READ IAIN ON TUESDAYS THURSDAYS AND SUNDAYS ONLY IN THE HERALD AND SUNDAY HERALD. Has Nicola Sturgeon launched a new Highland Land War with her abolition of rates exemptions for sporting estates? 30/11/14
If so, there’s nothing wrong with a bit of good old-fashioned class politics to spice up her first Programme for Government, which was strong on intent but said little about how to pay for such policies as eradicating poverty.
The hunting, shooting and fishing community has been left grousing (sorry, couldn’t resist it) about damage to “fragile local communities” and “the rural economy”. But most people will wonder why deer stalking and grouse moors were exempted from business taxes in the first place. They are essentially part of the leisure industry; blood sport theme parks for the wealthy.
Some would like Ms Sturgeon to go a lot further and limit the maximum amount of land any one individual can own and end the zero rating of agricultural land, or introduce land value taxation which would prevent large landowners paying less tax than some of their tenants, all the while harvesting subsidies for wind farms and forestry? Land reform is one of those complex subjects that is really very simple: too few people own too much land. Some 400 own half of the land in Scotland. Reversing centuries of property rights and restoring people to the land requires the kind of political will few politicians possess.
This is because most politics in Scotland is urban politics and, for some reason, land reform is not seen as relevant, even though it is, as land is what we build houses on.
I am told that land value taxation (LVT) will be one of the options looked at by the review group into replacing the council tax announced by Ms Sturgeon yesterday. The SNP appears to have dropped the idea of a local income tax for the very good reason that many voters would see it as a new tax on hard-pressed incomes.
LVT, which applies tax to land rather than just the houses built on it, would encourage landowners to use rather than hoard land and would hopefully reduce house prices. It would also allow the community to benefit from the huge increase in land values when zoned for housing development.
However, LVT would also involve a wholesale revaluation of property values, which would inevitably create losers, as would any new or revised scheme for local taxation, which is why one suspects that council tax will be around for some time to come. And so will the council tax freeze. Some Labour MPs want the Scottish Government to lift the “Tory” cap on council tax. But if and when it does, Labour will accuse it of increasing taxes on hardworking families.
Rather like the council tax itself, which was a temporary expedient to have the poll tax abolished, frozen council tax has become the new normal. The truth is we already have a local income tax. It is called income tax. Eighty per cent of council funding comes from central government financed through general taxation.
Income tax is, if we are to believe reports, to be devolved today by the Smith Commission. Since the reports have all come from the frontrunner for leader of the Scottish Labour Party, Jim Murphy, we can assume that they are accurate. He has performed an extraordinary U-turn and now claims that the devolution of all income tax bands and levels is a great achievement of devolution and equivalent to the abolition of clause 4 of Labour’s constitution.
Why has this former devo-sceptic, who used to believe that income tax was the cement of the Union, changed his mind? Well, because he sees an opportunity to expose what many in Labour believe is the faux socialism of the SNP. If Ms Sturgeon is really so keen on social justice and redistribution of wealth, let her show it by increasing taxes, first of all by imposing a top rate of 50p on those earning over £150,000 a year then by increasing taxes on the rest of us.
Mr Murphy believes that the First Minister will do neither and, with the council tax freeze, will be exposed as a Tartan Tory in a red suit. In truth, this will be a real challenge for her. Labour says she “talks to the left but walks to the right”.
Alex Salmond always looked both ways, too: he it was who introduced the policy of cutting corporation tax and introducing the small business bonus. He would not have introduced a 50 top rate of tax either, unless it was already in place south of the Border.
The SNP argument is that it would put Scotland in an unfavourable position, as those 16,000 Scots who earn in that bracket would probably leave Scotland, taking their businesses with them. Even if they didn’t, it would raise only £250m.
But that is an argument of expediency that is difficult for a party that claims to be for “the many and not the few”, as Ms Sturgeon put it yesterday. Couple that with lots of public sector demonstrations about cuts in council services and you can begin to see how Labour could start to chip away at the SNP’s radical credibility.
Those thousands of left-wing nationalists at the Radical Independence Conference in Glasgow last weekend would be the first to fall away if the SNP became the cuts party. Then many of Ms Sturgeon’s women supporters, who mostly work in the public sector, might begin to peel away
Of course, an incoming Labour government in Holyrood would be in exactly the same hole as the SNP and in a situation of trying to make do with less. The problem with devolving tax is not just that the Barnett Formula will be cut accordingly. It is that Scotland’s income tax returns, which have been relatively buoyant recently, will start to turn down as the supply of young taxpaying immigrant workers falls away.
Scotland’s population is ageing because young workers are leaving Scotland and taking their income tax receipts with them. With the Coalition Government’s immigration controls choking off those young Spanish and Italian workers who have been coming here, Scotland faces a financial squeeze.
Devolving income tax in isolation is an irresponsible, regressive and destructive policy that could severely damage public services in Scotland. Without job creation policies, without access to oil revenues or other taxes and without the ability to borrow to pay for cyclical deficits, all of the weight is going to be thrown on to what could be a shrinking income tax base. Income tax is the most visible and most resented tax and no Scottish government will want to increase it. But it will probably have to.
The Barnett formula is, of course, supposed to remain as part of the “Vow” but there is no way it can survive in its present form. If Scotland has to raise the money it spends, it is going to have to accept the risk that what it raises might not be enough.
What will happen, then, to Ms Sturgeon’s promises on the extension of the living wage, equal opportunities and the eradication of poverty? Scotland has two social democratic parties vying for government, but neither of them can work magic.
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