post it.
#33 by Jeff on November 9, 2010 - 12:55 pm
1 – We clearly need some clarity over whether any use of the tax-varying powers would lead to ‘London’ deducting that amount from future years. Personally I think that is non-sensical. How can there be a situation where Scots pay a higher rate of tax but over a number of years do not receive any benefit. I know you won’t like this Indy, but it sounds like the kind of scaremongering that Labour have indulged in in the past. Furthermore, if that was the case, why haven’t we just reduced our taxes and waited for London to top up our budget in future years, resulting in the same money coming North and Scots paying less tax? No, I’m afraid that logic just does not stand up, but I am onboard with full fiscal autonomy (not that that helps the here and now)
2 – You said Greens were against borrowing powers but that is not the same as being against how they would be used if they were devolved. You don’t seem keen on admitting that but I’ve made my point.
3 – If I misread what you were saying about ‘less people voted Green than for any other party’ then so be it. I could point out that less people voted for the SNP than any other party but that would just be childish.
4 – 57% of Scots reject bridge: http://scotlandonsunday.scotsman.com/scotland/Majority-of-Scots-reject-plan.5805030.jp
#34 by DougtheDug on November 9, 2010 - 1:27 pm
Just some information on the Scottish Parliament’s tax raising powers and who gets to keep the money.
The tax varying powers are in Sections 77 and 78 of the Scotland Act 1998.
If the Scottish Parliament puts the tax up it gets to keep the extra, if it reduces the tax it has to pay for that reduction out of the block grant.
The actual amount of increase or decrease in money the Scottish Government gets will be an estimate. This is also stated in sections 77 and 78 of the Act.
#35 by Jeff on November 9, 2010 - 1:30 pm
Thanks Doug, finally a voice of reason confirming that if you pay more tax then you get to keep the extra revenue.
Indy, Gaz and CynicalHighlander, how would you like your hats served…? 😉
#36 by James on November 9, 2010 - 1:37 pm
Yes, “it shall be the duty” in there is pretty clear. The estimated sum comes to Scottish Ministers, but then if actual receipts are higher or lower that is taken into account in subsequent payments. Seems reasonable to me.
#37 by Richard Thomson on November 9, 2010 - 3:51 pm
Before you get round to drizzling balsamic glaze over anyone else’s millinery, Jeff, let me paint you a wee picture:
– The Scottish Government levies 2p on the basic rate, raising for arguments sake, £400m gross.
– HMRC estimates the collection and administration costs of levying the tax as being £50m. The Chief Secretary to the Treasury topslices this accordingly.
– The Barnett Formula is applied to English expenditure and a change in Scottish spending allocated as per normal. However, the Treasury decides to alter Scottish baseline expenditure as part of a review of spending allocations in the UK. Accordingly, even with Barnett applied correctly, the block grant is cut by £100m as a result of a series of relatively minor alterations to that baseline.
All of a sudden, your £400m has become £250m, and everything that has happened to make it so is perfectly within the rules, and sufficiently mired in detail to make the average punter switch off completely when anyone cries foul.
Indy, Gaz and CH make a perfectly reasonable point IMO – for so long as Holyrood lacks the ability to collect taxes, you are always reliant on the generosity of HM Treasury estimates and the absence of any political jiggery-pokery from Treasury Ministers when it comes to passing on the proceeds of the 3p tax power – heroic assumptions both 🙂
#38 by Jeff on November 9, 2010 - 4:59 pm
I don’t know, I’m more of a barbecue sauce man Richard.
Anyway, a convincing point you’ve made so I’ll put those hat dishes back in the fridge (was only banter anyway)
I say a convincing “point†because I agree that the cost of collection would be top-sliced from the revenue raised, noting of course that £50m and £400m are arbitrary figures. It could also be £600m and £10m for all we know but, nonetheless, a valid point.
Your second reservation is one I am less convinced by. Surely the Treasury could alter the baseline irrespective of what tax is raised north of the border so to link such a move to the tax-varying powers is somewhat tenuous? And if you were to suspect London to not resist dipping its fingers in Scotland’s pot strictly as a result of Scots paying more tax and helping itself to a cool £100m then I guess we’ll just have to agree that either you’re too cynical or I’m too naïve. There’s enough independent economists and Big 4 accountants out there who’d be able to work out what Scotland deserves from a 2p tax rise though so I suspect a fair deal would be reached and it’d be money worth raising.
I do worry that many seem to want to make this issue about full fiscal autonomy which, while something I support, is a long term solution to a short term problem.
#39 by Richard Thomson on November 10, 2010 - 12:08 am
You’re right, Jeff. The Treasury could muck about with baseline spending anyway, and has done before. I was only trying to point out that there’s no hard and fast formula to determine how much Scotland should get in block grant, either with or without the tax varying power.
GIven the paucity of data from HMRC relating to income tax collected in Scotland, there’s always another possibility to see Scotland short-changed – that of the underestimate of yield.
The dataset used for GERS estimates on income tax receipts is the HMRC survey of personal incomes. This tries to attribute income tax receipts based on a UK-wide sample of 400,000, but has no way of verifying how representative any Scottish taxpayers trawled into the net this way may be.
There’s almost endless room for manipluation under those circumstances, and there almost certainly would have been under the previous Labour government.
#40 by CassiusClaymore on November 9, 2010 - 1:30 pm
Jeff
I agree that spending tax money to keep people in jobs has some stimulus effect. However, the effect is diluted by public sector inefficiency – if you have £100, then it’s all going to be spent productively in some way. If I give £100 to the Scottish Government, then at least part of it will be wasted on unnecessary items.
That’s why it’s better to let people to keep as much of their own money as is practically possible. I know how to spend my income better than Alex Salmond does.
Re. the Scandanavian countries – all good in principle but if implemented by our creaking beaurocracy we’d just get the higher taxes bit. The services wouldn’t be any better.
CC
#41 by Indy on November 9, 2010 - 1:43 pm
Eh? Can I quote exactly what James said.
“UK Ministers have three dimensions to consider. Revenue, expenditure and borrowing. Scottish Ministers have only the first two (WHICH IS PROBABLY A GOOD THING given the perverse desire of the other four parties here to blow billions on the Alex Salmond Additional Forth Bridge).
In other words, it is probably a good thing that Scottish ministers don’t have borrowing powers because they would use them – with the support of all the opposition parties – to build a new Forth replacement crossing. I don’t really see how that could be any clearer.
Regarding your point about a minority of Scots voting for the SNP – so what? This is not about the SNP versus the Greens, no matter that James has tried to personalise it by referring to Alex Salmond. The point about the Forth Road replacement is that only 2 Green MSPs (intentionally) voted against it. 2 out of 129. There are very few issues that have seen the SNP, Labour, the Lib Dems and the Tories all take the same stance. Between them they have a pretty overwhelming democratic mandate to take the decision that they have taken.
Regarding your poll – it is not suprising that if you ask people if they would prefer to repair the existing bridge than spend billions on a new one that they would prefer to repair it. If you asked me that question I would also prefer to repair the existing bridge. But the fact is that no-one can guarantee that the existing bridge can in fact be repaired. That is why a replacement is being built. The Greens alone are willing to gamble the economy of the east of Scotland on an unproven and un-proveable assertion that the existing bridge can be repaired.
#42 by James on November 9, 2010 - 6:20 pm
Er, us and a few others. Like the former head of FETA, Lawrence Marshall, who knows more about the bridge than you or I ever will.
The counter-arguments weren’t that it couldn’t be done – everywhere else recabling has been tried to bridges of this sort it’s worked fine. The arguments against were about congestion and consequent economic problems. As if building the new bridge wouldn’t cause the same (actually we got papers from Transport Scotland that said it’d be worse).
#43 by Indy on November 9, 2010 - 1:57 pm
Yes the Scotland Act says that: This section applies where the basic rate of income tax is increased for Scottish taxpayers. It requires the Inland Revenue to pay into the Scottish Consolidated Fund (SCF) an amount equal to the estimated yield from the additional tax to be paid by Scottish taxpayers, and requires the Inland Revenue to make and maintain appropriate arrangements to determine the amount and frequency of payments into the SCF.
No-one is arguing with that.
What we are saying is that it is most likely in the current climate that the consequence of that is that the Scottish grant would be reduced accordingly.
Look at it from the UK Government’s point of view – and they won’t care if there is a clamour from pro devolutionists about it because they have very little to lose in Scotland anyway.
#44 by DougtheDug on November 9, 2010 - 2:20 pm
Jeff,
Though the Scottish Government will keep any extra tax income from the variable rate and thought the full 3p rate will cover the whole in year one, (2011), it’s not going to be enough in years 2 to 5. As the Scottish Block grant is based on English expenditure if the English expenditure is slashed permanently by the Tories so will the Scottish Grant with the result that either Scotland keeps a permanent variable rate tax increase or has to make cuts in the future sometime regardless. What Scotland needs to do is leave the union right now because nothing any party does under the current devolution settlement will stop the cuts coming.
I actually posted this comment before on http://www.betternation.org/2010/10/tartan-penny-were-gonna-parly-like-its-1999/#comment-912 but it’s still relevant here.
Jeff, a penny on income tax would have brought in an estimated £350 million increase in 2009/2010 in Scotland in the funding for the Scottish Government.
That’s a Treasury estimate in the Budget 2009 Report, Chapter A, A10, p156.
http://www.hm-treasury.gov.uk/d/bud09_completereport_2520.pdf
So 3p extra would bring in roughly a billion for the Scottish Government for each year of its implementation. A 3p in the pound rise in Scotland would cover the anticipated billion pound cut for next year easily.
The problem is that it is estimated that the Scottish budget will continue to be cut for the next five years at an average of 2.6.% per year from 2009/10.
“From the 2009/10 peak, this would imply a five year real-terms contraction in Scottish Government DEL expenditure of 2.6% per annum. Consequently, by 2014/15, the Scottish Government DEL would be £3.7 billion lower in real terms than it was in 2009/10, equivalent to a cumulative decline of 12.4%.â€
This is from, “Outlook for Scottish Government Expenditureâ€, Dr Andrew Goudie, Chief Economic Adviser, April 2010.
http://www.scottish.parliament.uk/business/financialscrutiny/documents/OutlookforScottishGovernmentExpenditure22April.pdf
12.4% is about a £4 billion pounds less in the block grant in 2014/2015 compared to 2009/2010
As the cuts continue to bite council tax and business rates, which are the only other revenue streams Scotland controls, would have to rise by about 90% in year five in addition to Holyrood keeping the 3p in the pound extra to cover the hole in the block grant if services were not to be cut. Even a permanent rise of the 3p in the pound variable rate won’t cover the cuts beyond year 1, 2010/2011, and it will also take money out of the economy. If it was as simple as raising taxes then I’m sure Westminster would also propose that route.
The cuts are unavoidable as long as Westminster doles out the cash, whether or not the 3p in the pound rate is used. It comes down to how much any Government in Scotland wants to pull money out of the economy to maintain, not improve, just maintain current services and how much of a political risk that is.
#45 by James on November 9, 2010 - 2:41 pm
Doug, thanks again for comments, but your figures are slightly out of date – as linked to at the bottom of my piece, the 2010 Treasury estimate of the additional income each 1p change would bring is now £400m, not £350m. Even assuming the Tory/Lib Dem agenda stagnates the economy, which is likely, I suspect the consequences aren’t quite as dire as you suggest given the DEL reductions are real terms and the SVR will increase by inflation.
I agree, though, that the SVR won’t be enough to cope with a radical long-term reduction in the Block Grant, but it’s better to act and offset the worst of the cuts, surely?
#46 by DougtheDug on November 9, 2010 - 2:57 pm
Hi James, it was a comment posted before the 2010 financial review so the figures are a bit out but it is still valid in that this is not a one year blip in finances. Even with the new figures a permanent 3p in the pound income tax rise will not be able to cover the cuts across the next five years.
It doesn’t matter what kind of government runs Scotland under devolution they have to adhere to the spending policies implemented in England. If the spending cuts are permanent in England then the variable rate increase will have to be permanent in Scotland just to maintain the current level of services. This will make Scotland a region of the UK with a permanently higher taxation rate which will not encourage either spending by the populace or the creation of new jobs and companies.
There is also the unknown quantity of what tax increases will be implemented at the next budget. Any Scottish income tax increase would be on top of those.
An incoming Scottish Government would have to tell the electorate that not only were they going to raise income tax for the next 4 years of their term in office by 3p in the pound but that they couldn’t promise that there wouldn’t be cuts anyway. I don’t envy the election strategists in any of the parties though the backtop SNP answer is just to leave the whole sorry mess behind and start anew.
#47 by James on November 9, 2010 - 3:02 pm
I agree we can’t eliminate all the cuts, and I can’t imagine the full 3p being used, but I think this isn’t quite right:
I’d say “they cannot diverge too far from the overall spending limits set by Westminster”. Not quite the same thing.
#48 by Chris on November 9, 2010 - 3:19 pm
It’s not simply a tax code. It involves a software rewrite, which is going to be a pain in the bum for any company with only a handful of cross border employees. The temptation not to do it would be quite high and evasion would be very easy.
Also in countries with LIT then the payroll systems are designed already to pick this up and the link between where you live and how much tax you pay is explicit.
I agree that the technical issues are surmountable. The real problem is that is easy to evade it.
#49 by cynicalHighlander on November 9, 2010 - 4:44 pm
If I am wrong so are these guys and others, so be it on your political heads. end of.
http://www.cuthbert1.pwp.blueyonder.co.uk/new_page_2.htm
“If the policy of increasing the tax base in Scotland actually worked, then the beneficiary would be the Whitehall Exchequer, at the expense of the finances of the Scottish Parliament. This is because any increase in the amount of tax collected would go directly to Whitehall. Moreover, the Inland Revenue’s estimates of the cost of the tax foregone would increase so that the fiscal penalty on the Scottish Budget would actually increase. Effectively, the option of using the tax varying powers to positively influence the tax base in Scotland has been precluded because of the perverse way in which the tax varying powers have been designed.”
#50 by Jeff on November 9, 2010 - 5:22 pm
Touche CH (not that I can actually find that quote, via your link or on Google)
The Cuthberts are quite correct that the money would go to Whitehall but I still don’t agree that they would necessarily be “the beneficiary” so I remain of the view that it is just not feasible for the UK Treasury to hold onto Scottish money raised by Scottish people through a Scottish income tax that does not apply in England, Wales or NI. As I said before, maybe I’m just naive but no amount of back and forth will change my mind on this one.
Good debate though, would love to see Salmond and Harvie banging away on it 5 months hence.
#51 by James on November 9, 2010 - 5:25 pm
Also, I cannot see how we’ve not resolved this with direct reference to Section 77 of the Scotland Act.
Yes, the Block Grant comes from Whitehall. Yes, independence would be better. But neither of those things means, either constitutionally or politically, that we can’t act.
#52 by cynicalHighlander on November 9, 2010 - 6:25 pm
Its nothing to do with Calman as this is 1998.
http://www.cuthbert1.pwp.blueyonder.co.uk/new_page_3.htm
Nothing is cut and dried thats the problem as Westminster can alter/interpret the rules and I wouldn’t trust Whitehall to be honest on anything.
I hope Patrick does his homework first.:)
#53 by Debra on November 9, 2010 - 5:04 pm
Now I am no economist but when Paul Krugman calls the UK cuts stupid, I am rather inclined to listen. Noble laureate’s tend to be pretty respected in their field.
As far as where my council finds £25m-40m is concerned. My neighbouring council is a total financial basket case – roughly the equivalent to asking a neighbouring country to merge with Greece.
My calculation is that the total cost of all councillors across Scotland is in the range of cuts my council needs … so that is just a nice cheap shot that doesn’t get anywhere. As far as having just 6 or 8 mega councils is concerned, frankly at that level you may as abolish the lot. But before you do so, please consider how much people value local services and how much councils tailor services to local needs.
Get serious CC – tell me which council services you would cut.
Salary freezes, reduction in senior mgmt have all already been done. Pensions are no longer final salary for both new and existing employees – that change happened a year or two back alongside increases in contribution rates … (yes, they are contributory pensions)
Education is about half of any council’s expenditure. Social Work another third. Where do you want me to cut out 10-15% of the total budget this coming year?
#54 by Indy on November 9, 2010 - 5:27 pm
I think there may be a bit of cross-over between criticisms of the tax raising suggestions contained in Calman and the tax varying powers contained in the Scotland Act. I suspect the Cuthberts may be talking about the Calman tax raising powers rather than the existing tax raising powers in that quote (not certain about that though).
But the same criticisms apply – and the same underlying point exists, which is that it is luidicrous that the Scottish Parliament has only one – or two – ways to increase revenues i.e. by increasing income tax and/or council tax. The options of increasing revenues by also growing the economy and having borrowing powers must also be in the mix.
Debra – I don’t know where your council is but mine has introduced a living wage for its lowest paid staff. They gave themselves some pretty large slaps on the back for that and then, almost the next day in fact, suggested clawing it back by increasing council tax. An exercise in pointlessness don’t you agree.
As for where you are going to cut the budget – it will mainly come from capital spending won’t it? That’s where the cuts are going to fall hardest so it probably means your roads will stop being maintained. As a Green does that actually bother you?
#55 by Debra on November 9, 2010 - 5:39 pm
the £20m to 40m is the revenue budget.
My council hasn’t gone living wage … but OK council tax increases would undo that … but my point is that cuts in services are even worse – even more regressive. And will probably involve job losses, possibly amongst lower paid workers. It’s harder to cut teachers than support assistants.
I am no fan of the council tax – it’s sole virtue is that is isn’t quite as bad as the poll tax.
The capital budget has also been slashed ,,, and no that doesn’t please me. What has been cut is some major public transport investments along key corridors where development was focused on the back of these developments. And school building/rebuilding. And investment in energy efficiency.
#56 by Andrew BOD on November 9, 2010 - 9:19 pm
Debra
“As far as having just 6 or 8 mega councils is concerned, frankly at that level you may as abolish the lot.”
and..
“My neighbouring council is a total financial basket case – roughly the equivalent to asking a neighbouring country to merge with Greece.”
These are hardly valid arguments.
I seem to remember there being 7 or 8 regional councils before the last local government re-organisation. And yes there were also district councils, but of course no devolved parliament. Pooling resources is something councils across Scotland are already beginning to do, so merging councils would be a natural step with huge efficiency savings.
I take it the “financial basket case” is Aberdeen Council. Presumably the majority of the people you serve live in Aberdeenshire and work in Aberdeen city. Would they like to see part of the wider region fail, especially the part where they earn their living? Like I said before, collaboration is required when times are tough. An ‘I’m alright Jack’ attitude will help no-one.
#57 by Malc on November 9, 2010 - 9:58 pm
Just to throw something into the mix:
Switzerland has a population of 6-7million. It has a federal structure of 26 cantons underneath the federal level. They have divisions below them, but basically they administer and decide everything on that level. Why do we need 32 local authorities with a population of 5 million, when their 26 cantons can do more for a population that is bigger?
Maybe we don’t need 6-8 mega ones, maybe we just need to reduce the amount of them – to around 20 or so? An idea?
#58 by Debra on November 9, 2010 - 11:05 pm
26 cantons with legislative powers …. Plus a layer of government below that … Varies as cantons decide.
Hardly a model of administrative lean.
3 councils in Scotland are tiny .. Western Isles, Orkney and Shetland. And then there are Clacks and Moray
… And I don’t know why we have three Ayrshires, two Renfreshires two Lanarkshire, and three Lothians
But would amalgamations save money? Would it be worth the disruption?
Yes Aberdeen city and shire are interdependent but that doesn’t mean that there are benefits in pushing them together. The cultures are so different.
Councils are sharing services … Do a quick google. And more can be done but not enough and not fast enough for the current scale of cuts.
#59 by Malc on November 10, 2010 - 10:07 am
I think the point was really that the Cantons have the ability to decide for themselves how best to function – and they can do much more in the way of cross-canton stuff than we do with councils here. Equally, look their administrative levels are a damn sight more sensible than ours – we have health boards stretching across as many as 8-10 local authorities, police forces on other borders, water areas, TV areas… not to mention SP and Westminster constituencies. People are hugely confused, since many still rely on previous place names (like “Banffshire”, which no longer exists) and have no idea what Moray actually is.
I’m not sure about amalgamations – it was simply to give another perspective – as I take your point that city and shire in Aberdeen are distinctly different (parents’-in-law live in Ellon, so I know the area quite well) but I do think there could be more consideration across borders. Example – if health services are reduced in say, Huntly or Inverurie, then joint-council meetings could ensure the service is still provided in Aberdeen City. Doesn’t that sound like a sensible idea?
#60 by Andrew BOD on November 10, 2010 - 12:21 am
Malc, I agree to an extent. And Debra, I think you can see the benefit in reducing the amount of LA’s. There’s no way I would advocate the creation of another Strathclyde Region. And even pushing the two Lanarkshires together would create an authority as big as Glasgow. Dundee and Aberdeen are small enough cities to be able to join with Angus and Aberdeenshire respectively. Aberdeenshire’s HQ is in Aberdeen already! I don’t feel the cultures are so different that it would be unworkable. Perhaps in the past when there were lots of ‘independent’ councillors, but not now when most councillors have lined up with the mainstream political parties.
Yes, there would be some disruption in any amalgamation, and yes it would take a bit of time to get get any change through the Scottish Parliament. But the cuts that are hitting first are merely the tip of the iceberg. Four or five years of deep cuts with no guaranteed pot of gold at the end of that period will force politicians to look at this sort of radical, but inevitable change anyway.
On an earlier point, cutting the amount of councillors across Scotland would only go a small way toward helping lessen the impact of the cuts, but it would set an example and show that politicians are serious about shouldering some of the load.