Alex Neil calls for urgent tax reform

The UK Government should allow devolved governments to borrow as much money as needed for the economy to recover from the coronavirus pandemic, Alex Neil MSP has said.

Writing for Holyrood, the former cabinet secretary for infrastructure and investment also argued for the introduction of a wealth tax, the scrapping of council tax and business rates and reform of the national insurance system.

He said that there has to be “fundamental reform as a matter of urgency” to the way the economy functions in order to assist the economic recovery.

The comments came ahead of Rishi Sunak's summer statement, with the chancellor expected to announce a number of measures aimed at mitigating the economic damage of the coronavirus lockdown.

Neil said that with interest rates at very low levels the UK Government should avoid cutting public spending and should instead borrow heavily to invest in a recovery strategy.

The Scottish, Welsh and Northern Irish governments should be allowed to borrow directly from the Bank of England in order to do this, he said.

As well as investing heavily in areas such as housing, broadband, transport, science and technology, Neil argued that all four UK governments should “use a slice of their borrowed funds” to boost business resilience and investment.

The former cabinet secretary suggested there is an “urgent need” for tax reform and said that “removing the unfair tax breaks that the wealthier sections of society benefit from should be a central feature of any economic recovery programme”.

Neil said reforms should include imposing a modern version of a capital charge, a form of wealth tax, to tackle the “unhealthy and unfair over-concentration of wealth in the hands of too few people”.

Pension tax reliefs should be reformed, he said, and the triple lock for state pensions should be protected.  

Neil said that national insurance contributions are “one of the most unfair taxes in the UK” and are “crying out for fundamental reform”, while he also pushed for council tax and business rates to be replaced by a land value tax.

Neil said: “Another bout of austerity would be even more disastrous than the 10 years of misery inflicted upon us by George Osborne, for which our economy and society is still paying a heavy price. Instead, we need a strategy for growing the economy as fast as humanly possible.

“Already the UK government has had to increase public spending by £124bn more than what was planned in Rishi Sunak’s March budget whilst tax revenues are falling off a cliff because of the lockdown.”

He added: “Not only would all these tax changes make our country fairer, they would also greatly assist our economic recovery.”

Separately, finance secretary Kate Forbes has joined with finance ministers from the Welsh and Northern Irish governments to urge Sunak to ease fiscal rules to allow devolved governments to borrow significantly more.

Sunak is expected to announce £3bn of new investment in green projects as part of a pledge to “kickstart eco-friendly economic recovery” and create jobs in low carbon industries.