The Point

Last updated: 27 June 2022.

How to tax and REALLY fight austerity: Scrap the Council Tax and replace with a Scottish Service Tax now

 

Writing exclusively for The Point prior to Solidarity's National Conference in Glasgow this weekend, Tommy Sheridan argues that if we want to raise more money to protect and advance local council services then we should do it with a radically fairer and more redistributive measure than the blunt tool of a one percent basic rate rise.

There is such a proposal that is legal, worked out, that raises another £500 million for local government, and yet leaves 75% of Scottish households better off. Tommy put it in front of the Scottish Parliament before in the form of a Bill.

Perhaps now is the time to look at it again.

 

 

TIME FOR A RADICAL AND REDISTRIBUTIVE TAX POLICY – SCRAP THE COUNCIL TAX NOW

 

With the current ‘stooshie’ over Scottish Labour’s extra one pence on income tax proposal in full flow it is appropriate to inject some reality into the debate. Adding one penny onto the tax burden of those already reeling from the 5 year freeze on real income increases -because of Tory austerity measures which amount to economic illiteracy and political cruelty - is neither ‘progressive’ or socialist. It is cowardly and timid in the face of an onslaught against the living standards and public services which ordinary folk rely upon not seen since the dark days of Thatcher.

Implementing an across the board increase in taxation is not redistributive or radical. The Solidarity proposal is to replace the unfair council tax with an income based Scottish Service Tax is both.  In fact, it was debated in 2006 in Holyrood and remains the most radical redistributive measure ever considered by the Scottish Parliament. It is necessary now more than ever as it not only generates hundreds of millions more for local government jobs and services it does so in a fair and equitable fashion; meaning the wealthiest pay more and those on average and below average incomes pay less. The economic multiplier effect of increasing the disposable income of millions of low income Scots is also huge and guaranteed to increase economic activity at a local level improving living standards for millions.

Any party with an ounce of social justice accepts the council tax is an unfair tax. The very richest in society will only ever contribute three times more towards essential local services than the very poorest despite income differentials being several hundred times greater. A band A property for council tax purposes is the lowest band property. Band H is the most expensive. The nursery nurse on £12 – 13,000 a year living in a band A property will pay only a 1/3^rd of what the chief executive on £1.2 million a year living in a band H property pays. Thus the council tax pays far too little attention to ability to pay when calculating how much each citizen should contribute to the costs of maintaining and developing essential local government jobs and services.

The Scottish Parliament is now in its 16^th year of existence. Over that period the SNP and Greens have publicly stated their opposition to the council tax. However throughout those 16 years only one actual Bill to replace the council tax with a fairer system has been introduced. I should know as I introduced it via a Private Members Bill on 11^th November 2004, and moved the Parliament to accept the proposal in early 2006. It was defeated and sadly the SNP opposed it that day on the principal basis that it was a tax for local services set nationally and collected nationally and therefore not really local in nature. This despite the fact all the money collected is wholly designated for and distributed to local authorities to pay for local government jobs and services.

A year later the SNP fought the 2007 Holyrood election on a local income tax proposal which was – wait for it – set nationally and collected nationally… They have yet to introduce an actual Bill to parliament to give effect to their proposal.

The Scottish Service Tax (SST) proposal which Solidarity will champion in the May Holyrood election is radical, redistributive and economically advantageous to local government and the economy as a whole. It is legally competent and involves the introduction of 5 SST Bands with different rates of payment based on income. The SST is levied on income at progressive tax rates. Those on incomes below £10,000 a year are automatically exempt. Those on £10,001 to £30,000 pay 4.5% on each pound within that band, £30,000 to £50,000 is payable at 15%, £50,000 to £90,000 18% and £90,000 and over 20%.

Extensive and robust research into the proposal in 2005 and 2006 produced detailed analysis which confirmed it was indeed a radical and redistributive tax which taxed the average and low paid less, and the very well paid more. Scotland’s pensioners would be significantly better off and not be subjected to embarrassing means tests.

According to the independent Scottish Parliament Information Centre (SPICe) in September 2004 635,000 citizens earned less than £10,000 per annum (25.92% of the tax paying total), while 1,924,000 individuals earned less than £25,000 p.a. (78.53% of the taxpaying population). Only 88,000 individuals earned more than £50,000 a year and only 20,000 earned more than £90,000 a year (representing 3.59% and 0.82% of the taxpaying population respectively).

619,004 of the wealthiest households (27.32% of all households) would have paid more under that 2006 Scottish Service Tax proposal,  while 1,646,818 households would pay less (72.68% of all households).

Based on the detailed analysis in 2004 the SST would generate £500 million more for local government jobs and services. Today, this radical proposal would eliminate the need for cuts budgets across Scotland and create more jobs and better services as well as boosting consumer spending across the whole country.

Bus drivers, refuse collectors, postal workers, nurses, cleaners, shop workers, pensioners would all pay less and have an increase in their disposable incomes. Advocates, council chief executives, bank managers, and of course MSPs and MPs would pay more and depending on their actual incomes - considerably more than they currently pay under the unfair council tax.

A household with 2 earners living in a Band D house, with one on £25,000 p.a. and another on £13,000 p.a. would save £225 a year

A household with a double income of £27,000 p.a. and £25,000 p.a. living in a council tax Band F house would save £81.27 per year

However, a household with a double income of £56,358 and £80,000 in a council tax band H house would pay £12,236 p.a. more. A large sum, but they would still be left with a joint gross income of over £10,000 a month to live on. And it is the wealthiest 20% who have seen their incomes rise in comparison to everyone else during the last 40 years of Tory and Blairite Labour Governments in Westminster

The SST not only replaces the unfair Tory council tax with a radical redistributive alternative it generates hundreds of millions more for essential services and encourages greater economic activity from the population as a whole leading to a virtuous economic cycle. The proposal benefits three quarters of Scotland’s households and puts the principle of fair taxation at the heart of Scotland’s politics.

The detailed statistics relating to 2005/06 may have changed slightly but the general thrust and overall effect will be the same in 2016 as it would have been in 2006. The radical reduction in real incomes and living standards suffered by millions of Scottish citizens over this last 6 years in particular demands radical responses from political parties committed to reversing the obscene inequality which scars the whole country. The SST represents only a start in the long journey towards a fairer and more socially just Scotland but it is a radical and significant start. When compared and contrasted with Labour’s one pence penalty on ordinary workers and the SNP’s disappointingly meek passing on of Tory austerity cuts from Westminster, it highlights the need for Solidarity to be represented in the Scottish Parliament after May 5^th.

The Tory imposed cuts to Scotland’s block grant have no democratic mandate and represent economic madness and political cruelty. Those who are suffering and will continue to suffer are the poorest, most vulnerable and lowest paid citizens. There needs to be a concerted fight back involving the Scottish Parliament, all 32 of Scotland’s local authorities and the organised trade union movement to defy Tory austerity and setting of no cuts budgets. Scrapping the council tax and introducing the Scottish Service Tax would give Scotland the financial platform to do that.

The general election rout for the SNP was secured on the back of an anti-austerity platform. That platform of words has to now become real action and defiance. The slogan of Defy Not Comply with Austerity has to be taken up, and all of Scotland mobilised to declare that a Westminster government that can afford tax cuts for the rich, allow tax avoidance and sweetheart deals for the big corporations and £167 billion for immoral nuclear weapons is not fit to govern and possesses no mandate for its heartless programme.

Tommy Sheridan, Co-Convenor, Solidarity,  4^th February 2016