THERE was a time when I looked forward to the Chancellor standing up in the House of Commons and revealing the details of the Budget. Now, there seems to be very little point. What is not announced in advance is instead leaked.
In any case, there’s a rough rule of thumb that a Budget which is praised on the day will look mistaken by the end of the year, when people have got beyond the headline-grabbing promises.
Devolution has now progressed so far that, for Scotland, rather than listen to Rishi Sunak, I want to hear what Finance Secretary Kate Forbes has to say on December 9 in her own Budget statement and medium-term financial strategy, how the Scottish Government frames the National Strategy for Economic Transformation in November, and to what extent the SNP demonstrate their willingness to commit to setting up the institutions which an independent Scotland will need.
After wasting one-sixth of this article outlining plans for this column for the next two months, I will try to pick up my argument where I left it last week, and suggest that the Scottish Government needs capture the boldness, and enterprise of the early days of devolution.
READ MORE: The REAL Scottish Politics: Busting Unionist media spin on 'Budget bonanza'
Let us revisit the ideas of the Scottish Socialist Party, when it successfully blended disparate left-wing groups in a coalition, and attracted the support of many disaffected Labour Party voters, unconvinced by the New Labour project, especially in the aftermath of the invasion of Iraq. To replace council tax, the SSP developed proposals for a local income tax, which it called the Scottish
Service Tax.
To forestall some of the criticism that such a radical proposal was bound to face, it asked my former colleague Professor Mike Danson to evaluate the measure, and, along with Geoff Whittam, he produced a set of numbers showing that a modest increase in tax revenues could be generated with 80% of the population paying less in tax, leaving only the 20% with the highest incomes having to pay more.
For the SSP, the shift in the burden of taxation to the people best able to bear it would have been a fairer outcome. Council tax has never had many defenders. Given how it was rushed in to salve the political wounds of the Conservative Party after the debacle of the poll tax, it was inevitably a botched compromise. Despite manifesto commitments from other parties, and the work of the Commission on Local Tax Reform, every Scottish Government has found this too complex and controversial to deal with.
The SSP’s plan could also be presented as a scheme for overcoming the limits on the powers of the Scottish Parliament, which at that time could vary the basic rate of income tax, upwards or downwards, by up to 3p in the pound.
For the SSP, who wanted to increase the progressivity of the tax system, increasing the basic rate of income tax was out of the question. Such a measure would have imposed the heaviest burden on people on lower and middle incomes.
Unable to use the most obvious policy tools for achieving its objective, the SSP were forced to be innovative, and imaginative. They stated that local authorities would collect, and keep, the Scottish Service Tax revenues. Yet, they also recognised it was important that there should be a single national tax schedule.
That was intended to address concerns about tax arbitrage, with higher earners moving together into a few local authority areas, and then electing councillors who would set low tax rates.
THE SSP’s planned national schedule of tax rates need not have led to the opposite problem that for local authorities to provide good services, they would need to many high earners in the population.
Council tax receipts are about 12% of total local authority income, and non-domestic rates provide 14%. In contrast, funding which originates from the Scottish Government is more than 60% of current total income.
Scottish Government grants can be applied across local authorities to achieve the desired pattern of funding for services. Areas generating substantial service tax income would have lost a considerable proportion of their grant income, with a planned shift in national resources to poorer areas.
READ MORE: UK in a 'race to the bottom' after report Liz Truss blocked plans to ban low standard food
There was another reason for the SSP proposal. While using illustrations in which there would have been little effect on total revenue, and therefore expenditure, the policy would have allowed increases in tax rates over time, enabling the expansion of public services. Increasing the use of local taxation was intended to avoid any immediate effect on the Scottish Government’s block grant. Total public spending would have increased.
With the highest 20% of earners paying substantially higher taxes, it is possible that many would have established an English domicile very quickly, perhaps enabled, and quietly encouraged, to practise tax avoidance by the UK authorities. Like so much to do with the SSP, it seemed to take good ideas and push them just too far.
Perhaps, though, this was a missed opportunity for further devolution. Not from Westminster, but from Holyrood. A form of service tax enabling the Scottish Government to show greater willingness to let people decide on local priorities, rather than holding the purse strings ever more tightly, has many attractions.
Not least, it would show that Scotland can be different, and better, even with limited powers. In doing that, it would demonstrate what independence could bring.
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules hereLast Updated:
Report this comment Cancel