IT’S the oldest tale in politics. A radical party wins power on the strength of a widespread popular movement. Then it becomes the target of powerful private lobby groups and gradually its radicalism is jettisoned for economic “realism” – which invariably seems to be the realism of the rich and powerful.
It happened to Labour under Tony Blair after 1997 with tuition fees, NHS privatisation and Iraq. It happened to the Liberal Democrats after they entered coalition with the Tories in 2010 – they never recovered. Now the Scottish National Party under Nicola Sturgeon is gradually stripping off its radical pretensions as it becomes another party of the establishment.
Ms Sturgeon’s decision to abandon her policy of restoring the 50p tax band in Scotland, originally promised in 2014, is a sign that the First Minister’s social democratic principles are as perishable as Labour’s. Of course, the abandonment is justified in terms of economic necessity and pragmatism. We’re told that restoring the 50p rate wouldn’t raise much money, that it might lead to tax competition, that many of the wealthy wouldn’t pay it, and that some might leave Scotland. Well, good riddance. Why should any group in society be freed from the obligation to pay tax because they threaten to avoid it? That isn’t government; it is capitulation.
The 50p band could have raised significant funds of up to £100 million. But revenue raising isn’t the only function of taxation, as the financial geographer Danny Dorling has argued. It is about fairness, equity and the kind of society you want to live in.
Does Scotland really want to create that more communitarian, harmonious Nordic society where income differentials are held in check and top rates are up to 60 per cent? Or are we content to join the low tax, devil-take-the-hindmost society of the UK under the Tories?
Ms Sturgeon is using exactly the same arguments for not restoring the 50p rate that George Osborne used for axing it. He said that it didn’t bring in much revenue, risked encouraging investors to leave the UK, and penalised enterprise. “No chancellor”, said Mr Osborne in 2012, “can justify a tax rate that damages our economy and raises next to nothing”. That is almost word for word what Ms Sturgeon told MSPs yesterday at First Minister’s Questions. If your wad is fat enough the Scottish Government won’t even try to tax you.
Of course, she insists that she is still raising tax on the “wealthy” by not raising the threshold for the 40p tax rate to £45,000. But is she? You could equally say she is penalising basic rate taxpayers who should never have been paying the 40p rate in the first place. Those earning up to £45,000 only drifted into the higher rate band because of inflation and the fact that the threshold has not been raised in line with it.
The Scottish Government is penalising families lower down the income scale and letting the wealthy off the hook. Where is the fairness in that? She is right not to raise the threshold, but she should also have stuck to her guns and insisted that those earning more than £150,000 pay just a little more on grounds of social equity. Seems that not even in Scotland are we “all in this together”.
Indeed, there is a strong case that the additional rate should be 60p not 50p. Until Margaret Thatcher took over, the wealthy were paying more than 80p in the pound. By abandoning progressive taxation Ms Sturgeon is adopting precisely the neo-liberal agenda she condemned during the General Election campaign.
She also risks undermining the very cause for which the SNP is supposedly in existence: independence. If, as Ms Sturgeon appears to be saying, you can only have a 50p tax band “UK-wide” then surely that is an argument for remaining in the UK. An independent Scottish economy would be just as vulnerable to tax competition. Wealthy people could still escape the tax by stepping over the Border.
There will anyway be no border for economic purposes under the SNP’s vision of independence because Scotland would still be harnessed to the UK economy through the currency union and the fiscal dominance of the Bank of England. This makes a nonsense of the whole project of creating a “better nation”. If the same wealthy few are going to be dictating policy what point is there in being independent?
The argument that taxation of wealth can only be tackled at a UK level is the reverse of what the SNP was saying during the referendum campaign. Then it was Jim Murphy and Gordon Brown who claimed that only within the Union could the high income earners of the south-east of England be forced to contribute, through taxes, to the welfare of the entire UK. Unfortunately Labour only managed to deliver on its progressive principles at the moment it was about to lose power.
Of course, for many in the SNP, social justice always came second to national “liberation” from the English yoke. For the “45” nationalists, it is about identity and ethnic mythology. But for most Scots, who have never felt oppressed by England, do not want separation and were motivated to vote for Ms Sturgeon because of her social democratic principles, this is a wake-up call.
The u-turn on the 50p rate will be a huge disappointment also to the many supporters of Yes Scotland who joined the SNP after 2014. They had already been placed in the invidious position of justifying a halving of Air Passenger Duty – which is a tax break for well off frequent flyers – and also the Scottish Government’s failure to properly reform council tax.
Now they have to follow their leader’s conversion to low tax. I wonder what the SNP MP Mhairi Black, whose maiden speech to the Commons was all about social equity, really thinks of all this. She has to follow the party line. But what does she tell her Paisley constituents? “Eh, the rich don’t like paying taxes, so we’re not going to try”.
This is a critical moment for the SNP. There has always been a strand of economic conservatism in the party and a weakness for financiers. Remember Alex Salmond leaping to the defence of the Scottish banks in 2008 back in the days when he hoped Scotland could emulate the banker-led “tiger” economies like Ireland and Iceland? That didn’t end well.
The SNP is now so confident of its political hegemony that it can park its conscience. But its leaders are mistaken in believing that the 2015 tsunami was all their own work. It was the result of the referendum campaign, which galvanised the working classes with the belief that, for once, voting could actually change something. It will be tragic if they discover they have just voted for more of the same.