Common Weal comments on Scottish Draft Budget

Common Weal comment on tax, housing, local government, Scottish National Investment Bank and public-sector pay

THE Common Weal think-tank has commented on the Scottish Government's draft budget for 2018/19.

Commenting on the changes to the income tax system, Craig Dalzell head of research stated:

"The changes to income tax are a move in the right direction, but we should not overestimate this change – those on low incomes will be very marginally better off, while those on middle and higher incomes will be very marginally worse off. The super-rich in particular are still not paying their fair share. It’s positive that the Scottish Government has now committed to using its tax powers in a way which is more reflective of Scotland’s income distribution and thus more progressive, and this should be the start of a journey to seriously reducing Scotland’s income inequality.

"However, Common Weal believes the emphasis must shift to tackling Scotland’s enormous wealth inequality problem, which is much larger and more pernicious than income inequality. Scotland remains a very good place to accrue unearned income on rising property and land values – this isn’t fair or progressive. The Scottish Government needs to reform local taxation and press for the devolution of powers over taxes such as capital gains and corporation tax."

“Common Weal believes the emphasis must shift to tackling Scotland’s enormous wealth inequality problem, which is much larger and more pernicious than income inequality. Scotland remains a very good place to accrue unearned income on rising property and land values – this isn’t fair or progressive.” Dr Craig Dalzell

Commenting on the capitalisation fund for the Scottish Government's new Scottish National Investment Bank, an idea heavily promoted by Common Weal, Craig Dalzell head of research stated:

"The news of the capitalisation of the Scottish National Investment Bank to the tune of £341 million between 2019 and 2021 is extremely welcome news and is similar to the capitalisation in Common Weal’s own proposals for the SNIB. Our proposals require this funding to be matched over a number years so the announcement of the setting up of financial transaction infrastructure to allow funding in the future is encouraging. We shall continue to work with the Scottish Government to ensure that capitalisation of the bank is carried forward beyond this initial two year period and look forward to helping the government set up the SNIB so that it operates for the public good."

Commenting on a new LBTT tax exemption for first-time housebuyers, head of policy Ben Wray said:

“The Scottish Government has replicated in full the UK Government’s recent Budget announcement on housing, by introducing a new tax exemption on first-time buyers taking 80% out of LBTT all together. This is a big mistake: not only has the OBR already shown that this policy will actually push up house prices, making the problem of lack of affordability even worse, but it takes away over £30m of vital revenues in coming years which could have went towards increasing investment in public rental housing. On the day we discover rent rises in Scotland are outstripping England, this is extremely disappointing.

“Tory market-led solutions to the housing crisis have continually failed – why the Finance Minister thinks they will succeed in Scotland is anyone’s guess.”

“This is a big mistake: not only has the OBR already shown that this policy will actually push up house prices, making the problem of lack of affordability even worse, but it takes away over £30m of vital revenues in coming years which could have went towards increasing investment in public rental housing.” Ben Wray

Commenting on the lifting of the public-sector pay cap, head of research Craig Dalzell stated:

"The lifting of the public sector pay cap is not before time and but with inflation now exceeding 3% it represents public sector workers on less than £30,000 still merely maintaining their real-terms income whereas those above £30,000 will experience a real-terms pay cut. This move does not even begin to reverse the damage caused by the years of the pay cap."

On Local Government funding, Common Weal head of policy Ben Wray stated:

“This is another rough budget for Local Government, which is entirely unnecessary, because there is a very simple solution to local authority funding. Scrap the Council Tax, which is a regressive tax that is based on property valuations that are 25 years out-of-date, and introduce a property tax levied on actual house prices and paid by the property owner. Not only will that be more fair, more progressive, and will substantially increase local authority budgets, but it will also have the added bonus of stabilising property and land values which is absolutely essential if we are going to tackle the inherent inequality of our housing system.”

Comments

Peter Dow's picture

Peter Dow

Thu, 12/14/2017 - 17:43

Mackay was wrong when he claimed that it was "not possible" to spend more and to tax less.

Oh it is possible, if the Scottish government can BORROW MORE, which it could do with a NEW DEAL fiscal framework instead of the BAD DEAL AUSTERITY FISCAL FRAMEWORK which the SNP government agreed with the UK Tory government in February 2016.

The fiscal framework has dropped off the Holyrood political agenda so that's why Mackay gets away with his ludicrous claim that it is "not possible" to both increase spending and cut taxes simultaneously.

Perhaps it is "not possible" for the SNP to think outside of the box or move from the corner into which they have painted themselves but it would be possible for an intelligent government to demand a new deal fiscal framework, whether in negotiations with the UK or by establishing a new Scottish currency and borrowing from the newly established Scottish central bank.

Peter Dow, Science and Politics http://scot.tk

Peter Dow's picture

Peter Dow

Thu, 12/14/2017 - 18:07

As for Common Weal's comments, it is disappointing not to find any mention of how the bad deal fiscal framework restricts the Scottish government's scope to borrow more to increase spending and cut taxes or both.

Neither Craig nor Ben seem to be researching or policy-making or thinking hard enough. Try harder Craig and Ben and please do confront the fiscal framework / borrowing issue.

Just because Craig is a "Dr" that doesn't mean that he isn't able to make a fool of himself by omitting mention of the fiscal framework and the Scottish government's minimal borrowing powers.

You, like me, can not have a Ph.D and say to Craig - "WRONG!".

Also Craig is wrong to welcome the pitiful few £100 million for the Scottish National Investment Bank "£341 million between 2019 and 2021" when 10 times as much would not be enough.

What would be enough to my mind would be if the Scottish government could borrow an additional £10,000 million every year interest-free from the central bank and was able to use some of that borrowing to capitalise the Scottish National Investment Bank.

The UK borrowed an average of 8% of GDP for 5 years to grow itself out of the 2008 global economic crisis, so there is no economic or fiscal reason why borrowing of 8% of GDP should not be available to grow the economy at any time.

For the Scottish economy of a GDP of £150 billion, 8% of GDP is £12 billion a year.

So compared to a potential Scottish borrowing of £12,000 million annually for Craig to welcome a tiny few £100 million from 2019 to 2021 is really very poor research.

Come to think of it shouldn't I Peter Dow be the head of research and policy making at Common Weal and shouldn't Craig and Ben take their lead from me? I think so.

Nelson

Thu, 01/04/2018 - 22:37

Commonweal is rather madly into investment banking, and want to bring back the Council rates. Odd.

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