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politics, scotland

Kezia Dugdale: pledges to compensate for tax credit cuts. Will the Scottish Government?

As I was perambulating around the rather sparse Scottish Labour conference in the Perth I bumped into the former Scottish (and UK) Labour minister, Malcolm Chisholm. He reminded me that, in 2006, he’d been sacked by the Labour leader, Jack McConnell, for voting against Trident in Holyrood.

Changed days. Opposition to the renewal of Trident has become a touchstone policy for delegates at Scottish Labour conferences. If Labour votes as expected today, this could be the beginnings of a new party in all but name.

Johann Lamont promised to make Scottish Labour its own boss; Jim Murphy said Labour would have total devolution of policy; it may be that Kezia Dugdale has finally delivered on both, even though ironically she supported the renewal of Trident.

The SNP laugh at the new Labour leader’s naivete, inexperience and sometimes robotic delivery. But Nicola Sturgeon now has a real challenge from the left.

Ms Dugdale’s first conference speech yesterday was better than anyone had a right to expect, at a gathering which is more like a casualty ward than a conference. She delivered it with a kind of ragged conviction, lacking the fluency of experience, spilling out pledges without the usual hedges and get-out clauses. But if Kezia Dugdale is serious, she is going to hit the middle classes where it hurts – in their tax thresholds – and reverse Tory tax credit cuts.
The maths are a little vague: it’s not entirely clear that NOT cutting Air Passenger Duty and NOT increasing the threshold at which people pay the higher rate of tax will actually raise enough to match the £400m or so that poorer Scottish families will lose in tax credits.

Nevertheless, the commitment was firm and unequivocal. Labour is not going to “mitigate” the tax credit cuts, but “restore the money Scottish families stand to lose from this Tory tax rise on working families”. Entirely. And it is a “promise” not an aspiration.

And it will hit the SNP’s left wing supporters where it hurts. “A tax cut for those who can already afford to shop for airline tickets cannot be Scotland’s priorities when families cannot afford the weekly shop.” Well, put like that…

She is also proposing to restore the 50p tax band on very high earners to pay for educational improvements, grants for students from care homes, a living wage for care workers and to “protect and invest” in the NHS.

The list of spending commitments is a hostage to fortune, of course. Some will no doubt ask whether the priorities are right. And there are questions about where the money is going to come from for all this when a restored 50p tax band on very high earners will be lucky to raise over £50m in Scotland.

But no one can any longer question where Kezia Dugdale and her party stand – and it certainly isn’t the centre ground. The SNP now has to decide whether it will match the tax credit cut pledge. Nicola Sturgeon can’t just leave this hanging in the air.

The Scottish Parliament has had the power to raise income taxes since 1999, but this is the first time anyone has actually promised (effectively) to do so. There is a very good reason why no party has used the Scottish Variable Rate – the same reason why all the parties, including Dugdale’s Labour, have refrained from raising the council tax freeze: fear of the electoral consequences.

There are questions about whether and to what extent Kezia Labour can now be reconciled with UK Labour, which remains the ultimate authority on reserved issues. It is only months since the interim Labour leader, Harriet Harman, was saying that Labour would not oppose tax credit reforms. The Shadow Chancellor, John McDonnell, seems to be accepting some cuts in tax credits if they are phased-in.

At the Brighton conference only last month, Labour reaffirmed its commitment to renewing the Trident nuclear deterrent when it voted through the “Britain in the World” policy document. Cynics will say that the Scottish Labour Party can say what it likes because it has no power to influence UK policy.

Nevertheless, this isn’t play acting any more. For the Scottish Labour Party to have radically different policies on welfare, taxation and defence is a remarkable step for anyone who knows the history of the party in Scotland. These are reserved issues – terra incognita for Labour in Scotland.

It may have come too late to save them from another withering defeat in the Holyrood elections in May, however. There remains a huge credibility gap between what Labour says and what the Scottish voters are prepared to believe. Frankly, many people won’t buy a word of it.

The gulf is just too great between what Kezia Dugdale is saying in Perth and what so many senior Labour Party figures have been saying in the recent past about not returning to the days of “tax and spend” socialism. There were quite a few sceptics in the Perth conference too.

Placing the Scottish Labour Party to the left of the SNP involves a huge electoral risk. During the referendum campaign, Labour became, by default, the party of the unionist middle class. Since the days of Tony Blair, Labour has been the party of sound defence, low taxation, and enterprise – the party of the “aspirational” classes.

No one could have believed that the party of Tony Blair and Alasdair Darling would ever launch an assault on the living standards of middle classes. Of course, the people who stand to lose out by the non-uprating of tax thresholds – those earning around up to £50,000 – only think they are “in the middle”. In reality they are well within the top 10% in Scotland where income distributions are flatter than in the south.

But they will feel hard done by when they learn that they are to lose £1,300 a year in order to pay for tax credits to those who aren’t in work. Perhaps the one serious mistake in Kezia Dugdale’s speech was her suggestions that only those on the very highest earnings would be paying more in tax. This is sophistry. As she said herself: “someone has to pay” and it is the people newspapers like to call “middle earners”.

So this is not an easy hit for Kezia Dugdale. If it were, Nicola Sturgeon would have got there first. This is precisely the kind of Big Offer she’d hoped to make at her victory speech in Aberdeen. In the event, the First Minister’s address fell flat.

Nationalists preferred not to listen when the Scottish Finance Secretary, John Swinney, told them that he wasn’t in the business of reversing Tory tax credits cuts but wanted instead to allow cuts in business rates and APD to support “enterprise”. Labour saw their opportunity to turn the tables on the SNP and challenge their left wing credentials.

No doubt Nicola Sturgeon, who likes to think of herself as the guardian of Scottish social democracy, will have a sharp reposte to Dugdale’s barb: “To those who base their politics on nationality rather than need, I ask this: who in Scotland are you standing up for”.

But after this week, will be hard for the Nationalists to stand up the claim that Scottish Labour are just “Red Tories”.

From Sunday Herald 2/11/15

About @iainmacwhirter

I'm a columnist for the Herald. Author of "Road to Referendum" and "Disunited Kingdom". Was a BBC TV and radio presenter for 25 years - "Westminster Live" and "Holyrood Live" mainly. Spent time as columnist for The Observer, Guardian, New Statesman. Former Rector of Edinburgh University. Live in Edinburgh and spend a lot of time in the French Pyrenees. Will that do?


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