Wednesday, 23 March 2016
Something very strange is happening in political discourse in Scotland – everyone’s talking about tax.
The Scotland Bill hasn’t even been passed, but it is having the desired effect of moving the debate from spending, to a debate that includes how we will raise the necessary resources. This is a debate that goes to the heart of the sort of Scotland we want to live in.
Yesterday was a busy day for the taxation debate.
I started the day at the IFS seminar on the recently agreed fiscal framework. The three David’s, Bell, Eiser and Phillips (is it only David’s who do numbers?), took us through the different models for adjusting the block grant the Scottish Government receives from the UK Government to reflect the new devolved tax and welfare powers.
Adjusting it in the first year is straightforward; the tricky bit is indexing future years. The UK government favours the Comparable Model (CM) which recognises that Scottish revenues per capita are lower than rUK, but the Scottish Government objected because it does not account for Scotland’s slower population growth, which is likely to be half that of rUK. The Scottish Government therefore favours the Indexed Per Capita (IPC) approach which increases in line with comparable UK spending and the rate of population growth in Scotland. The compromise reached is that the Comparable Model will be used, adjusted to achieve the outcome delivered by the IPC approach. This holds until a review in 2021-22.
The IFS argument is that while this meets the Smith Commission’s ‘no detriment’ principle, it fails the ‘taxpayer fairness’ principle. While I accept the numbers, I beg to disagree on their interpretation. As a trade union official, I think I understand very clearly what ‘no detriment’ means in an agreement. On the other hand, ‘taxpayer fairness’ is less clear. I would also argue that this is fair because Scotland does not have all the economic levers of central government. A point developed in Jim Cuthbert’s Reid Foundation paper.
The fiscal framework does leave some risks for the Scottish Government. The agreement only insulates Scotland from UK wide shocks, not those that affect Scotland to a greater extent than rUK. In addition, the Scottish Government got fewer borrowing powers than it hoped, both for resource and capital borrowing - some way short of a prudential regime.
Scottish Government Income Tax plans
Next up, we had the First Minister announcing the SNP plans for using the new tax powers. She said that no taxpayer will face a tax increase. However, they will reject the UK government's plan to cut the tax for middle earners by only increasing the 40p threshold by the CPI inflation rate, taking it from £43,000 to £43,387. They will slightly increase the basic personal allowance from the planned £12,500 to £12,750, avoiding this reserved power by the mechanism of a zero rate.
The FM said: "That increase will prevent higher rate taxpayers from receiving a real terms cut in their tax bills, but nor will they see their bills increase”. In addition, the SNP is now not proposing to increase the additional rate, for those earning £150,000 or more, from its current 45p level.
While not passing on Osborne’s 40p threshold tax cut is welcome, the rest of the package does nothing to tackle austerity, respond to the huge social challenges facing Scotland or make tax more progressive. Changes in tax allowances benefit all taxpayers.
I have covered this ground before and my colleague at the STUC, Stephen Boyd, puts it well in a Rattle blog post this week, he said:
“No-one seems prepared to explicitly acknowledge three inescapable truths: if the social and economic objectives of Scotland’s two main ostensibly social democratic parties are to be achieved then total tax revenues will need to increase as a proportion of GDP; this increase will need to be delivered through devolved tax powers (higher transfers aren’t in the offing) and responsibility for funding this increase will have to be shared by more than just higher and additional rate taxpayers.”
As 83% of Scottish taxpayers pay the basic rate, we simply have to get real if we are to meet current needs, let alone address civil society’s shopping list. Labour and the Liberal Democrats have started to recognise that. Others must follow if they are serious about tackling inequality and providing decent public services.
Scottish Labour’s local taxation plan
And finally, Scottish Labour announced that it wanted to scrap the Council Tax and replace it with a tax based on property values. Councils would also get discretionary powers to introduce new taxes including a Tourist tax and a Land Value Tax on vacant, economically inactive land. They would also devolve the surplus from the Crown Estate to local government.
In essence, this is similar to the plan recommended by the Burt Commission and closely matches UNISON’s policy position. Property values are easily understood and assessed, and provide a more progressive and certain local tax. We are always happy when political parties adopt our policies!
Labour has capped the increase at £3000 making it less progressive at the very top. I understand the desire to avoid £5000+ increases, but in the longer term the cap should be phased out. Equally, restricting increases to 3% is fine as a transitional measure, but once the new system has bedded in that should go. Otherwise it means councils have less control over setting the rate. Local democracy is the only proper constraint on a local tax.
After years of inaction we have local taxation proposals coming from all directions. Scottish Labour’s plan is a proper reform of local taxation, even with a bit of political expediency mixed in.
Whatever you think of the various proposals, we are at least starting to have a debate about tax in Scotland. It isn’t always comfortable, but perhaps that’s the point.
Tuesday, 22 March 2016
Thursday, 17 March 2016
Wednesday, 16 March 2016
Monday, 14 March 2016
Governments must do more to reduce energy bills by improving the energy efficiency of new and existing buildings.
MPs on the Westminster Energy and Climate Change Committee report that the energy efficiency supply chain has been affected by inconsistent and unpredictable policy signals, as various schemes have been chopped and changed. Last year the UK Government announced an end to the Green Deal and reneged on a long-standing commitment to require all new homes to be zero carbon from 2016. The zero carbon homes policy would have saved future homeowners money on their energy bills. They recommend that it should either be reinstated or the Government should set out a similar policy that will ensure that new homes generate no net carbon emissions and are inexpensive to heat and light.
In the Agenda pages of The Herald, Sam Gardner from WWF makes the case that energy efficiency should be an infrastructure priority in Scotland. He uses the example of a new investment model in the Netherlands, known as Energiesprong. This scheme is retrofitting entire streets in a matter of days to create net-zero emissions (energy-neutral) homes and regenerating entire neighbourhoods. He says: "There is much that we could learn from the scale and ambition of this approach as the Scottish Government turns its commitment to a national energy efficiency programme into a programme of works. If we are to cut the emissions from our housing sector and tackle fuel poverty all homes must be supported to reach at least an Energy Performance Certificate of C by 2025."
He also argues that a Warm Homes Act would bring clean and affordable warmth to households and businesses, by supporting the growth of district heating and renewable heat, while improving the energy efficiency of our buildings. It would reduce heat demand, cut fuel bills and create jobs in a new district heating industry. He says: "By making the improvement of energy efficiency a long-term national infrastructure project, no one in Scotland would have to live in a hard to heat, draughty home by 2025. Public investment in energy efficiency could create up to 9,000 new jobs around every part of Scotland, and ensure 1.25million homes in Scotland will be made warm, affordable to heat, and lower carbon."
District heating is unlikely to attract enough investment without a level playing field. In an evidence session to the Westminster Energy and Climate Change Select Committee ADE’s director Dr Tim Rotheray welcomed the £300m of government support, but said the government needs to develop a “regulatory investment framework” to support future growth. He said district heating needs a framework comparable to that which electricity and gas already have so “institutional investors” can compare options.
Rob Raine from the University of Sheffield argues that we need to do more to prevent valuable energy being lost to the environment as heat. He points out that it's not just draughty buildings – power stations lose a vast amount of heat through their cooling towers or dumped into waterways, equivalent in the UK to a third of final energy use, while UK industry wastes enough heat to warm more than two million households. Storing this heat can even help us manage renewable energy – at lower cost than batteries.
Scottish Labour has highlighted the Scottish Government's Budget cut on spending for fuel poverty measures by £15 million – a 13% cut to the current budget. They say this is short sighted and leaves 200,000 'out in the cold'. Communities spokesperson Ken Macintosh MSP said:
“Labour will deliver a ground-breaking Scottish Warm Homes Act. This will deliver the changes we need to see in planning and building regulations to tackle fuel poverty. The SNP may miss the 2016 target, but Scotland must not give up on ending fuel poverty."
Action on energy efficiency is a clear win-win. It helps individuals in fuel poverty, boosts the economy and helps tackle climate change. It's time for action.
Cross posted from Utilities Scotland.
Friday, 11 March 2016
Monday, 7 March 2016
We have plenty of land in Scotland, and plenty of sea, and plenty of skilled people, scientists and innovators. There’s no reason why we shouldn’t have plenty of good food for everyone.
That is the key message from the launch of the Scottish Food Coalition’s report: ‘Plenty: Food, Farming and Health in a New Scotland’ at UNISON House today. The coalition brings together a wide range of organisations that have an interest in developing a more progressive food policy in Scotland.
UNISON Scotland represents a wide range of workers in the food industry. From those who inspect food production at source and regulate the safety of food operations – to those who cook and serve food, particularly in our schools and hospitals. We also have a wider concern to ensure that food policy contributes to a more equal society that protects our environment. Our Food for Good Charter represents the approach we would like to see food policy take in future.
Our members working with food face significant pressures. From light touch regulation of meat inspection at Food Standards Scotland, to cuts in environmental health departments, food safety is being compromised. Catering staff are also trying to produce nutritious meals on ever smaller budgets. In our last member survey, most workers described the negative impact of spending cuts on the quality and quantity of the food they provided.
Our current food system is characterised by inequalities and exploitation. People face the double burden of poverty and ill health, whilst our natural resources, animals, and workforce are exploited. Today’s report covers four broad areas:
- The food system should value people. By taking action to prevent food poverty through the benefit system, to ensuring all employers pay at least the Scottish Living Wage. Equally important is creating democratic structures to facilitate public engagement that challenges the power of corporations.
- We need sustainable food production that ends the negative environment impacts on the food system and our climate. Championing CAP reform and properly enforcing food and environmental legislation by taking a whole system approach to the impact of food on climate change.
- The Scottish diet wins few accolades and we can do much more to improve our food culture. Food purchased with public money should be nutritionally balanced and sustainably sourced - joining up school catering with the curriculum and the community. In the private sector, caterers should be required to report on nutritional composition and pay a levy on the difference between their sales and national nutritional targets.
- We need to cut the length of food supply chains, creating a better connection to our food. We should strengthen planning to support diversity in town centres, including farmers markets and safeguard land for growing food. Encouraging community land ownership and community-connected agriculture, including allotments.
To drive these changes forward, the report proposes primary legislation that enshrines the Right to Food in legislation. It should include the creation of a statutory Food Commission that provides oversight and scrutiny of our food system – reporting directly to parliament.
For too long food policy has been addressed in silos, with the big commercial producers having the dominant say. This report is a first attempt at building a broader consensus that joins up the strands of policy into a coherent whole.
Wednesday, 2 March 2016
The First Minister has made the welcome announcement that the Council Tax freeze will end next year and has published the outline of some reforms to local taxation. The much needed detail is due in further consultation papers that will be published after the election.
The headline is some stretching of the higher bands. Bands A-D are unchanged and the others will increase as follows: band E - £105; band F - £207; band G - £335; band H - £517.
This does make the Council Tax more progressive, but it is hardly 'radical'. Stretching the bands was proposed in 2007 and rejected at that time by the SNP. Eight years later, at a cost of £3.15bn to local services, we have come full circle. Importantly, there is no indication that there will be a revaluation of properties, which means properties are allocated to bands based on 1991 property prices. Like a proper reform of the Council Tax, this was presumably put in the 'too difficult' file. Labour made the same mistake in response to the Burt Report in 2007.
There are some welcome changes to council tax benefit to provide additional support to families by increasing the child allowance within the council tax reduction scheme by 25%. Extending the council tax reduction scheme to exempt 54,000 households on low net incomes, but who live in higher property bands, appears sensible as well. No doubt those who understand the interaction with the benefits system will have views on these changes. Ending second home discounts and the development tax is also good news.
It is very welcome that the regressive council tax freeze will come to an end in 2017. However, councils are to be told that any increase must not exceed 3%. We also have a nice infographic telling us that that the new system means £100m for schools. Does this mean further ring fencing or ministerial direction? This goes to the root of the problematic relationship between local and central government in Scotland. It is for democratically elected local councils to decide what the council tax should be and what it should be spent on. Not big brother government in Edinburgh.
There is an outline proposal that councils could have a share of income tax revenues assigned to them. I suspect this is the First Minister's way of gently letting her supporters down over dumping the unworkable and unfair local income tax plan. However, I am frankly struggling to see how assigning revenues makes local taxation more progressive as the government claims.
The problem with assigned revenues is that they are largely cosmetic. UNISON opposed the Smith Commission plan to assign 10% of VAT revenues to the Scottish Government for the same reason.
It is not clear to me from today's announcement, how these assigned revenues will be adjusted to reflect economic growth. In any case, as the Scottish Government rightly argued in the fiscal framework negotiations in relation to their powers, councils have even fewer levers to influence economic growth. In addition, is the Scottish Government proposing to use income tax generated by payroll where taxpayers work, or where income tax payers reside. An important issue in a city like Glasgow with leafy suburbs. And we have to ask how an equalisation scheme would work. This chart highlights the problem.
The short answer appears to be that they haven't worked all this out, but needed to say something before the election. After eight years of inaction, we might have expected a bit more.
Of course all of this doesn't happen until 2017. The additional revenues won't save a local service or a job in the coming year. John Swinney made great play of council reserves over the weekend. His claims are exaggerated because the way council reserves are accounted for doesn't mean the cash is sitting in the bank ready to be spent. However, if I can pinch his own hyperbole, its not 'utterly exaggerated' - it is something we have highlighted before. Mind you, council leaders are entitled to a wry smile given John Swinney's own under spends with the Scottish Government's budget!
The promise of additional revenues next year may well encourage some councils to use reserves to plug more of the gaps in their budget. Others may have an eye to George Osborne's recent statements about public expenditure, as he digs a bigger hole for the UK economy. The problem remains that the Scottish Government has consistently shunted austerity onto councils. I have covered this before, but here is another chart that starkly makes the point.
The best we can say about today's announcement is that we are to be spared another pre-election council tax freeze bidding war, as in 2011. For that we should be grateful. However, after eight years of stop gap measures, we might have hoped for a proper reform of local taxation. Sadly, this isn't it.