Labour’s ‘Basket of Taxes’ Piling Up

A piece I did for Newsnet Scotland:

by Alex Porter

Labour’s Michael McMahon has announced Labour’s ‘firm commitment’ to a new property based tax.

In a speech to Labour’s Scottish conference the Shadow Cabinet Secretary for Local Government said: “Let me also be clear, though, that Scottish Labour remains committed to the principle of a property based tax.” (1)

Labour have seemed to be caught up in a policy confusion after the SNP Government’s announcement that it would freeze the unpopular council tax for another two years. Initially, Iain Gray seemed to be pushing for a council tax rise in order to mitigate the budgetary effects of a cut to the Scottish grant from Westminster. However when an opinion poll emerged demonstrating that Scottish voters were hostile to the idea of such a rise Gray, Labour’s Holyrood group leader, seemed to endorse the idea of a freeze.

Labour’s policy is unclear and Mr. McMahon’s announcement adds to the confusion. As the Holyrood election nears the Scottish electorate will wonder if Labour is proposing an increase in the council tax and introduce another property tax or replace one with the other or neither.

The SNP argue that a new tax would impact on 750,000 Scottish households who would move up a band after an expensive revaluation process.

Labour argue that taxes need to increase to compensate for the impending cut in the Scottish Government’s grant to minimise the impact on services especially in local government.

The problem with that analysis is that an increase in taxes will mean the consumer has less money to spend. That will cause jobs to be lost in the retail sector meaning an increase in social security payments and a drop in VAT income for Westminster, especially at a time when the rate of VAT is due to rise to 20% from January 4 next year.

As the capaign to enter Bute House heats up both the SNP and their arch rival Labour will have to show how they can protect government services in the face of Westminster cuts without damaging jobs and the economy.

This problem is fueling growing demands for economic independence to shelter Scotland, whose national accounts shows a surplus, from having to unnecessarily endure the economic instability and volatility that austerity cuts will bring.

(1) http://www.scottishlabour.org.uk/speech-to-scottish-conference-by-michael-mcmahon