Scottish Labour seeks to end post-referendum slump with income tax plan

Feb 2, 2016

Call for a one per cent rise across all income bands, with a payment offsetting losses for low-paid workers

Jeff J Mitchell/Getty Images

Scottish Labour leader Kezia Dugdale with party chief Jeremy Corbyn

Kezia Dugdale, the Scottish Labour leader, has proposed a one per cent income tax increase for all workers in Scotland as the party seeks to end a post-referendum malaise ahead of critical Holyrood elections in May.

What is the proposal?

Specifically, Scottish Labour is planning a tax rate that would be one penny per pound more than the 20p, 40p and 45p rates that apply on annual pay of more than £10,600, £42,375 and £150,000 respectively. It is also proposing an annual payment of £100 a year to those earning less than £20,000 a year to prevent low-paid workers losing out.

Can Scotland set different tax rates?

Yes, it can. From April, new powers under the Scotland Act 2012 will reduce the three UK tax bands by 10p in Scotland, with the government north of the border being able to set whatever rate it sees fit to replace this. The catch is it must apply the same rate equally across all tax bands, so if it set the replacement rate at 11p to increase the overall levy by 1p (as Labour proposes), this applies to everyone.

In his budget, Scottish National Party finance minister John Swinney has proposed setting the replacement rate at 10p, meaning income tax would stay in line with the rest of the UK. He says the party will look to change rates to a "more progressive" regime once more extensive powers to vary tax in the new Scotland Bill, including adjusting single bands or introducing new bands, are passed.

Is the power to vary tax new?

No. Under the provisions of the original devolution settlement, passed in the Scotland Act 1998, Holyrood had recourse to the Scottish Variable Rate, which gave it the power to increase or decrease the income tax rate across all income bands by 3p. The power was never used and lapsed in 2007.

What does Labour reckon the rate will raise?

It estimates proceeds of around £500m once the payments for lower-paid workers are taken into account, which, the BBC says, would be used to "avoid cuts to education and other local services". It says lower-paid workers would initially lose £20 a year and therefore gain overall, while someone on £30,000 a year would pay an extra £200 a year.

The SNP disputes the figures, citing HMRC administration costs that would eat into the amount raised. The Scottish Lib Dems are also proposing a 1p increase.

Will it help Scottish Labour?

It's unlikely to turn around a huge poll lead for the SNP in Holyrood as it heads for an unprecedented third term of outright governance. In fact, The Independent cites opinion polls showing a narrowed four per cent lead for Labour over a more credible Scottish Conservative party, which could even see the Tories, once toxic in Scotland, go second and take over as the official opposition after May.

BP cuts 'prove Scotland should not be independent'

13 January

The loss of hundreds of BP jobs in the North Sea together with the plummeting price of oil proves Scotland should not be independent, said MSP Alex Johnstone today.

The Conservative MSP spoke out following the announcement by BP that it planned to shed about 600 workers from its operations in Scotland, part of a new set of cutbacks that will see 4,000 staff go globally.

"The SNP said the oil industry would make the whole of Scotland financially secure," he said, referring to claims made prior to the 2014 independence referendum.

"This shows how much of a mess Scotland would be in financially if we'd sleepwalked our way into independence. This will have an ongoing effect on our local communities and Scotland’s economy."

Johnstone's comments come days after Dennis Robertson, SNP MSP for Aberdeenshire West, was criticised for describing the Scottish oil industry as "booming".

Speaking during a Holyrood debate, Robertson said: "There is no crisis. We have just actually extracted more oil than ever before in the North Sea."

The North Sea oil industry, the proposed backbone of an independent Scotland, has been hit hard by falling prices.

A barrel price of $110 was used to justify post-independence spending plans, but the international benchmark is currently nearing a 12-year low at $31.50 a barrel. 

The decline "has made a mockery of [the SNP's] pre-referendum fiscal forecasts," says the Financial Times.

Responding to the job losses, First Minister Nicola Sturgeon said a taskforce would focus on doing "everything we practically can do to help both individuals who are facing the prospect of redundancy, but also helping the industry in general as it seeks to cope with what are very difficult market conditions".

Cameron and Sturgeon set for showdown over devolution framework

14 December

David Cameron and Nicola Sturgeon will discuss the financial framework that will underpin Holyrood's new devolved tax and welfare powers in talks described by the Scottish First Minister as "crucial".

Cameron agreed in September 2014 to hand substantial new powers to Scotland in the event of a 'no' vote in last year's independence referendum.

After Scotland voted to remain in the UK, the Smith Commission was set up to decide the extent of the new powers and the future funding for Scotland, which has been based for decades on the Barnett formula.

A deal for the new powers and future funding was supposed to be agreed by autumn, reports the BBC, but talks now look to be continuing into the new year.

The Prime Minister said the deal needs to be fair not just for Scotland but for the whole of the UK, following the Smith Commission's recommendations.

"What I am absolutely clear on is that we must abide by the Smith principles - that is the promise we have made to the people of Scotland," he said.

"This means that the fiscal framework must be fair to Scotland, fair to the rest of the UK, and built to last."

Sturgeon agreed but warned of the consequences should the talks fail. "We need a fair deal for both governments – no more, no less," she said.

"These considerations are critical. If the financial framework accompanying the new powers is wrong, Scotland could be worse off by hundreds of millions of pounds a year."

The leader of the SNP also said she would be using the meeting to set out Scotland's clear opposition to the government's trade union bill in Scotland, according to The Guardian.

The bill, which will go in front of MPs in the House of Commons for its second reading early next year, seeks to limit the powers of unions to call strike action.

"There is clear opposition across Scottish society and across the Scottish parliament to this damaging piece of legislation," she said.

She added: "The number of days lost to strike action have been reduced in Scotland by 84 per cent through partnership working, not by slapping sanctions on workers.

"To impose this bill on Scotland would be an unacceptable step and I will make that clear to the Prime Minister."

Defending the UK from terrorism will also be on the agenda, with Cameron stating that co-operation between devolved governments and the UK government is essential.

"We are looking at a number of issues, including the use of intelligence information, and we also need to ensure co-operation at a legislative level as well," he said.

Nicola Sturgeon issues appeal to referendum No voters

15 October

Scotland's First Minister Nicola Sturgeon is due to issue an appeal to referendum No voters today in a bid to secure a historic third term in government for the SNP.

She will open the party's biggest ever annual conference with an all-inclusive, "one nation-style" speech, reports the Scotsman.

"Everyone, from the strongest supporter of independence to the stoutest advocate of the Union, has the right to know we will continue to govern well with the powers we have at any given time," Sturgeon is expected to say.

Around 3,500 delegates will gather in Aberdeen for the conference, ahead of the Scottish Parliament election in May of next year.

"I don't just want to win the votes of independence supporters. I want to inspire people who voted No last year to vote SNP too," Sturgeon will say.

"I want them to vote SNP because they know we are the best party, with the best ideas and the best people to lead Scotland forward."

The first minister is expected to acknowledge the "significant interest" in what the SNP manifesto will say about independence, but she looks unlikely to reveal the answer.

The fortunes of the SNP have "flourished" since the referendum defeat last year, says the Scotsman. Within eight months of the vote, party membership officially passed 100,000, a four-fold increase, and the party celebrated a dramatic Westminster election victory with 56 out of 59 MPs winning seats in Scotland.

Sturgeon's speech comes as ministers prepare to introduce the reformulated plans for English votes for English laws (Evel) in the House of Commons next week. Tory sources told the Times that the timing of the announcement was intended as a "deliberate provocation" of the SNP at the start of its annual conference.

'Holyrood is here to stay' says David Cameron 

18 September

On the first anniversary of the Scottish independence referendum, David Cameron has dismissed claims he reneged on his promise to the Scottish people.

The Prime Minister spoke of the unprecedented turnout in the referendum and said he would make sure that Scottish devolution couldn't be undone by Westminster legislation.

"One year ago Scotland's majority spoke," he said. "More Scots voted to keep our kingdom united than have ever voted for any party in any election in Scottish history.

"[We] listened. So let me be crystal clear: Scottish devolution is woven into the very fabric of our United Kingdom. We will table an amendment to the Scotland bill so there is absolutely no doubt: Holyrood is here to stay."

The first anniversary of the vote will be marked by a speech by First Minister Nicola Sturgeon. She is expected to tell the Prime Minister that the future of the UK relies on him listening to the 56 SNP Westminster MPs that were elected in the May General Election.

"Right now, you are living on borrowed time," Sturgeon is expected to say. "If you continue to ignore Scotland's voice, if you continue to disrespect the choice that people across this country made in May, more and more people will conclude that Westminster simply can't deliver for Scotland."

Cameron dismissed that challenge, claiming: "Some may want to obsess about separation. But I am focused on delivering devolution so that the debate can move on from what powers the Scottish Parliament should have, to how they are used to better the lives of the people of Scotland.

"Today, on the anniversary of that historic vote, let me repeat: We are delivering a new, accountable and permanent Scottish Parliament. Holyrood will be one of the most powerful devolved parliament."

The anniversary comes in a week when Cameron was visibly irked by an SNP question during Prime Minister's Questions, which alleged he had broken his vow to the Scottish people. 

Former First Minister Alex Salmond also told The Independent this week that he thought another vote on independence would result in a ‘yes’ from the Scottish electorate.

He explained: "I think we'd win. With a campaign of course – the reason I'd do that is that we started at 28 per cent during the [last] campaign and finished at 45 per cent. I think if you start at 50 per cent, you're likely to end up substantially better than that."

In last year's referendum, 55 per cent of voters backed remaining in the UK, with 45 per cent in favour of independence.

Referendum anniversary: has Scotland got what it was promised?

17 September

Tomorrow marks the first anniversary of the Scottish independence referendum, when the majority of Scots voted to remain a part of the UK. One year on from the historic vote, there is continued debate about whether David Cameron has delivered on his promise of further devolution.

'The Vow' and the Smith report

The Prime Minister, Ed Miliband and Nick Clegg made a vow during the final days of the campaign pledging "permanent an extensive" new powers if the people of Scotland rejected independence. When they did - with a vote of 55 per cent - the government established the cross-party Smith Commission to examine which powers could be further devolved to Holyrood.

The commission's report recommended that the Scottish Parliament be given new powers over tax and welfare, including control over income tax rates and a number of benefits, as well as increased borrowing powers and management of Crown Estate assets.

However, many in Scotland felt the measures did not go far enough. First Minister Nicola Sturgeon said the she was disappointed in the proposals offered and described the package as "continued Westminster rule". Lord McConnell, a Labour peer and former Scottish first minister, was equally critical, describing the entire commission as a "shambles".

The Scotland Bill

Earlier this year, the Government introduced the Scotland Bill, which it said would enshrine the Smith recommendations in law. The bill is still working its way through parliament but has been widely criticised by Scottish politicians. Although the SNP's representatives on the Smith Commission signed off on the final agreement, they made it clear they were unhappy with the limited powers.

Deputy First Minister John Swinney has said the Bill falls short on issues such as social security, employment programmes and the Crown estate and threatened to block it unless an agreement is reached linking Scotland's budget to economic performance, the BBC reports. He also criticised the legislation for allowing UK ministers to veto proposed changes to universal credit and energy schemes. 

Has Westminster delivered?

Speaking to the Scottish Parliament yesterday, Swinney said that the Smith report fell short of the promises of 'The Vow' and the Scotland Bill did not currently represent the recommendations made by the commission, the BBC reports.

During this week's Prime Minister's Questions, SNP Westminster leader Angus Robertson accused Cameron of breaking his promise to Scotland. "Not one single amendment has been accepted by the Government to the Scotland Bill," said Robertson. "Let me ask the Prime Minister again when will he fully deliver what was promised to the people of Scotland?"

Cameron dismissed his accusation, insisting that "unprecedented devolution on taxes" was being sent to the Scottish Parliament.

Your smart start to 2016 – Get 6 free issues of The Week magazine.
News Feed

Disqus - noscript

To those who wish for a "YES" vote next September, let me make a suggestion from south of the border.

Why not have every Scottish cinema arrange to offer a special season of stirring Scottish movies - like "Braveheart" "Highlander" "Rob Roy" "Brave" etc., etc,... for 6 months or so leading up to the vote...???

You got a problem? Sounds like you're spitting the dummy out ...

I'm sure there'll be plenty of patriotic feeling as it is. Especially with the commonwealth games happening.

I'd rather see every theatre, lecture hall, arena etc in the country rented out and hosting a debate on independence. Each event can have a panel made of of Yes Scotland, Better Together and local politicians split 50/50. Plus a key note speech from a high profile YES and NO advocate. Have an extensive Q&A.

Everyone should have the chance to take part in this debate and it should be based on intellectual thought.

Not a very well researched article and it's fairly one sided towards NO. You don't even get the spending figures right but I suppose when you use the Torygraph as source what can one expect.

Stupid comment.

The last paragraph says it all realy.
Why should Scots feel bad the so called democratic defesit that SOME English feel because of devolution when Scotland had NO voice for 300 years?
Also it's an English problem not a Scottish one.
remember the "feable 50"?

"Torylaugh" - not "Torygraph"!

LOL

I wish the question would be this simple in my native Province of Quebec. "Should Quebec become an independent country?" But don't bet on it!

At the risk of chucking some history into the equation....
Scotland did not become part of he United Kingdom; England and Scotland formed the United Kingdom.
It is - to say the least - highly questionable to assert that Scotland gets more out of the Union than she puts in. The Barnett Formula does not give Scotland a higher share of public spending, just a higher share of certain parts (about half) of public sending, however she gets very little from the other half. The south-east, OTH, does very well indeed in the way of public spending that does not have a Barnett dimension - Channel Tunnel, Thames Barrier, renovating the underground, the M25 to name but a few....the oil revenues have been spent on projects that have benefited the whole country from Watford in the north to Guildford in the south. and a disproportionate share of 'national' government departments which helps to fuel escalating property prices.
Scotland has no clout at all in the EU.
Defence...Scotland's defence needs are trivial compared to the share of Scottish revenue spent on UK vanity armament programmes and foreign intervention.

It is the ignorance of those 'south of the border' that makes independence more appealing day by day. It is often like talking to an American when you talk to an English person. So full of propaganda it renders them politically mute. They resort to the nonsense you have just read from the ironically named TruthBeatsLies. What has happened to Portsmouth ? Royal naval vessels will be built in Scotland. If Scotland becomes independent, this will mean that they will be built in a foreign country. Is this good for Scotland ? Is it good for the remnants of the UK ? Independence is not about patriotism. It is political (shameful that this has to be pointed out). The majority of the population of Scotland are lowlanders.

Unfortunately, very few people (anywhere in the world) have the knowledge to make such a decision on the future of a nation. We are misinformed, ill-informed, and disinformed, and we make our decision based on this 'information'. If the politicians are unable to provide us with accurate information on what independence means, then what chance does the plebeian have ? Alas, our ignorant masses will have their say next year. Heads or tails.

Brotherhood?