Tax changes must be progressive, and comprehensive
Jim O’Neill welcomes the SNP’s consultation on income tax, but points out that it is important to know what any new revenues are intended to be spent on.
Now that the Scottish Government have released their consultation paper on income tax changes, I welcome the approach they are taking on cross-party talks to try to achieve agreement on the way forward.
As a result of First Minister’s Questions, it is clear that there is a substantial majority for a progressive approach to the tax bands, although Colonel Ruth and her Conservative brigade are not part of that majority. While this is unsurprising, it is nonetheless regrettable, and I am sure that their clear support for the wealthy against the poor will rebound upon them.
However, in deciding the structure of tax it is essential, as Jackie Baillie said, to determine the size of the budget. We need to know in advance whether Derek Mackay intends to increase the budget to pay for improvements to the health service, education and local government, including an inflation-proofed pay settlement among other things, that have been damaged by the austerity budgets of the last seven years. That will allow informed discussion on the actual tax rates, and how that will impact on the progressive nature of the tax structure.
I favour a five band policy, with a new lower band for the poorest tax-payers, and two higher bands, of 45 and 50% for those who can bear the greatest burden in making our country favour those in need again. Those on the lowest incomes are the ones who have suffered greatest in the period of austerity, whether by benefit cuts, frozen pay or inflation of basic items needed to bring up a family. It is they who are in most need of support from foodbanks and benefit mitigation, and they must be the absolute priority.
At the same time, however, it would be sensible to make similar changes to Council Tax. Council Tax bands have not reflected the explosion in house values across our country, with the owner of a £5m house paying the same as someone who owns a house worth £120,000. It would be sensible to increase the number of bands at the top by at least two, to begin to resolve this anomaly, and to reflect the higher worth of homes owned by the wealthy. Again, the principle has to be that those who can bear the greatest burden should do so, and those who have the greatest need should benefit most.
The Tories will, no doubt, come out with their shibboleth about the poor old lady living in a house that has increased in value over the years at no fault of her own. However, this constitutes a very small percentage of the cohort, and I cannot believe that it is beyond the wit of the bean counters to come up with a system of Council Tax rebate that takes into account very low incomes.
As I noted earlier, it warms my heart to see the conversion of the SNP to the need for increasing tax in Scotland. As Kez Dugdale said in a recent tweet, she led Labour in four elections on a policy of tax increases, only to be viciously attacked by the SNP for that policy. Indeed, time after time, SNP MSPs have voted against tax increases in the Scottish budget. It is amazing that Nicola can now flip a switch for them to take a diametrically opposite position. But, that’s politics in 21st century Scotland.
Finally, a word about the Catalan situation. In an earlier piece, I compared the SNP approach of ensuring that their referendum was legal with the approach taken by the Catalan government. Indeed, with a maximum turnout of an estimated 43%, Puigdemont did not have a mandate for declaring Catalan independence. Prime Minister Rajoy, however, exacerbated the situation by his bully boy tactics to try to stop the referendum taking place, and the Spanish courts have compounded this by jailing eight members of the Catalan government before a trial.
At least these eight brave souls were prepared to stay to fight their corner, unlike their president who ran away to Belgium to avoid facing the Spanish courts. It will be interesting to see whether the Spanish Government deploys a European Arrest Warrant to have him arrested in Belgium and returned to Spain. It could all have been so different, if Puigdemont had sought a legal referendum and Rajoy had the courage of his convictions and granted it. It would seem that the anti-secessionists would have won, with about the same margin of victory as in Scotland. By taking such a hard line, however, Rajoy and the Spanish establishment risk converting more in the state to the Catalan cause.