Saturday, 28 November 2009

Indecent Proposal

This week saw Jim Murphy stand on Scotland’s doorstep, open up his suitcase and reveal Labour’s all new devolutionary vacuum cleaner – guaranteed to remove all signs of independence

The ‘suitcase’ held the implementation of the Calman proposals, or to be more accurate those parts of Calman that Labour had decided to adopt ... or was that adapt?

Airgun law, speed limits and drink driving limits formed part of this new ‘Labour saving’ contraption put before us Scots, however the real power behind the gadget was apparently provided by new tax and borrowing plans.

What Labour have proposed is a cut to the top level of Scottish based income tax by 10p with an equivalent cut in Scotland’s block grant. If the Scottish Government wants to make up the grant shortfall then they simply re-apply the 10p.

Yes, that’s right – Westminster simply refuse to collect 10p in tax from Scottish incomes and leave it up to the Scottish Government to do, which they of course will unless they want to effectively cut their own grant – and throat.

However this apparent economic stasis, where nothing actually changes, is not what it appears. For the cut to the block grant is only an estimate based on a forecast of what the 10p income tax might accrue – estimates (especially government estimates) are very often wrong.

The first problem with the proposal is that the Scottish Government has no control over tax bands; this means that Westminster could, if it wanted to, effectively cut the money available to Scotland by altering these bands – Scotland would face an immediate budget deficit through no fault of her own.

A much bigger disaster waiting to happen is if the UK or Scotland both enter an economic downturn such as we are experiencing now. In such situations people lose their jobs and the income tax take goes down. This would mean that the Scottish Government would find itself with a budget shortfall due to the tax take being less than forecast by Westminster.

In situations such as these nations will usually borrow to make up the shortfall, this is how Gordon Brown has kept the UK afloat in recent months. However Labour’s proposals for Scotland insist that any borrowing must be paid back by an immediate increase in taxes. Scottish workers would find themselves in an unbelievable situation of having to pay higher taxes than anyone in the UK just to stand still.

If such a mechanism were applied to the UK then all of us in the UK today would see an increase in our taxes by almost 200% - spelling economic armageddon.

Professor Andrew Hughes Hallet, writing with fellow economist Professor Drew Scott, has already described Labour’s proposal as "unworkable" and "illiterate".

They wrote: "In the UK as a whole, the crisis has caused a drop of 5-6 per cent in income levels and the government has had to borrow 11 per cent of national income to counter it. Translating that to Scottish conditions, since noncapital borrowing is ruled out, public spending on services (schools, health) would have to be cut by 11 per cent immediately."

Scotland would very easily find itself in a vicious cycle of decreasing tax revenue, falling spending and rising taxes – a treasury bail out might be the only way to ‘save’ Scotland in such a scenario.

Hughes Hallet adds: “One can only speculate on the motives for favouring a regime that comprises such a punitive measure.”

In the view of Newsnet Scotland these tax and borrowing proposals are nothing more than a ticking bomb designed to cause damage both to the Scottish economy and to the reputation of the Scottish Government.

These proposals show that Labour with regard to Scotland are not just inept, they are out of control and behaving like a trapped animal who can smell the end – the traditional handler in these situations is the media who [at least in Scotland] appear blind to Labour’s flailing arms.

Labour’s refusal to back minimum pricing for alcohol is another indication of the damage they are willing to inflict on this country as their detestation of the SNP continues to grow.

To use the vacuum cleaner metaphor again, Labour’s response to Scotland’s ever growing problem with alcohol appears to be - ‘Diesoon’.

The Labour tagline for the next General Election campaign surely has to be - ‘Labour – for suckers’.

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Jeanne Tomlin said...

Ed, I re-added my email addy to your mailing list since I didn't receive your most recent issue.

Marian said...

It appears that the majority of people of Scotland are fed up of being portrayed as work-shy and benefit dependent because of the actions of Labour politicians, and want to stand on their own economic two feet again. David Cameron could destroy Labour’s support in Scotland if he has the courage to devolve full fiscal autonomy to Scotland (Devolution max in the SNP Government's Referendum White Paper) and abolish the Barnett Formula but with Scotland remaining still part of the UK for that appears ,meantime to be what the vast majority of Scots would vote for. Labour's alternative of offering nothing but the Calman proposals is a dogs breakfast that will inflict enormous damage to the Scots economy if applied. Labour fear fiscal autonomy more than anything for it is only the benefits dependency that they have created and sustain that gains them votes in their municipal socialist heartlands where people vote Labour out of tribal loyalty.  Labour don’t appear to want the constituencies they represent to become economically successful for that would destroy their core vote. The voting system also needs to be changed for Labour may also have systematically gerrymandered the system of voting for Westminster and Holyrood in order to gain votes. So far the only party that has shown the vision needed to turnaround Scotland from Labour's dead hand is the SNP who have frozen and reduced local taxation which is already within their Holyrood control but they need full fiscal autonomy in order to do much more. All of this could change if David Cameron has the vision to put a commitment to Scotland gaining full fiscal autonomy and changing the voting system in Scotland into his manifesto for the next UK general election.