{"id":2511,"date":"2016-02-09T12:17:29","date_gmt":"2016-02-09T12:17:29","guid":{"rendered":"https:\/\/sceptical.scot\/staging\/?p=2511"},"modified":"2025-12-27T13:30:06","modified_gmt":"2025-12-27T13:30:06","slug":"swinney-frets-or-frits-about-srit","status":"publish","type":"post","link":"https:\/\/sceptical.scot\/staging\/2016\/02\/swinney-frets-or-frits-about-srit\/","title":{"rendered":"Swinney frets – or frits – about SRIT"},"content":{"rendered":"\n

So it won\u2019t be a penny for education, or anything else.<\/strong><\/p>\n\n\n\n

Still, there\u2019s no denying that the last week has been educational.  Now we know that the Scottish Government prefers passing on Westminster tax cuts to protecting public services in Scotland. You didn\u2019t know that? Read on.<\/p>\n\n\n\n

The first critical piece of context here is that, from its less than usually sure footed reaction, the SNP does not appear to have been expecting Labour\u2019s announcement. The party has lately been responding to Labour criticism of planned spending cuts by asking with breezy confidence how its opponent would pay.  It doesn\u2019t seem to have anticipated that Labour would come up with this<\/i><\/a> answer.<\/p>\n\n\n\n

While some government supporters were quick to express joy at a \u201ckamikaze\u201d decision, the SNP leadership and backbenchers at Holyrood didn\u2019t sound the way they do when truly delighted with the opposition. Labour\u2019s decision is unlikely to do the SNP any electoral harm, but then it never was going to be short of votes in May.<\/p>\n\n\n\n

The governing party\u2019s longer-term need is to retain command of the narrative about Scotland and itself.   As council after council turns abstract numbers into actual service cuts, increased charges and job losses over the year ahead, having Labour lined up on the side of using tax to protect public spending and the SNP on the other side (with \u2026  you know who) is not so helpful to the story the SNP needs to tell.  From that perspective, a message for its lefter-leaning supporters that the party could not reasonably be asked to take all the political risk of being in the vanguard of proposing a tax rise would have worked much better.<\/p>\n\n\n\n

To get round this, the SNP leadership has been hurriedly trying on various different social-justice themed lines for size. The leadership\u2019s description of the Scottish Rate of Income Tax (SRIT) as \u201cregressive\u201d had worked reasonably well over the past few months, while it wasn\u2019t too much in the headlines: even the STUC had been content to say so to the Parliament\u2019s Finance Committee<\/a>. However, by the end of last week voices as diverse as Torsten Bell at the Resolution Foundation<\/a>, Ben Wray at Common Space<\/a> and, from the academic world, Davids Bell and Eisner<\/a> (\u201carguments that an increase in the SRIT is regressive are wrong\u201d), had all unambiguously deemed the use of SRIT progressive, if only modestly so.  An earlier quote dug up from John Swinney didn\u2019t help either.<\/p>\n\n\n\n

Osborne’s invisible hand<\/h2>\n\n\n\n

So Ministers have largely retreated to more solid political ground, simply decrying any tax effect on people on incomes over Labour\u2019s \u00a320,000 cut off for compensation. But there\u2019s some awkward maths lurking there, which has barely surfaced yet. When John Swinney says he is \u201cdefending\u201d the take-home pay of low and middle earners, he is actually passing on a Westminster tax cut<\/i>, due to a \u00a3400 increase next year in the tax-free threshold and a slight further expansion of the basic rate band.  This means that if the Scottish Government does nothing, everyone on the basic rate (that is, up to \u00a343,000, well above the median) will pay \u00a380 a year less tax. Those paying a marginal rate of 40% will do even better, seeing a flat gain of \u00a3202.  For those taxed at 45%, the change is worth most, at \u00a3233.<\/p>\n\n\n\n

This means that, even without Labour\u2019s compensation scheme, compared to the current year anyone earning up to \u00a319,000 would still see their tax bill fall<\/i> with a 1p increase in the SRIT.  They would be more than compensated by the threshold change. Someone on \u00a325,000 would pay \u00a35 more a month<\/i> than now: around median full-time earnings (about \u00a327,000), a person would pay \u00a37.50 more a month.  To be paying at least \u00a35 a week more than now, you would have to be earning over \u00a355,000. Those numbers exclude the tax cut foregone, but still put into perspective some of the more florid rhetoric about protecting the less well-paid.  These calculations moreover ignore a point made by Bell and Eisner, which is that many low earners<\/i> live in relatively well-off two-earner households<\/i>. Indeed, they note that Labour\u2019s compensation scheme, as currently proposed, could benefit many who are quite comfortably off.<\/p>\n\n\n\n

The government has found some traction in criticising Labour\u2019s off-set proposals.  Yet, as the numbers above show, an administration which was strongly motivated to protect public services, but unconvinced about the mechanics of Labour\u2019s specific proposals, could easily argue that the impact of increasing SRIT this year will be more than off-set for the lowest paid, and substantially mitigated for many more,  by the threshold increases.  If it still wished, it might exercise its imagination and look for alternative ways of directing help at lower income households, such as tweaking the (fully devolved) Council Tax Reduction Scheme.   That is not the government we appear to have, however.<\/p>\n\n\n\n

The First Minister also had a go at portraying the Conservatives as the party of backdoor tax rises, due to their questioning of universal benefits. But that\u2019s not only tortuous but risky, as SNP-led councils, such as Dundee, contemplate raising charges significantly for services<\/a> as disparate as parking and non-residential social care. The government then tried changing the subject to the implementation of the living wage, overlooking that in local government, and bodies funded by local government, many are likely to see any benefit from that wiped out by fewer jobs or shorter hours.<\/p>\n\n\n\n

Service cuts<\/h2>\n\n\n\n

In short, the main tactic has been to find any angle at all which looks at the earnings side of the equation.  Because as long as that\u2019s the focus of attention, conversation is shut out on what might be done with \u00a3400m or more of avoided cuts. The ministerial lines on that were simply hopeless, with John Swinney calling large numbers of avoidable public sector job losses \u201cregrettable\u201d.<\/a> There were challenges too for the party on the ground.  Dundee City Council\u2019s SNP leadership welcomed the decision<\/a> to leave SRIT in the box, even as it peered into a \u00a323m \u201cblack hole\u201d (The Courier<\/a>).  The leader of the SNP Group on Glasgow City Council condemned the possibility that the council might have to tear up a three year funding deal for local charities as a potential \u201cdisaster\u201d (The Herald<\/a>).    There\u2019s much more of this to come and, while sending the blame back south (in the words of a letter writer to The National<\/a>, \u201cA Penny for Trident\u201d) will play well with some, it\u2019ll be harder to make work locally when cuts become reality, as long as the opposition continues to highlight the potential for an alternative.<\/p>\n\n\n\n

Wray\u2019s careful analysis on Common Space challenged the scale of Labour\u2019s anti-cuts rhetoric by arguing that \u00a3400m net proceeds would be too little to fully protect public spending, an argument also put by Torsten Bell. Wray estimated that would cost nearer \u00a3650m.  But that\u2019s hardly a position the government can comfortably take, not least as \u00a3400m is still more than the cost of maintaining the entire prison system: it would unarguably make a big difference.<\/p>\n\n\n\n

Notably, Labour does not appear to have been able to look to anti-poverty campaigners for support.  Strictly speaking, this is not news. When the Finance Committee held an inquiry into the use of these powers last summer, they received no evidence at all from organisations who are otherwise generally very concerned about the impact of tax, benefits and public spending policy on the poor. Not one third sector organisation argued then that using these powers might be better than foregoing the money they would raise.  It is new to observe however that even as the scale and nature of council budget cuts has become clearer, not one such organisation (as far as I can tell) has spoken out this week in favour of using progressive taxation to protect public services: only some of the unions<\/a> have so far offered support. I find that astonishing: it does not leave me feeling comfortable about the state of Scottish civic life.<\/p>\n\n\n\n

The Green Party too played a baffling hand, with Patrick Harvie MSP<\/a> refusing to support an increase in SRIT while still arguing that we urgently needed to raise the money. His alternative proposal appeared to rest heavily on a wholesale reorganisation of council tax bands in the next 6 weeks or so, by comparison with which implementing Labour\u2019s compensation scheme would be a doddle.<\/p>\n\n\n\n

Frit about SRIT<\/h2>\n\n\n\n

This reluctance to argue for SRIT now as an alternative to cuts carries a longer term risk to the nature of public debate about tax. As the week went on, it was noticeable how many government supporters on-line came out as income tax sceptics, identifying it principally not as a civilised and equitable part of the toolkit for financing public services, but a discouragement to and penalty on hard working types, including those who are not particularly  low paid.  As one put it to me, he was really a \u201csoft Tory\u201d, though he took polite exception to my saying that his arguments reminded me of the Thatcherite rhetoric with which I grew up, prioritising keeping tax down over investing in public services even as my school crumbled.  Another lively and interesting new pro-independence voice, and critical friend to the SNP, tweeted that redistribution is a \u201cflowery word that allows politicians to take more of your money and spend it\u201d. There weren\u2019t many echoes of Keir Hardie\u2019s advocacy of graduated income tax as progressive in principle, or the Atlee government\u2019s Keynsian economics, in all this.<\/p>\n\n\n\n

So, it\u2019s all been very educational.  However it\u2019s now the SNP who need to learn fast. As negotiations over the fiscal framework run on, it becomes increasingly possible that SRIT will be the only game in town for serious revenue raising not just in the coming year but the one after. So even if the Scottish Government can identify a sub-group from whom it feels confident asking for substantially more, it could be another two years before it is able to do that.<\/p>\n\n\n\n

With the Liberal Democrats and Labour declared, the political risk (and it is a real one) of proposing a tax rise has been removed for the governing party. Various people have described SRIT as a trap for the SNP: damned if they do and damned if they don\u2019t. The repositioning of Labour and the Liberal Democrats makes that far less true. Of course most people don\u2019t particularly want to pay more tax, but it is impossible to imagine a safer context politically in which the SNP could propose using these powers, particularly once the cushioning effect of the threshold rise at lower incomes is thrown in. Indeed, this may be the easiest opportunity there will ever be to challenge the assumption that a race to the bottom on income tax is as inevitable as gravity.  The SNP might lose a few votes, but it\u2019s  implausible that it would be on a scale which would cause them real damage.<\/p>\n\n\n\n

Otherwise, the dossier of painful local cuts will fill up. Even if the government finds a way to repair some of this year\u2019s damage to council budgets in twelve months\u2019 time, ahead of the local elections, the narrative in which Scotland distinguishes itself by being more Nordic than Anglo-American in its instincts will have taken a knock.  I\u2019ll confess to always having been sceptical about that one, a position I now turn out to share with a surprisingly large number of government supporters. But as I watch councils being pushed \u2013 avoidably, I repeat \u2013 into advancing the Cameron\/Osborne smaller  state agenda, ostensibly so that those on median earnings need not pay \u00a37.50 a month more in tax than they do now, nothing would make me happier than Nicola Sturgeon proving me wrong. Whatever we learnt this week, there\u2019s still time for Sturgeon and Swinney to do some revision.<\/p>\n\n\n\n

Photo: courtesy of Scottish Government via Flickr Creative Commons <\/a><\/em><\/p>\n\n\n\n

<\/h2>\n\n\n\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The row over a 1p rise in income tax or SRIT has for once put the SNP and Scottish Government on the back foot. And that’s before increases in tax allowances kick in. This leaves local services painfully exposed – with worse to come. Nicola Sturgeon and John Swinney need to revise their sums.<\/p>\n","protected":false},"author":7,"featured_media":2532,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[125],"tags":[46,39,37,36,47],"class_list":["post-2511","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-politics","tag-council-tax-reform","tag-scotland-act","tag-scottish-education","tag-scottish-government","tag-srit"],"_links":{"self":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/2511","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/comments?post=2511"}],"version-history":[{"count":1,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/2511\/revisions"}],"predecessor-version":[{"id":18124,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/2511\/revisions\/18124"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media\/2532"}],"wp:attachment":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media?parent=2511"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/categories?post=2511"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/tags?post=2511"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}