Meeting of the Parliament (Hybrid) 25 February 2021
The current session of the Parliament has seen the only substantial tax reform since devolution, with a new, five-band system of income tax that is closely modelled on what the Scottish Greens proposed at the previous election. It is worth recalling, as some other speakers have done, what the other parties proposed at that point. Labour and the Lib Dems wanted to raise income tax at the basic rate, increasing what low earners—those who can least afford it—would pay. The Conservatives, naturally, wanted big tax cuts for the richest, which would be funded by cuts to the public services that everybody else depends on.
The SNP, meanwhile, proposed only the most timid possible change by not copying the UK Government’s ideas. It also wanted a new, extra personal tax allowance for Scotland, which would have mostly benefited high-income households and would have given nothing at all to those who are in most need. I am very pleased that we not only blocked that damaging proposal but shifted the debate on tax completely and won through with the Green proposal to raise more revenue from those who can afford it while protecting everybody on low or middle incomes.
Has that change gone as far as it could or as far as we would like? It has not, and the SNP’s return to threshold increases that benefit high earners is not something that we support. However, in the middle of the pandemic, I have to accept that this is not the time for a further radical shake-up of the system. We will not vote for the rate resolution motion, but we will allow it to go through to prevent the budget as a whole from falling.
Let me say something about the future. As the Finance and Constitution Committee has agreed, we need to re-examine the persistent structural inequalities in our society, which have been exacerbated by the current crisis. As Bruce Crawford said in the stage 1 budget debate, that means redistribution. It means closing the wealth and income inequality gap in our society. If we are going to do that, yes, we need a national conversation, but we need a deep re-examination of the role of tax policy. We need that in Scotland and in the UK but, actually, all Governments are going to have to look creatively at the role of tax in the coming fiscal consolidation, instead of returning to the brutality of austerity.
That must mean dropping the silly, shallow rhetoric that we keep on hearing in claims about being the highest or lowest-taxed part of the UK. That kind of language is grounded in the idea of tax competition—the idea that each jurisdiction must compete to be the lowest-taxed area. Tax competition is one of the things that have led to the growth of inequality and the hoarding of wealth by the few. The implication of that kind of language is that tax is a bad thing in principle, and we are going to have to reject that.
The deep re-examination of tax policy that we need must mean looking again at income tax for high earners, and it must mean finally addressing the long-overdue reform of local taxation. It should also kill off the SNP’s absurd decision to back Tory free-market extremism with free ports—a system that is designed to remove economic activity from the tax base. Finally, it must mean raising revenues from the Covid profiteers and tackling the legal tax avoidance that takes place on such a huge scale by vastly profitable businesses and bringing corporate profits back into the scope of taxation after decades of tax cuts for those who need them the least.
We will make a case for radical proposals in the next session. For the time being, we will abstain on the rate resolution motion today.