The one thing that worries me about the SNP Government and, by extension, a Yes result in 2014, is a barb that James regularly levels their way – they want Scandinavian-style services on a conservative low-tax base.
Alex Salmond has been the master of being all things to all people and it is into this world of smoke and mirrors that Johann Lamont has rather cack-handedly stepped, ending up only choked and spooked as a result. The Labour leader took another step into this quagmire at Labour Conference today and, in her battle against universal provision, it seems the lady is not for turning.
Ian Bell and Iain Macwhirter quite rightly (and quite spectacularly) derided Lamont for her poor delivery and poverty of ambition in the Sunday Herald this week so there is no need to labour the point by pointing for too long at Labour. After all, to be fair to Johann, the media pundits and SNP personalities may merely be making hay while they still can. Holyrood budgets are yet to attract double digit percentage decreases over the next few years and I don’t see many fatty sides of the budgets put forward of late. Maybe being unpopular now is worth being right in a couple of years.
It wasn’t so long ago that the SNP was pushing for a rise in income tax, a tartan penny that would fund Scottish services. That was back in the good old days, when the sun was shining and we were blissfully ignorant of the roof’s brokenness. So why isn’t it a good idea in these bad days? The SNP would argue that higher taxes would strangle growth (just as Boris Johnson would, incidentally) but the party must also be mentally scarred by the bruising defeat that they received when they asked Scottish turkeys to vote for Christmas with a tax-increasing manifesto. Once bitten, twice shy.
This institutional Nationalist nervousness around tax-raising might explain the white knuckle resistance to letting go of the Council Tax freeze and also the private-cum-public smackdown levelled out to John Mason by the First Minister for merely suggesting that an independent Scotland might increase the top level rate of tax.
The SNP party memo is clear, we don’t do tax rises this side of the referendum. End of. END OF!
For me, this is unfortunate. I make a poor turkey as I have voted for the party most likely to raise taxes in each election I’ve taken part in this century. There is undoubtedly a lot of wastage in the system that would ideally be addressed before the taxpayer is shaken down for more cash. For example, an in-house public sector recruitment team would save a fortune as contractors can double the cost of temporary personnel through agency fees while a sharper, leaner feedback and appraisal system would reduce instances of staff turning up to work in body but not in spirit. (Yes, it happens in the private sector too, but that’s far less the taxpayer’s problem). However, such wastage can easily be self-indulgently exaggerated in a Daily Mail manner. From John Swinney’s toothcomb downwards, it is difficult to imagine that value from every last penny isn’t being squeezed as far as humanly possible. Even the trams are on track to be finished early. Well, when I say ‘early’, you know…
The key is jobs though, there is surely few greater miseries in life than wanting to work and not having the opportunity to do so and, as comfortable as any one of us think we currently are, your livelihood can be whisked away from you as quick as it takes to print out a P45.
Unemployment in Scotland is running at 8.2%, more or less in line with the UK’s 8.1%. (Norway, incidentally, has an unemployment rate of 3%, a clear sign of what well spent oil revenues could do). Scotland’s rate is nestled snugly the right side of a European average of 11.4%, which would be considerably lower with the PIIGS stripped out. The SNP can’t rest on its laurels though with a light touch approach to jobs until independence may or may not come along with its oil-fuelled riches (sic). It will win more votes from pro-active progress within the confines of devolution than it ever would from the tempting grudge and grievance but ultimately inert anti-London rhetoric.
Facts and figures are important so from the Scottish Government website:
The employment rate in Scotland, using the European age definition (15-64), in 2011 was 69.5% which is 0.3 percentage points lower than the previous year. When compared against 35 OECD countries, Scotland was ranked 13th highest in terms of employment rates. Between 2010 and 2011 the gap in employment rates between Scotland and the country with the 5th highest rate (Denmark in 2010 and now Sweden in 2011) increased from 3.7 percentage points in 2010 to 4.6 percentage points in 2011.
13th out of 35 is good, very good, but the employment rate of Sweden (higher income taxes than Scotland) is now further away than Scotland’s by a whole percentage point in the space of a year. We’re lagging behind the countries that are doing the very best. Sitting above and below Sweden in this table are Norway (top rate of tax 54.3%), Netherlands (top rate of tax 52%), Iceland (income tax rate 37%-46%) and Denmark (top rate of tax 55.4%). Progress on jobs comes at a cost to those that have them. It’s not rocket science, and Lamont’s on course to get there before Salmond is.
If, and it is a big if, 2015/16 (or earlier) is the correct time to raise taxes to ensure that those who can afford to pay a little bit more do pay more, then we all have to play our part. Political parties have to have the courage of their convictions to pledge to do the right thing, rather than the easy thing of offering the moon on a stick, but the electorate has to be braver still and vote for them.
The SNP was thumped in 1999 on a revenue raising manifesto, just as the Scottish Greens were in 2011. Whoever is brave enough to step into the public’s firing line next, maybe we should give them more credit, and our vote.
#1 by BM on October 2, 2012 - 2:54 pm
While Norway’s unemployment is low (and it has been lower), there is a significant amount of hidden unemployment in the form of so-called “permittering” (whereby an employee is still employed by his company, but receives payment instead from the state at a rate of 80% is usual salary, as an alternative to redundancy), and outright fraud (this usually takes the form of employees voluntarily putting themselves onto long-term sick leave, and receiving benefits to the tune of 100% of their salary from the state). I have seen both practices whilst working here in Bergen, and have seen both companies and individuals complicit in this sort of benefit fraud. In addition, it is much easier to qualify for different illness-related benefits in Norway than in other countries, so someone who might count as employable in Scotland could claim incapacity benefit in Norway (indeed, an incapacity benefit claimant was two-three years ago hailed in the newspapers for completing the strenuous seven mountains walking tour – a miraculous achievement…). Norway has, over the last decade, seen a discomfortingly sharp rise in the number of people receiving incapacity benefit (particularly amongst the young).
So what exactly has well-spent oil revenues done? Has it reduced unemployment, or has it merely provided a soft cushion of benefits for the unemployed to be pushed onto when the economy turns (probably a bit of both)?
Incidentally, whilst on the topic of oil funds; it was recently reported in the Norwegian press that the rule of using only 5% of the oil fund from year to year would have to be changed, since the oils fund is so large now, that using 5% would destabilise and overheat the economy. The new rule, it was suggested, should be no more than 2.5%. the phrase “an embarrassment of riches” springs to mind.
Also, the top rate of tax is around 48% in Norway. Prime Minister Jens Stoltenberg’s Blairite-like promise of no-one paying more than 50% tax has been kept.
#2 by Jeff on October 2, 2012 - 3:00 pm
Fine points BM, and an interesting ‘behind the scenes’ account of what this Norwegian valhalla is really like. All countries will have certain intricacies but as a high level indicator, the trend is clear that higher tax economies can lead to lower unemployment (and the considerable social benefits that that brings).
I took the majority of tax rates from this link: http://en.wikipedia.org/wiki/Tax_rates_of_Europe which states 54%. If Norway’s top rate is 48%, then it doesn’t really change the point I’m getting at. Progress on jobs comes at a cost to those lucky enough to have one.
#3 by BM on October 2, 2012 - 3:37 pm
I wouldn’t say that such a trend is clear. According to the data from your link (let’s use that so that we’re consistent, even if there is a small variation in accuracy), all of the PIIGS have quite high income tax (45%+), and yet still have high unemployment. So, it does not following that raising income tax will lead automatically to more employment.
What we could say is that some countries have been able to maintain low unemployment despite/whilst having high rates of income tax. So, low unemployment is probably independent of income tax levels (maybe it’s dependent on corporate tax rates, or population density, or area, or participation, etc).
#4 by Jeff on October 2, 2012 - 4:08 pm
Not sure I agree. The Irish tax rate of 55% appears to include what we would call National Insurance. The rest of the PIIGS appear to have jacked up income taxes to dig themselves out of their current troubles, which is entirely different to the Northern European countries with their high income tax rates that tend to believe higher taxes are the price of a balanced, fair society.
I’m arguing for the latter, not digging Scotland out of a hole that doesn’t exist (not to the same extent as the PIIGS, at least).
#5 by BM on October 2, 2012 - 5:21 pm
Norway’s income tax also includes NI (or at the very least, it’s not considered a separate part of the money the state takes each month – everything is rolled into one) – just FYI 🙂
#6 by peter on October 2, 2012 - 5:02 pm
mainstream media:
1999 snp: they want to tax us to dearh
2012 lamont: brave women, we need this debate
#7 by BaffieBox on October 2, 2012 - 5:52 pm
Im against any and all changes in tax rates until I understand what it’s for, how it’ll be used and how it’ll find it’s way back into my community. In general terms, I understand the point Johann wanted to make, so I’m all for debating how we finance these expensive policies (even if Johann failed on every measure possible in framing that debate).
However, it is overly simplistic to reduce this to a should-we-or-shouldnt-we raise taxes debate? We simply don’t have that option right now. Of course, we could abandon that much loved, and now much hated, council tax freeze, but really, it barely scratches the surface of the Scottish budget and it’s a hugely discredited policy who’s days are numbered.
So what of Income Tax? With the Tartan Tax slipping infamously “Out of Order”, 2015 will be the next opportunity for the Scottish Parliament to tinker with the Scottish tax rate. But from what I remember, the Scotland Bill was a basket case that was roundly criticised as having the potential to do more harm than good to the Scottish budget. So forgive me if Im wrong, but I have absolutely no faith at all that taxes raised in Scotland are sufficiently accounted for and suitably spent in my Scotland.
Devolution has become a bolt-on to a fudge to a quick fix to a formula to an amendment to a bill. It’s an utter shambles and until someone can sort the entire mess out, with a clean, responsible and accountable Scottish treasury, demonstrating clearly where taxes are raised and spent, I have no interest in throwing more money to the Scottish Parliment by proxy of the London treasury.
If Johann wants to get serious about the Scottish budget is spent, she better start talking about how it’s funded. Come back to me when FFA is on the table.
#8 by Andrew Smith on October 3, 2012 - 11:03 am
days are numbered? but it’s there for at least another 3 years, with the consent of parliament and the electorate.
#9 by BaffieBox on October 3, 2012 - 1:15 pm
When I say it’s days are numbered, I really mean it’s years are numbered (which is a more realistic and literal window for change in political terms).
Aye, it’ll see out this session of parliament but it’s only a matter of time before it’s canned. The SNP, LibDems and Greens all have it in their sights so as soon as 2014/2015 are out the way and the constitutional framework takes it’s next big step and settles down, it has little or no chance of surviving. And not before time.
As I said though, it misses the point. Council tax is merely a small bite in the Scottish budget. If Johann and others want to put all tax spending decisions on the table, I want all tax powers on the table too, not just the impotent ones we have at present.
#10 by Andrew Smith on October 3, 2012 - 2:03 pm
I agree with you on more tax powers.
But it’s because Council Tax is a proportionately small part of the proverbial pot that I would expect other taxes to be increase first if the referendum results in a YES vote.
Bringing back the 50p rate wouldn’t raise any significant funds in Scotland, with that in mind what is needed in the long run may be a total restructure of the tax system.
#11 by BaffieBox on October 3, 2012 - 2:38 pm
I think we agree then.
If the referendum results in a YES vote, I’d expect the council tax to be replaced by something like LVT pretty sharpish. I’m not even sure how the 50p tax rate would work in Scotland were we to vote NO and the Scotland Bill comes to pass in 2015. We still become responsible for 10p in the pound, with the Barnett allocation dropped by an equivalent amound? Or something? Either way, it’s a dug’s breakfast.
What’s needed is a simple, open and complete balance sheet for Scotland’s budget and that mean’s responsibility and accountability for not just spending Scotland’s tax rake, but raising it too. All of it.
#12 by Doug Daniel on October 3, 2012 - 2:32 pm
Indeed, the SNP are still planning on looking into a replacement for Council Tax this session, in preparation for the next election: http://www.telegraph.co.uk/news/uknews/scotland/9347772/John-Swinney-to-consider-new-local-income-tax.html
In his reply, the Finance Minister said: “The Scottish government believes the current council tax system is unfair and will consult with others later in this Parliament to produce a fairer tax based on the ability to pay.
“All potential alternative approaches will be considered as this work is progressed.”
#13 by Ben Achie on October 2, 2012 - 6:23 pm
This is all about FFA! Fact is, an SNP government has been better at generating greater operational efficiencies than either Labour or Con-Dem governments at Westminster.
The SNP’s handling of local authorities has been smarter too, and while there are one or two areas of concern generally – college funding for example – it has done a remarkable job.
The reason for this I would suggest is a greater sense of collectivism and better empathy than our toff Tories and Lib-Dem would-bes, or Labore apparatchiks and their cronies (see City of Glasgow etc).
I am convinced there is scope for more efficiency savings before raising taxation, but Holyrood has no effective way of raising income or corporation taxes currently, anyway.
SNP policy has had to be to exhibit the social democratic principles it seems to be unique in having among mainstream parties, while maintaining a balanced budget as it is obliged to do under the devolution settlement.
As with everything else, some people and organisations are better than others in fulfilling their role, and the SNP at Holyrood has shown it is miles better in government than Labour and the Lib-Dems ever were.
Johann Lamont has thrown in the towel in terms of pursuing Scottish social democracy – she knows on that score a London orientated Labour just cannot compete!
#14 by Juteman on October 2, 2012 - 7:05 pm
So what if the system in Norway encourages folk to be ‘sick’ on 100% pay?
Do we want to live in a country that works folk to death?
Rich folk do very little actual work (i don’t include attending meetings, or sitting in front of a PC for a few hours as ‘work’), so why can’t the rest of society enjoy a stress free life, if the wealth of the country can support it?
#15 by BM on October 3, 2012 - 6:22 am
My point is that it’s difficult to compare unemployment figures in Norway up against those of the UK since hidden unemployment in Norway and the UK have a different basis, and that although unemployment figures in Norway are low, there is a considerable amount of hidden unemployment which is pretty much just swept under the rug.
#16 by Steve on October 2, 2012 - 8:56 pm
Good post Jeff, I should have read this before accusing you of being a bit of a Tory on twitter!
I agree, and think the better off could afford to pay a bit more income tax. I do think though we shouldn’t focus solely on income tax, the countries where the overall levels of public spending are relatively higher achieve this with a range of taxes. So it’s also about getting the balance right between taxing different things and activities, as well as between people and businesses.
I think baffiebox’s point is fair, people want to know what they are getting. For me, we can’t compete for low wage, low skill employment, and we shouldn’t try. Instead we need to invest in infrastructure and skills, to attract high quality employers offering high quality and well paid jobs.
#17 by Grahamski on October 2, 2012 - 9:12 pm
I don’t know why you’re fretting, Jeff.
Everybody knows that Scotland is a far more left wing country than those reactionary so and so’s south of the border.
Indeed, that is the conceit which drives much of the SNP current thinking.
Of course, the egalitarian Scots will vote to pay more taxes to support their less fortunate fellow Scots.
Why wouldn’t they?
They will also provide a beacon of progressive thinking for the the non-Scots across these islands who apparently are stuck in a morass of laissez-faire economics.
To suggest otherwise is anti-Scottish…
#18 by Steve on October 2, 2012 - 10:08 pm
Are you guys still running that “too stupid” line? I thought you’d moved on a bit.
Count the number of Tory MPs in Scotland.
#19 by Grahamski on October 3, 2012 - 11:26 am
“Are you guys still running that “too stupid” line?”
Not us. Never was.
The only folk who peddle that are nats, they believe that Scotland is:
Too wee to have its own monarchy.
too poor to have its own currency
and
too stupid to regulate its own financial sector.
When are the nats going to stop talking Scotland down?
#20 by Angus McLellan on October 2, 2012 - 11:46 pm
Why the Romneyesque obsession with income tax Jeff? Devolved income tax now and for the foreseeable future is a flat tax, something which is seen as quite unthinkable at UK level. Not what we want, is it? (Or if it is what we want, why not have a flat income tax across the board?)
There are plenty of other ways to raise money, or rather there can be plenty if and when the Scotland Bill should become relevant. On the whole I’d rather see accumulated wealth taxed, something that is only done in an indirect and very limited way right now. So, land tax (or land value tax) anyone? Most land is “owned” (quotes because I’ve read Tom Johnson and Andy Wightman), much of it via shell companies in tax havens and secretive trusts, by those who could well afford to pay a little bit more I feel.
But I’m not sure I hold out much hope of new revenue streams being exploited. Edinburgh’s Bed Tax seems to have hit the buffers and that seemed to me to be a no-brainer. While it might have been trivial in terms of tax take, it would have cost almost nothing to collect and would have established an important principle. I’ll be marking that as a fail then.
#21 by BM on October 3, 2012 - 8:27 am
Also worth noting that the UK has had quite high income tax – 40% at the top rate, then 50%, now down to 45% – and yet unemployment before the financial crisis was more than double that of Norway (bumping around about 5% compared to Norway’s 2%).
There are of course, other taxes, too. Corporation tax in Norway is higher than in the UK. VAT is higher and applies to more goods than in the UK. There are toll charges on almost everything. There are two different wealth taxes (one local, one national). How about instead of increasing income tax, we increase corporation tax, or create a wealth tax?
#22 by Barbara Gribbon on October 3, 2012 - 9:45 am
Well, I had been going to say: Good post, Jeff, I’ve been waiting to see if someone would pick up on this. If there is any tendency towards raising income tax in the SNP, now was the ideal time to get it out there as much of its poison would be drawn by Ms Lamont’s equally unpalatable repas. But also points taken BN and baffiebox – high tax is hardly a utopia, and has to be transparent. But if these are the worlds we are to choose between, go ahead and give us the choice.
#23 by Indy on October 3, 2012 - 10:40 pm
I think we need to firstly get a full picture of things financially. It’s not just the much referenced Trident – there’s all kinds of stuff that Scottish taxpayers fund now which maybe we don’t have to. There’s someone tweeting as asset scotland which is actually quite interesting albeit slightly bonkers. It references, for example, Scotland’s share of FCO assets in a range of countries which we will not really need as an independent nation.
Assuming we become independent there is all kinds of stuff that could be scaled down. For example we should be able to have a fully integrated and much simpler tax and benefits system which will cost less to administer. A lot of things could be simplified simply because we are going to be a much smaller country than the UK.
This will of course take time and we will be dealing with a difficult financial situation inherited from the UK so maybe a tax increase would be necessary but I don’t think it should be seen as desirable in itself. What would be desirable – and what I would like to see made a priority – is ending the loopholes which allow people to avoid paying tax. I really don’t agree with increasing the top rate of income tax so you can squeeze more out of those who actually pay it while others avoid paying their share. If everyone paid their tax I don’t think there would be a need to increase the rate.
#24 by Doug Daniel on October 4, 2012 - 12:07 pm
Indeed, I’m hopeful that we’ll learn from the Treasury’s mistakes and create a tax collection system that is devoid of the loopholes which allow people making a fortune to pay ridiculously low percentages of tax. Robert Peston’s “Who Runs Britain?” book has some pretty eye-watering stats about how much certain people pay in tax – and he wrote it when Labour were still very much in power, so it’s not a problem that can be fixed simply by electing Blue Ed.
I’d by more than happy to pay more tax than I do at the moment – but as you say I’d like to be certain that I’m not compensating for a black hole created by major tax avoidance/evasion schemes first. Do that and then I’m happy to be taxed to the hilt if it means a better society for all of us.
#25 by Derick on October 3, 2012 - 10:57 pm
Generally, income (or asset) based taxes must be preferable to flat rate taxes which hurt the less well off disproportionately. VAT being the biggie with bastard Council Tax not far behind. The tax system we will inherit from the Former UK (FUK) is bizarre (e.g. income tax in 2 forms give that NI is just income tax by another name; fuel tax, VAT on fuel, VAT on the Fuel tax for Godsake), tax on pensions? weird. We have a major opportunity here to make tax (and benefits) simple, easy to understand and cheap to collect. I would go for – widely banded Income Tax and LIT, a carbon tax and a land value tax, and maybe an Inheritance Tax. Would reduce corporate taxes to stimulate employment (and hence tax revenues), increase Living Wage. No end to the possibilities. But we Must Not replicate the ‘dead hand of the Treasury’. etc
#26 by Chris on October 4, 2012 - 10:23 am
Isn’t one of the major appeals of independence the proposition that by keeping oil money for ourselves we will get more services for less taxes? Indeed it is the subtext of all the GERS arguments (ie ‘we’ contribute the oil money).
Indeed isn’t the whole Scotland is more progressive than England self-deceit based on the fact that oil money will be used to provide better services? So we don’t need to put up taxes in order to be fairer and in fact we can reduce corporation tax too!
#27 by Doug Daniel on October 4, 2012 - 11:59 am
“Isn’t one of the major appeals of independence the proposition that by keeping oil money for ourselves we will get more services for less taxes?”
No, it’s that we can avoid cutting services because we won’t be ruled by governments that refuse to stop following failed neoliberal economic policies – as we have been for the past 33 years, uninterrupted.
The sole point of the GERS arguments is that the “Scotland can’t afford to be independent” mantra is, quite simply, a lie.