SNP and Tories: cuts are better than 1p tax rise

Submitted by Matthew on 10 February, 2016 - 12:04 Author: Ann Field

In response to the decision of the SNP Holyrood government to cut £350 millions from local government funding — at a cost of some 15,000 jobs — Scottish Labour Party leader Kezia Dugdale has called for a 1p increase in income tax rates in Scotland.

Although the power to vary the different income tax bands will not be devolved to Scotland until next year, Holyrood already has the power to increase (or cut) the income tax rates currently set by the Westminster government. Dugdale’s proposal enjoys broad support among Labour Party members.

Some affiliated unions, such as the GMB and ASLEF, have also publicly backed it. It chimes in with the attitude: “Better for everyone to chip in a bit extra than to see jobs and services cut.”

Under the proposal, no-one on less than £11,000 a year would be affected (because they do not pay income tax anyway). And anyone paid between £11,000 and £20,000 would receive compensatory payments through local authorities — paid for out of the overall “kitty” of the extra income tax — which would cancel out the increase they pay in income tax. The impact of the tax rise would be broadly progressive. It is certainly true that the more you earn, the more you pay.

According to a study of the proposals carried out by the Resolution Foundation, the top 10% of earners would pay £1,000 or more — an extra 1.3% of their income — while middle-income households would pay an extra 0.4% of their income. Someone on £25,000 a year would pay £140 more in tax, someone on £30,000 would pay £200 more, someone on an MSP’s salary would pay £481 more, and anyone on First Minister Nicola Sturgeon’s goldplated salary would pay £1,447 more. But, clearly, anyone on more than £20,000 a year will, to some degree, be worse off. And this will include many workers, such as public sector workers, who have been subject to prolonged pay freezes and/or minimal pay rises.

Another problem with the proposal is that there does not seem to have been any statement by the Scottish Labour Party that it is a temporary measure for just twelve months — until Holyrood receives another tranche of powers, which would allow it to target tax rises only at the better off. The proposal to increase income tax is therefore far from “ideal”. Having said that, none of its supporters argue that it is “ideal”(although some come perilously close to doing so). And while socialists are certainly in favour of increasing — by much more than 1% — taxation of the rich, Dugdale’s proposal is not what we advocate as a response to the SNP’s cuts in the funding of local authorities.

Our aim is to build a campaign involving first and foremost trade unions, CLPs and community groups, which exerts enough pressure on local authorities to pass “no-cuts”budgets (which are not the same as illegal budgets). No-cuts budgets could arguably be achieved by using council reserves and council borrowing powers, renegotiating debt repayments, and deploying some “creative council accountancy”, alongside putting more pressure on Holyrood to find more funding for local authorities. In the “bigger picture” the answer to cuts in local authority funding (and Westminster cuts in grants to Holyrood) involves measures such as a wealth tax, scrapping Trident and using the money saved for social spending, and the writing-off of the debts of local authorities by a nationalised banking system.

But pointing to the limitations of a mainstream social-democratic proposal to raise income tax rates by 1p is far removed from the rabid and hypocritical response which the proposal has triggered from the SNP. When Labour MSPs moved the proposal in Holyrood last week as an amendment to the SNP budget for the 2016-17 financial year, the SNP were vehement in their opposition. And the Tories even promised to stand “shoulder to shoulder” with the SNP in opposing the proposal to raise income tax!

The SNP profess concern about the impact of the proposal on the low-paid — the very people who have suffered most under SNP austerity and cuts in funding to local authorities — and claim, wrongly, that the increase in income tax will hit the lower paid harder than the higher paid.

As usual, the SNP is also suffering from selective amnesia. In 1999, when the first Holyrood elections took place, the SNP campaigned under the slogan “A Penny for Scotland”, i.e. an increase of 1p in income tax rates. This, boasted the SNP, would “generate £230 millions per annum to spend on Scottish health, housing and education.” But in 2002 the SNP dropped the policy with its characteristic make-it-up-as-you-go-along bravado: “Gordon Brown has increased taxes and put more money into the public purse. So, the argument we put forward in 1999 has been comprehensively won by the SNP. We have forced Gordon Brown into a most spectacular u-turn.” In other words: A 1p increase to raise money for health, housing and education was a good idea in 1999; but now it’s an off-the-wall attack on the low-paid.

The SNP’s response to the proposal — “Labour’s tax grab”, as they have taken to calling it in typically Tory language — underlines the fact that the SNP is the pro-austerity party of low taxation, cuts in spending, cuts in jobs, and privatisation. The Tartan Tories are back with a vengeance.

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