Why Scotland Needs a Tax Cut – Alan Grant
A refreshing maturity has taken hold of Scottish politics lately. The emergence of debate on fiscal issues, where before there had been little but constitutional quibbling and point scoring, is exactly the dose of reality that Scottish politics desperately needs. The fact that Scottish politicians, commentators, and campaigners are talking about tax rates, bands, revenue and other elements of fiscal policy is to be welcomed unreservedly. This is especially the case in terms of revenue raising powers as it allows for more open and thorough debate instead of our politicians basing their entire pitch on how best to spend other people’s money. Scottish politics is finally growing up.
This adolescence is the perfect opportunity to make the case for what to do with tax in Scotland. It is clear; Scotland desperately needs an income tax cut!
Context is everything in Scotland’s emerging fiscal debate. Currently, the Scottish Parliament has the ability to vary certain tax components; the most important of which is the Scottish Rate of Income Tax (SRIT). This allows Holyrood to vary all the bands of income tax simultaneously e.g. if the top rate increases by 1p then so do the middle and bottom rates. In fact, this exact policy has been touted by the SNP (in a slightly different form – remember the disastrous “a penny for Scotland” campaign?) and is currently in vogue with Scottish Labour and the Scottish Liberal Democrats
Presently, the SNP is correct on this issue. Raising SRIT would place an intolerable burden on the lowest paid in Scottish society whose pockets it would pick most deeply. The Scottish Tories are also right on SRIT and have avoided the trap they could easily have fallen into – advocating tax cuts purely for the sake of cutting tax. Their income tax commission has recommended an income tax cut for the “squeezed middle” in Scotland when band setting powers are devolved. Implicit in this is a welcome acknowledgement that a cut in SRIT is unworkable as it applies to all bands and cannot be realistically augmented by other policy. Income tax could be Ruth Davidson’s most reliable weapon during her time as Scottish Tory leader; many swing voters will be watching to see how she deploys it.
The truth is that SRIT is a non-power. Its only usefulness is to prepare Scottish politicos to start talking about taxation. Current SRIT powers allow for little flexibility and mean that all taxpayers are treated the same way, contrary to the progressive principles to which Scotland’s political class seems wedded. Other than introducing discussion of tax into Scottish political life, SRIT is not a tool that could be effectively used to any real purpose. The sooner Scottish Labour and the Liberal Democrats realise this the better – theirs is a sledgehammer solution to a scalpel problem.
However, introducing debate over how Holyrood should raise its own money and therefore become more accountable to Scottish taxpayers is not a minor achievement and if awareness raising and steering of the popular debate towards these important topics is all that SRIT does then it will have been an indirect success.
There are two main reasons that there should be an income tax cut in Scotland once control of bands is brought to Holyrood. One is practical and the other is more cultural or ethereal. I turn to the practical first.
There is much historical precedent in Britain and the United States, showing that gutsy, tax-cutting, spending-reducing governments tend to be rewarded; especially in tough economic times. If a prospective Scottish Government was able to rein in its spending, curtail the extravagancies of the devolved administrations and reward its citizens with more of their own money back then the rewards will be forthcoming.
During the independence referendum there was some inane chatter on the No side of a ‘brain drain’ occurring in the event of independence. The parallel here is that should Scotland reduce its tax bands, rein in the public spending and take full advantage of its increased ability to hold reserves, then it has the potential to become a ‘brain sink’ that attracts individuals, businesses and others from within the UK and across the world. Scotland could see itself go from lagging behind the rest of the UK to outstripping it in terms of prosperity and innovation; if only it were bold enough to do what needs to be done.
A move to a low-tax, low-public spending economy in Scotland would also do our morality an immeasurable amount of good. Whether we care to admit it or not, Scotland has an addiction to public services that needs to be addressed if we are to grow up as a nation and truly achieve what we can within the UK, EU and on the world stage. We need people to stop thinking that the “cooncil/that Nicola Sturgeon’ should take care of everything for them and that more ‘free’ stuff is always axiomatically a good thing and can ever be delivered at no cost.
There is a cognitive dissonance present here. Scots enjoy prattling on about Alexander Fleming and the other inventors we have birthed but they fail to realise that a country of innovation and development, if that is what is wanted, is not a country in which the government takes such a large role in personal life and organises so much of public life. If Scotland were brave enough to cut its income tax and be more sensible about its public services then we would have the opportunity to change our cultural outlook. It is time for us to stop talking about national independence and start developing an environment of personal independence – and that starts with cutting income tax.
Scotland’s political dialogue has gone through a number of important changes in recent times. 1997 saw the election of a Labour UK Government with an overwhelming majority of Scots voters, 1999 brought the establishment of the Scottish Parliament and now Scotland has the chance to do something genuinely revolutionary, again. If we want a more prosperous, fairer and more personally responsible Scotland then we know what we must do; we must cut our taxes. During the referendum on independence the former Prime Minister Gordon Brown called on Scotland to “lead, not leave” the United Kingdom – by reducing the tax burden on individuals and their families, we have the opportunities to do just that.
To miss our chance would be to let down a generation of Scots.
Alan Grant is a politics and culture blogger for the Huffington Post.