The calls for a Fairer Scotland

 9 November 2012

People in Dundee will recall from some 4 years ago a Scottish Government programme called “Fairer Scotland” with the intention of tackling poverty and deprivation.

Dundee’s share of the fairness was a cut in its spending in the city in each successive years of the programme.

Moving forward, earlier this month, Oxfam published a poll showing the true spirit of fairness in Scotland where 3 out 4 of  those questioned believe that taxes should be increased on the wealthiest and the richest.

This marks an appreciable turn-around in attitudes compared with a survey in 2010 which found that only 43 per cent of Scots questioned agreed that the government should intervene to redistribute incomes from the well-off to lower income groups.

The Oxfam poll also found that the majority – 57 per cent  - disagreed with the statement that taxes should be lower for everyone.

Perhaps it takes two years of the daily disdain and ignorance of a Tory Government for the financially insecure lives of the mass of the people to re-sharpen the focus on the role of government as the major agency for creating a fairer society.

Another welcome sign of support for redistributive action is the progressive campaign for the Living Wage promoted by the Labour group on Dundee City Council whereby the application of the Living Wage would extend beyond the council itself to include those seeking council contracts.

The campaign has been timely.

Earlier this week, the Joseph Rowntree Foundation reset its level at £7.45 per hour – an increase of 25 pence, and £1.26p higher than the National Minimum Wage.

Currently in the UK there are almost 5 million workers who are paid less than the Living Wage and in addition the poorest fifth in this country pay 5 per cent more tax than the richest 20 per cent do on all income and expenditure.

Another issue on a new Fairer Scotland agenda should be the reform of local government taxation.

However, for those in power, this issue will remain in compulsory hibernation until after the Referendum , lest it moves the debate away from glowing assertions about Stand-Alone Scotland and converges it instead upon the flagship policy that failed before it even sailed – Local Income Tax.

It is acknowledged that the council tax , as it stands, is not a progressive tax .

The tax levied does not rise in proportion with the value of the house.

As Paul Johnston points out for Resolution Foundation   ( http://www.resolutionfoundation.org/media/media/downloads/Fairer_by_design_-_efficient_tax_reform_for_those_on_low_to_middle_incomes_1.pdf  )

“Properties in band H were (in 1991) at least eight times as valuable as those in band A, but the tax levied on them was only three times as much. Today, this ratio of house values would likely be significantly higher.”

In its 2007 election manifesto Scottish Labour proposed adding 2 extra  bands to council tax bands - one at the top and another at the bottom .

The manifesto said that this would “ ease the financial pressure for those in the lowest value properties and ensure that those in the higher value properties make a more proportionate contribution.”

The council tax freeze on council services adds to the unfairness by not being properly funded by national government which command local councils to reduce spending on essential services instead.

As has been well-voiced, those who do best out of the council tax freeze financially are by far the most well-off, and the council tax freeze does not benefit those who qualify for council tax benefit.

One of the few SNP politicians willing to speak publicly up for fairer taxation in this pre-Referendum era has been John Mason MSP, the Depute Convener of the Scottish Parliament’s Finance Committee ,

Last August  his remarks were “slapped down by Alex Salmond”, according to The Herald 

John Mason’s supposed heresy had been to say that the top rate of income tax should be raised above 50%

“Some people at the very top have not really lost out of this recession, “ he said, “ but when you look at the price increases, lack of jobs, people on reduced hours, people on frozen pay, it all seems to hit those at the bottom.

“So I think there’s some public demand for increasing taxes on the well-off.”

But if a hand-up to help those hardest hit is out of the question,  hand outs to those who are not hard up will almost certainly be available.

Scottish Government Finance Secretary John Swinney had already produced a report calling for  corporation tax on businesses to be controlled  by the Scottish Parliament for the purpose of reducing the rate from the UK rate of 26 per cent to  closer to the Irish rate, 12.5 per cent  - a reduction of almost half.

The presumed "fairness" here is that lower taxation will result in more jobs.

However, let’s look at the Scandinavian experience and compare Scotland with its nearest Scandinavian equivalent population -wise, Denmark.

In Denmark, tax revenues account for 49 per cent of Gross Domestic Product.

In Scotland, as part of the UK, tax revenues are much lower at 39 per cent.

Yet Denmark has an employment rate of 73 per cent, while Scotland’s is lower at 69 per cent (2011 figures)

Dave Watson of UNISON sums the comparison up well,

“I would argue Scotland needs and wants high quality, generally universal public services, funded by progressive taxation and businesses that pay their taxes.

“However, you can’t have Scandinavian services on US tax rates.

 “ ‘Scandimerica’ is fantasy economics.”

 Yes, Fairness can’t be built on fantasy economics .

 


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