With one bold policy announcement Scottish Labour have given voters a chance to vote for an alternative to Tory austerity, a chance to vote to actually use the powers that Holyrood has, a chance to choose an alternative to four more years of just bitching about Westminster. They are suggesting that we actually use the Scottish Rate of Income Tax to apply a small, progressive tax increase as an alternative to cutting public spending.
Followers of Chokkablog will be aware that - despite John Swinney's previous assertions to the contrary - the simple act of increasing the Scottish Rate of Income Tax (SRIT) would be a progressive move. Tax free allowances mean that the more you get paid, the higher the proportion of your income that is taxed - so a "flat" increase of 1% on all tax bands hits the higher paid proportionately more. If you still need convincing, please read SRIT: A Blunt but Undeniably Progressive Tax.
The strongest argument against using the SRIT is not that it isn't progressive (it is) but that it still has a direct negative impact on the take-home pay of the lowest earning tax payers. The obvious counter-argument to that is to simply point out that the taxes raised do not disappear into the ether; a competent government would be expected to use the funds raised to prevent cuts that would hurt the worst off (including those lower earning tax payers). The logic of this may be sound, but the indirect nature of the "avoided cuts" benefit makes it a hard sell to a low-earner seeing their take-home pay decrease even by a relatively small amount.
Which is where we come to today's announcement by Scottish Labour: they would add 1% to SRIT but make a direct1 £100 "refund" to lower earning tax payers to guarantee that they won't be worse off. In fact, all of those earning less than £20k would be slightly better off. There will I am sure be some devil in the detail of administration, but on the face of it it's a simple, pragmatic solution - it allows us to use the SRIT while protecting the lowest earners from any economic downside.
Labour's proposal to actually use the SRIT is in stark contrast to the SNP's proposal to simply do nothing, to passively mirror Tory tax policies. In effect the SNP have thrown their hands in the air and said "if we can't do everything we aren't going to do anything" whereas Scottish Labour have rolled up their sleeves and said "right, how can we use this power to offer an alternative?".
While the SNP have been focusing their considerable political muscle on stirring grievance with Westminster, the Scottish Labour Party have been thinking about how they could constructively use the powers the Scottish Parliament has, have been focusing their efforts trying to work out how to actually prevent the worst of the cuts and to spread the burden of austerity more fairly.
This is a highly significant policy announcement. The proposed 1% increase in SRIT would be expected to raise £0.5bn2 - that's almost enough to completely wipe-out the £0.6bn cuts to Scottish DEL (Departmental Expenditure Limit) proposed in the draft budget for 2016/17.
I have no doubt that some earning £60k pa. will feel paying an extra £10 a week to help prevent £0.5bn of public expenditure cuts is too high a price to pay for "social justice", that some on £150k will honestly believe that paying £29 a week to protect vital public services is simply too much to bear. If that's your view I guess you vote Tory.
I have no doubt that some earning £60k pa. will feel paying an extra £10 a week to help prevent £0.5bn of public expenditure cuts is too high a price to pay for "social justice", that some on £150k will honestly believe that paying £29 a week to protect vital public services is simply too much to bear. If that's your view I guess you vote Tory.
But for those who heartily denounce "Westminster austerity", for those who rallied behind the banner of "social justice" during the independence referendum? Well Scottish Labour are now offering them a real choice come May 2016, a chance to actually choose a different path on tax and spending.
I wonder how many will follow their conscience and vote for the progressive option?
I wonder how many will follow their conscience and vote for the progressive option?
***
The following table and charts illustrate the impact of Scottish Labour's proposals on tax and take-home pay for those on different salary levels:
1. The precise mechanics of how this would work are unclear to me; the Press Release simply states "We would establish, with local authorities, a £100 annual payment to boost the income of low paid taxpayers."
2. The fact that using SRIT is a progressive step is neatly illustrated by the fact that the cost of the £100 bonus to all tax payers earning less than £20k (which more than offsets the impact of the 1% increase in SRIT on those tax payers) is estimated to be just £50m.
0 Comments