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.”