The cuts announced by the Scottish Government this week are a horrible backdrop to a looming Holyrood election campaign. What could the government have done differently or better? Let me give you three examples, though they all have an element of ‘if only…’.
First, while the cuts are driven by Westminster, the Scottish Government really does need to get a grip on its own forward planning. For example it settled pay deals in a way that left a bill twice as big as it had planned for and it froze the Council Tax like it had money to throw around. These are planning and policy errors. It really did make the situation worse.
Second, it is too late now but the Scottish Government desperately needed to reform the tax base. While tax powers in Scotland are limited, one of the main taxes over which it does have power (Council Tax) is an inefficient mess and needed replaced. In addition, Scotland has enormous amounts of wealth tied up in land, and it is untaxed.
If five years ago the Scottish Government had replaced the Council Tax with something like Common Weal’s proposed Property Tax (which would have taxed both land and buildings at a proportion of their current real value) two things would have happened. First, we’d be bringing in something like £450 million in land taxes.
Equally importantly, the Council Tax would have become much more progressive and so the tax burden would have fallen in a way that much better reflected ability to pay. That would have left no justification for a Council Tax freeze and it would make it feasible for local authorities to raise Council Tax in ways that were equitable and affordable.
We’re stuck in the wrong place because of Westminster, but also because of all the things not done
Third, while again this would have been much easier if it had been started years ago, the Scottish Government could have made a much better job of explaining why Britain so struggles to afford public services. It has little to do with the size of the economy and everything to do with the distribution of wealth in the economy.
Put simply, too many rich people are so rich they can avoid paying tax, and far too many poor people not only can’t pay tax but are reliant on benefits. This puts a disproportionate burden on the group in the middle whose taxes pay for everything. If you have more even wealth distribution you have much, much better tax efficiency.
In fact Common Weal showed at the time of indyref that if Scotland had the same national wealth it did then and the same tax rates it did then but had the income distribution of a Nordic country it would have raised £5 billion extra in tax without raising tax rates. That’s the big goal.
The Scottish Government should have pursued a high-skill, hight-pay industrial strategy for Scotland and it simply shouldn’t have been subsidising low-pay jobs (like all those grants it gave to Amazon).
These ships have all sailed, leaving us where we are. But it is not to late to at least understand that these are the reasons we are where we are and start to talk seriously and credibly about how this will be addressed in the near future.
We’re stuck in the wrong place because of Westminster, but also because of all the things not done. Get a grip of financial planning, properly reform the tax base and take pursuing much greater income equality seriously and put in place a proper industrial strategy focussed on skills-and-technology-driven productivity improvements.
Things happening today are always because of things done or not done yesterday. Let’s start thinking more seriously about tomorrow.