The tax and spend election - a Spring awakening

The Easter weekend was bookended by two television debates which saw the 2016 Holyrood election campaign move to the forefront of media attention.

By this time next year, the Scottish Parliament will have the ability to set income-tax bands and rates, so it should be no surprise that the subject of tax has outweighed political shopping lists in discussions so far. After all, it is the first Scottish election for a government that will raise money as well as spend it.

After an apocalyptic general election last year and facing record low polling, Scottish Labour and the Scottish Liberal Democrats have pitched for a tax rise.

A penny on income tax would fight inequality and boost education, the one-time Scottish coalition partners argue, a theme which has featured prominently since the debate around the referendum on independence placed poverty high on the agenda.

Scottish Labour has also said it would raise the top rate to 50p, something Nicola Sturgeon has supported across the UK.

For this election, however, the First Minister has not gone there. She called the idea “daft” and “reckless” because it wouldn’t raise any more money and may lead to top earners leaving the country.

Speaking to Good Morning Scotland, she said: “I’ve said I want to see a 50p tax rate. I don’t believe the 50p tax rate should have been lowered to 45p.

“But I’ve got analysis prepared by civil servants that says if we do that right now, within the current devolved powers, in Scotland alone then that could see us not raise additional revenue but lose us up to £30m a year.

“The reason for that is while we have the power to set tax rates, we don’t have power over income-tax avoidance. What I have said is we won’t do that in the first year.

Labour leader Kezia Dugdale responded: “With each passing day the SNP’s excuses for not reversing George Osborne’s tax cut for the richest few look thinner than ever. The SNP won’t ask the richest one per cent to pay more tax but they will ask our children to pay the price of cuts.”

Dugdale herself later came under fire after Labour’s idea to offer a £100 ‘rebate’ to low earners to offset the penny rise on income tax was dropped after less than two months. The party insisted it wasn’t a u-turn but a response to George Osborne’s increase in the tax free allowance.

On the idea of the flat one pence rise, Sturgeon said: “The fact that Labour are expecting some of the lowest paid in the country, including half a million pensioners, to bear the costs of Tory austerity, shows just how out of touch they have become.”

Scottish Liberal Democrat leader Willie Rennie dismissed any claims a tax rise would have an impact on investment and the economy. 

“I can tell you what will have a dramatic impact on investment in the economy. It’s not having the skills for businesses, for jobs, to create the growth to create the wealth to create the taxes. It’s a virtuous circle,” he said during the first televised leaders’ debate. 

But if arguing for Scotland to use its new tax-raising powers has put Sturgeon on the back foot, there is little historical evidence it is a vote-winner. 

In fact, voters traditionally dislike paying income tax, as the SNP learned in the first Holyrood election in 1999. 

Going into the campaign, Alex Salmond’s first term as leader saw the party polling around 40 per cent, but after a campaign centred around a ‘Penny for Scotland’ at the ballot box, it only picked up by around 28 per cent.

The 1999 ‘Penny for Scotland’ wasn’t even a tax rise either, but a proposal to reverse a UK-wide cut made by then Chancellor Gordon Brown.

The Liberal Democrats experimented with the ‘Penny for Education’ policy under Paddy Ashdown in the 1990s but it did not improve their electoral performance.

Using the word ‘penny’ may suggest a modest increase, but consistently, voters have recognised it for what it is – a penny of every pound they earn – and rejected it. 

Scottish Conservative leader Ruth Davidson believes she can break Scotland’s “soft left” consensus. 

“We don’t think people in Scotland should have to pay more tax than the rest of the UK and we don’t think it’s good for Scotland either,” she said in the first televised debate.

Polling suggests this and her tactic of playing the unionist card by “thanking No voters” may have had some traction. 

The Survation poll for the Daily Record for March indicated the Scottish Conservatives had drawn neck and neck with Labour on 18 per cent for the second regional list vote, though remaining on 16 per cent for the constituency ballot.

This would suggest No voters who are reluctant to pay more tax may well be considering giving the Conservatives their second vote.

Interestingly however, both Scottish Labour and the Liberal Democrats have not seen a slump in their polling since their tax proposals were announced, but both had a low starting point by their own standards.

The SNP, then, has been able to claim the centre ground and remains strong, some 34 points ahead of Scottish Labour, and on track to retain its overall majority.

While the lead seems untouchable, the party is still being cautious on tax. 

The party has played it safe with its policy on the top and bottom rate of tax, and its proposals for reforming the council tax (after years of promising to replace it), it has opted to shun George Osborne’s plan to raise the starting point for the 40p tax rate to £45,000.

The Scottish Daily Mail reacted with the headline, “Middle Scotland will pay highest tax in UK”.

With the median wage of a worker in Scotland around £27,000, it is perhaps a stretch to describe those paying tax at the 40p rate as the squeezed middle but it would seem the SNP hasn’t entirely abandoned its ‘Penny for Scotland’ roots.

Meanwhile, as the last party to unveil its tax proposals, the Scottish Greens have attempted to broaden the tax debate so it is not just seen in the context of income, but in wealth as a whole. 

Launching his party’s proposals, co-convener Patrick Harvie said: “With the SNP’s reluctance to act and Labour’s limited offering, our income tax proposals will find favour with those who see the chance to create a more equal Scotland,” he said.

The Green alternative is to split the basic rate into two bands and raise the top rate to 60 per cent, which the party claimed would raise an additional £331m compared to the SNP’s proposals.

But while many expected the Scottish Greens to propose replacing the council tax with one based solely on land value, instead the plans remain rooted in property valuation, at least for a “transitionary period”.

The party’s ‘citizen’s income’ plan, originally outlined in the general election manifesto, was left out, apparently because of limited powers to implement it in Scotland. 

Are the Greens becoming more cautious? Not if their polling is to be believed, with Survation putting them on 10 per cent for the regional list vote, their third monthly rise in performance. 

Chat among voters is likely to be less about reform and more about tax bills, and on an election-focused Easter weekend which saw those parties pitch to raise them, the resurrection of their fortunes may be some way off yet.

It may not all prove to be plain sailing for Ruth Davidson either. The Conservatives, too, start from a low base having recorded the worst share of the vote in the party’s history last year.

Chairman of Selkirk Conservative Club, Jim Terras, criticised Davidson’s narrow approach of focusing on No voters. “Policies or a detailed manifesto would help!” he tweeted to her. 

Those policies may be seen as stealth taxes in themselves. On her plans to introduce graduate fees and prescription charges Sturgeon said: “You’re not the party of no tax, you’re the party of hidden taxes”. 

Davidson also faces an association with a deeply unpopular Conservative UK Government and seemed uncomfortable facing questions on the disability cuts which led to Iain Duncan Smith’s resignation. “Am I just here to get shouted at?” Davidson asked the chair.

The Survation poll hinted at a movement in voters’ priorities, with education and the cost of living both on the rise compared to previous polls. In other words, spending, rather than raising taxes, may yet return to the top of the agenda by the time the manifestos are launched.