Pragmatism, Taxes, and the SNP

     Last week, First Minister Nicola Sturgeon announced that going into the Scottish Parliament election in six weeks, her party would maintain the 45% top rate of income tax for the highest earners in Scotland once Holyrood has full control of tax rates and bands during the course of the next parliament. This marks a reversal by the SNP leader, who had argued for restoring the 50% rate at the UK general election last year in the name of raising additional revenue for public services and education.

     The reasoning for abandoning the policy was that it would not raise much revenue and cause tax competition that could see high earners earner more than £150,000 leave Scotland or relocate their address in the rest of the UK – thereby not paying any income tax in Scotland at all once full devolution comes about.

     If this sounds similar, it is because it the same reasoning that Chancellor of the Exchequer George Osborne used to reduce the top rate from 50% to 45% throughout the UK in the belief that some investors and entrepreneurs already in the UK would leave for a lower-tax country, and thereby not paying any income in the UK altogether.

     Now, regardless of your views on tax policy and the merits of taxing people according their ability to pay, the reality is that most people don’t like paying taxes and when they do, they would rather not pay more – even if they tell opinion polls that they do, and this applies to Scotland just as everywhere else. This is why the SNP is reluctant to raise taxes on anybody, not least the middle and upper classes who have helped the party rise to prominence in the last decade.

     But for many of the more recent SNP voters – many of them working class former Labour voters in Glasgow, Dundee, Dumbartonshire, and Lanarkshire – they believed that the SNP was supposed to be a more radical, progressive, and bold party than the party they had left. It was not merely that they had been disappointed with the party standing “shoulder-to-shoulder” with the Conservatives to save the Union, but it was the discontented feeling that the party had taken them for granted for some time and were seen as drifting to the right and away from their socialist political principles in the pursuit of power at Westminster.

     New MP’s such as Mhairi Black defeated Labour heavyweights such as Douglas Alexander at the general election last year on the wave of this discontent, and with the message that Labour had left them, not the other way around. They made speeches filled with platitudes about fairer and more progressive taxation, and standing for left-wing principles – and in this regard, Black cited one of Labour’s left wing stalwarts, Tony Benn, as one of her political hero’s.

     However, the problem with Benn was that many of his cherished principles were not widely shared by voters throughout the United Kingdom, at least not at the ballot box, which explains why Labour lost with its infamous “suicide note” in 1983 and found that it had to moderate in order to be in sync with the center ground of British politics. Today, the SNP is doing the same with regard to Scotland in particular, and this means chucking away the 50% top rate in order to stay in power at Holyrood.

     To be clear, this article is not advocating anything on either side of the tax debate, but is merely pointing out that many ex-Labour voters found a new home in a party they believed was chock full of social justice warriors, and would be bold and do things differently than the other parties, like hiking taxes on the well off and getting away from the “austerity agenda” of Westminster. Now alongside dropping the 50% top rate for high earners, these people are watching as the SNP also effectively gives a gift to well-off frequent flyers via the halving of air-passenger duty.

     Now, some people who are politically savvy may say that this is just politics, and that of course you place yourself in the middle ground to win an election. Grow up and smell the coffee, they say. Again, that’s politics.

     Sorry, but so often during the referendum and general election, the SNP/anti-Union rhetoric was how Labour was basically too frit to raise taxes because it would have cost them in marginal constituencies (the UK equivalent to “swing” states or congressional districts in US politics), where only a small swing is needed to flip a constituency from one party to another. Many such marginal constituencies – usually inhabited by middle class voters not keen on tax increases – happen to be to England. Thus, the implication was that Scots are more amenable to paying higher taxes, and that Labour betrayed working class Scottish voters (who wanted tax increases on upper earners) to chase after middle-to-upper income English voters (who didn't want taxes increased), and this was used to argue for separation and voting for the SNP.

     Not only does the SNP admit that the same holds true in Scotland, but Sturgeon herself has said that higher taxation is only possible as part of the same UK tax base to prevent people from shifting money and company headquarters outside of a tax base that benefits Scots and everyone else (and because Scotland has comparatively fewer higher income earners than England). In the face of this, during First Minister’s Question’s last Tuesday, she went so far as to say that increasing the top rate would be “reckless” and “daft.” The First Minister would later say that she would consider the 50% rate during the lifetime of the next parliament, but still cited civil service experts warning her against it - at least initially - during the first year of full income tax devolution.

     Again, this article is not arguing the merits of tax policy for one of the issues here is the SNP selling itself as a radical, left wing, redistributing party that did things differently than everyone else, like raising taxes on those who can – at least in theory – afford them. In fact, it has proven not to be that party, and is every bit as cautious as the others, so as to not "scare the horses" (i.e., the middle classes).

     The other issue is selling this premise that Scots are vastly to the left of the English (and making this a reason for secession), when again, this is false. If this was the case, the SNP would have no problem raising taxes, but like every political party, it wants power, and rarely do parties win power on the promise of raising anybody’s taxes.

     The Labour Party learned this in the 1980’s and 1990’s as it clawed its way back into the British political mainstream and eventually into power in the landslide of 1997, which infamously included the wipeout of all the Scottish Tory MP’s. However, it may be a mistake to conclude that anti-Tory sentiment alone was responsible for this, whether in a Scottish or UK political context. If this had been the case, then Labour should have won the 1992 general election and the Tories should have by all rights been wiped out in Scotland following the Poll Tax debacle of 1989-90.

     Alongside the anti-Tory sentiment, the strategy of becoming “New Labour” and moving rightward to the center ground under Tony Blair allowed Labour to win in places it had never won before, or in a long time, throughout the United Kingdom, including Scotland, where the party had made itself acceptable to the middle classes, just as they had done in England and Wales. This helped it to win in constituencies that had been sending Conservative MP’s for decades, such as Edinburgh Pentlands, Dumfriesshire, and Eastwood – the safest Tory seat in Scotland which fell to Labour’s Jim Murphy in 1997.

     With devolution and the Scottish Parliament, the SNP probably thought they could show up Labour’s progressive and social justice credentials with their “Penny for Scotland” platform to raise the standard rate of income tax by 1% under the power to vary taxes by up to three percent. This was in response to Labour cutting that standard rate by 1% for the UK overall, and SNP looked to cancel this out in Scotland to provide more money for public services. This proved unsuccessful for the SNP’s electoral chances, and the policy was subsequently dropped.

     After that, the SNP worked on building its own moderate, centrist, and middle class credentials by painting itself as a party that would govern with modesty and with an eye on being competent – in short, a safe pair of hands that would not rock the boat. In many ways, they were first attracting the people who would have voted Conservative, but did not, perhaps because of the toxicity of the Conservative label in Scotland.

     From here, the SNP made itself increasingly presentable to the middle classes and were able to dislodge the Labour-Liberal Democrat coalition administration from power by winning one seat more than Labour in 2007. Then the SNP went after the Labour and Liberal Democrat vote by painting itself as the true defender of the social democratic order in Scotland, while Labour and the LibDems were in cahoots with the Tories in attempting to dismantle it by following an “austerity agenda” of low taxes and spending cuts. This worked to pave the way for the SNP majority government in the election of 2011, the ability to get 45% of Scots to vote for separation in 2014, and the near sweep of the Scottish seats in the House of Commons last year.

Journalist David Torrance's reaction to those expressing surprise that the SNP is not as left-wing as advertised.

     All the while, the party’s use of left wing rhetoric to help whip up discontent with Labour and drive up the pro-independence vote betrayed its true nature – like all parties – in being cautious with the reins of power, and even willing to pursue policies that don’t fit the typical mold of socialism or social democracy, such as dropping corporate tax by three points in order to attract business and investment and incentivize job creation.

     Such a policy is usually seen as a good thing by economic conservatives, but as an unnecessary giveaway to CEO’s and wealthy shareholders by those who see higher taxation as indicative of a fairer society. That policy was abandoned, but now with Nicola Sturgeon going against a rise in the top rate of income – at least for now – there are questions about her and her party’s credentials as a social democratic party. Writers Iain Macwhirter and Kevin McKenna have written about this phenomenon of the SNP apparently not even willing to use the powers it now has or the huge electoral mandate it is destined to have this May – largely on the back of people who became politically engaged during and following the referendum.

     SNP members and supporters have already taken to social media to express their discontent with the party on taxes and other policies where they believed it would at least try to take risks to create the fairer society the SNP has been talking about. Some have even announced their withdrawal from the party – wondering what point there is in voting for the SNP if it’s just going to be another party of the establishment. Indeed, what is the point of secession when the risks of raising taxes will be just as great if not greater, and if an independent Scotland more-or-less follows the economic policies of the rest of the UK?

     That being said, there is little to suggest that the SNP will do nothing other than win an unprecedented third term in power in May. If it does so ruling out a tax increase or no firm commitment to raise taxes, it will partly be a manifestation of that fact that there are people out there who may like the idea of higher taxes, but when it comes to actually doing the deed of voting for higher taxes (especially when it effects them), they tend to go with the party that either pledges to lower taxes or keep them the same. A Survation poll in February showed that most Scots wanted either a decrease or no change in the basic rate of income tax, and even a combined plurality of 47% wanted a decrease or no change in the top tax, as opposed to 38% who wanted to see an increase.

Survation online poll - February 25th-29th.

     Labour or the Liberal Democrats may not win this election (or even gain any seats) on a pledge to raise people’s taxes, but this may show that when it comes to paying for higher taxes, Scotland is not different than England, and the SNP will likely act in a pragmatic fashion that may well disappoint its new voters.

     Brian Wilson probably said it best in the Scotsman this past December:

Nobody ever lost money by reassuring the Scots that we are the most caring, altruistic, welcoming people in the world, uniquely blessed with an egalitarian gene which makes us a’ Jock Tamson’s bairns.

Equally, it is some time since anyone won an election through even the most timorous effort to translate that self-image into votes.

Who's "Anti-Scottish", Now?

SNP advertisement from the 2007 election.

     This week, the SNP unveiled its plans for local government taxation should it win the Scottish parliamentary election in May.

     Under the proposed changes, households within the four highest Council Tax bands will have to pay more for the funding of councils; specifically, those living in the average home at the lowest of these bands (Band E) will pay an extra £105 per year, while those living in the highest band (Band H) will be paying extra £517 per year. For everyone else in Scotland – those who live in homes within the lowest bands of A through D – there will be no changes to how much they pay.

     The biggest revelation by First Minister Nicola Sturgeon was that the package included the end of the Council Tax freeze in 2017 – ten years after the SNP implemented it when it came to power for the first time. The freeze was conducted under the pretense of helping all taxpayers by providing tax relief and it has been funded by the Scottish Government, which provided the money on the condition that the local councils did not change Council Tax rates (i.e., the “freeze”). However, the initiative has been criticized – including by the SNP government’s own poverty “czar” – for disproportionately benefiting those on higher incomes and living in larger homes at the expense of funding for public services.

     Sturgeon has claimed that the move to make those in the higher property bands pay more will raise £100 million for education initiatives, whilst the end of the Council Tax freeze and giving councils the ability to vary it by 3% per year will allow them to raise another £70 million for public services.

     In addition, those who are asset-rich but cash-poor – living in higher band homes on low incomes, such as pensioners – will be entitled to an exemption, and there will be relief across all property bands – particularly families with children. The First Minister further claimed that the charges for those in all bands will still be lower than of the freeze were not in place, average rates will remain lower than those in England, and that there were no plans for revaluation of properties, which are still taxed based on valuation from 1994.

     In many ways, this seems all well and good – getting rid of the prolonged freeze to give councils more breathing room and making changes to the overall system to make it “fairer”.

     However, it amounts to an overall tinkering with the present system, which is something they had criticized doing in years past. In fact, heading into the 2007 Holyrood election, Nicola Sturgeon as deputy leader of the SNP had said: “the Council Tax is unfair and cannot be improved by tinkering around the edges.” She had made this statement following the announcement by the Scottish Tories under then-leader Annabel Goldie that if elected, they would retain the Council Tax system with a discount for pensioners.

     To be fair, the Council Tax as been criticized throughout the United Kingdom by people of all persuasions. It was cobbled together by John Major’s government following the disastrous debacle over the Community Charge (aka, Poll Tax) which provoked a campaign of nonpayment, as well as riots and helped to bring down his predecessor, Margaret Thatcher. Council Tax has not generated such feeling as the Poll Tax, but is still considered unfair and regressive in many quarters as a means of funding local government.

     However, in responding to the Conservatives’ policy on retaining the Council Tax, Nicola Sturgeon went further in her criticism by calling them “anti-Scottish” for wanting to do so. Specifically, she said: “The anti-Scottish Tories have clearly run out of ideas as this is not the first time they have announced this policy.” Her party campaigned in 2006 and 2007 on a pledge to abolish the “unfair Council Tax” in Scotland and replace it with a “fairer local income tax where over half a million pensioners pay nothing and most will pay significantly less.”

     In May 2007, the SNP won the parliamentary election and formed a government for the first time, and they instituted the Council Tax freeze as a precursor to their objective of permanently replacing it.

     Once they got to the nuts and bolts of crafting policy however, they quickly realized that a local income tax was insufficient and undesirable; insufficient – because it could not be enough to bear the weight of funding local government, and undesirable – because it would have to be set by Holyrood and thus erode local accountability.

     Given these concerns, the SNP went into the 2011 election saying it would: “consult with others to produce a fairer system based on ability to pay to replace the council tax and we will put this to the people at the next election, by which time Scotland will have more powers over income tax.” Following that election, the cross-party Commission on Local Tax Reform was created during the current parliament and presented its recommendations in December – calling for the end of the Council Tax.

     In the wake of this, the SNP decided to forgo an all-out replacement of the Council Tax and instead, opted for the position of merely tweaking and reforming the current system.

     As Brian Taylor of the BBC noted, it has been a “long, slow retreat” for the SNP on this issue, and having placated the people with the nine year freeze, they now hope that this modest, moderate plan will be enough to satisfy the voters in thinking that they have kept their promise of producing “a fairer system based on ability to pay”, even if they failed to “replace the council tax.”

     Possibly the greatest irony of this climb-down from abolition is that the policy decided upon by the SNP shares much similarity with the recommendations offered by the tax commission created by the Conservatives. Tartan Tories, indeed.

     However, this may not matter for the election that occurs in two months. Indeed, one of my acquaintances on Twitter, who goes under the name “El Del” (@Del_ivered), believes that the very modesty of the proposed changes only further ensures the SNP’s reelection prospects. Specifically, he notes how the ability of councils to raise tax by 3% may actually be the SNP effectively passing on some of its ability to tax from Holyrood on to those councils, so that councils are left with the decision to raise council taxes for public services, but income taxation in Scotland stays the same as in the rest of the United Kingdom.

     This is important, because Labour and the Liberal Democrats have been advocating for increase in income taxes in Scotland in the belief that it may be attractive to some voters who believe that people – especially those of a higher income – ought to pay more for the benefit of public services. Not only does Del contend that they fell into a Nationalist trap, but they were “so hellbent on unleashing their tax missile at the SNP, they were blind to the vital bigger picture: Keeping [the] UK a level playing field and Westminster budgets relevant to Scots.”

     In this light, he further asserted that while the SNP does not “care a whit for UK cohesion”, they also did not wish to see talent drain away from Scotland to other parts of the UK due to tax differentials and that “calls for worker solidarity across the UK at the indy referendum were forgotten as [Kezia] Dugdale and [Willie] Rennie were happily prepared to make Scotland the highest-taxed part of Britain.”

     Having avoided this and for achieving a “reformed” (i.e., “tinkered”) Council Tax system, Del believes that pointing to broken promises by the SNP on abolishing and replacing it will prove to be ineffective because voters care about the here and now.

     However, pointing out this broken promise on Council Tax replacement is necessary when one realizes the circumstances of the election in 2007. To be sure, there were many things going on which help to explain why Labour lost power to the SNP that year, but this was still an election in which the SNP only beat Labour by one seat to form a minority government in Edinburgh. Given how close this election was in some individual constituencies (not to mention the irregularities and various voting/counting/ballot paper issues – possibly most infamously in Cunninghame North) and in the Scotland-wide result, it is possible that the “abolish and replace” promise was probably enough to help the SNP to power for the first time. Looking back, this election proved consequential, for it eventually led to the referendum, further constitutional upheaval, and nine years of SNP rule (with the last five years as a majority government). Without that promise, it is possible that Labour would have held on to power. At the very least, enough votes against the SNP would probably have kept it from attaining power that year, and all things being equal, prevented the madness of past nine years.

     Another issue is the fact that Sturgeon called the Conservatives “anti-Scottish” for taking the very position that that her party is now promoting: retaining the Council Tax system with some adjustments. Furthermore, during the 2011 election, senior SNP MSP Humza Yousaf tweeted that Scottish Labour was "betraying Scotland" by not lending its support for "scrapping the unfair Council Tax." Well, what does this make the SNP? As Euan McColm said recently in The Scotsman, "there's something troubling about the othering of politicians by opponents. It speaks of a pettiness that's a world away from the talk of consensus and working together that we so often hear."

     For that matter, if certain powers are not to be used because of the resulting disadvantage to Scotland (and the benefit of the rest of the UK), then what is the purpose – the need – for devolution, more powers, the recent struggle over the fiscal framework, or even separation? Indeed, this would seem to take the argument for the Union, as I explained a couple of weeks ago. Again, the SNP may not care about the unity of the UK, but they have paradoxically emerged as a UK unity party.

     Then again, it probably comes down to a simple fact: nobody likes paying taxes, and when they do pay taxes, they’d rather not pay any more. Even when they say they believe in higher taxes to fund public services in surveys and polls, so often, they vote according to their pocket books and not their political or social ideals – in other words, they usually vote according to their own economic self-interest.

     This may prove difficult to understand for people such as Lesley Riddoch, who seem to be wondering why the SNP is timid in its ambitions for local taxation. Why, they ask, is the SNP passing up an opportunity to really shake up the system of local taxation and come up with something new, innovative, and radical? The reason why is that Scotland is not as radical as she thinks or hopes, and the SNP knows this. Like most political parties, they don’t want to “scare the horses” (i.e., the middle classes, who tend to decide elections) so that they can stay in power. Indeed, some of those within Middle Scotland (a close cousin of Middle England) who benefitted from the freeze may well be shocked at having to pay more after nine years of frozen rates.

     In addition, as Brian Taylor pointed out, the SNP knows that any major change in local government taxation will be first such change since the advent of the Poll Tax, and we all know where that went.

     This brings up the important fact that there are no plans for a revaluation of properties, which means that Council Tax bills will be based on valuations from over 20 years ago – and that current property values are not accounted for and some people are effectively paying at a discounted rate. This sounds similar to what happened in the 1980’s when the Tories kept putting off what they knew would be unpopular revaluations and increases in the old domestic rates, until they couldn’t any longer (especially in Scotland) and decided to solve this problem by introducing…the Poll Tax.

     It is perhaps possible that similar conditions are being produced which will eventually force the SNP to move further on local taxation than it has thus far. For the moment however, they seem content with more-or-less adopting the position on local taxation taken by Tories in that consequential election of 2007. Who’s “anti-Scottish”, now?