Sturgeon wants the pips to squeak, but not if she has to do the squeezing
NICOLA Sturgeon plans to fight the General Election on a commitment to reintroduce a 50p in the pound top rate of tax – and across the UK, one assumes, in the unlikely event Nationalist MPs are in a position to uphold a minority or coalition government of the Left.
This was, in fact, SNP policy at the last General Election, in 2015, when such a scenario seemed much more likely and no one predicted outright Conservative victory.
But its revival attests – and not for the first time – to the First Minister’s central weakness, an agonised, selfconscious dread of being outflanked, out-progressived or out-virtue-signalled by anyone else.
Only the other week, Jeremy Corbyn, flatly ruling out any sort of deal with the Nationalists, seized on their reluctance to increase tax on Scotland’s highest earners as proof that the SNP is not ‘a genuinely progressive party’.
It evidently stung and, if anything, the First Minister’s squeaky repositioning only draws attention to further chicanery. Before last year’s Holyrood election, and as the devolved administration looked forward to new powers of taxation, she made plain the Nationalists had no plans in Scotland to increase the top rate from 45p to 50p.
This was not, she wittered – perish the thought – because she had the least moral aversion to squeezing the rich till Kilmacolm squeaked. It was because those tedious kill-joys, her own civil servants, had laid before her hard analysis that such a policy would cost the Scottish Government up to £30million in revenue a year.
Those affected would simply shift their money south of the Border – or, in further dribbling depravity, actually move there. That reality notwithstanding, Miss Sturgeon’s stance on this matter remains… involved.
Kezia Dugdale, even on the dark eve of Scottish Labour councillors falling like the clans at Culloden, stuck in with gusto. ‘When it comes to taxing the richest, Nicola Sturgeon has U-turned so many times she must be sick with dizziness.
‘Nicola Sturgeon pretends to support a 50p top rate of tax when it isn’t her responsibility to deliver it and then drops that support when it is.’
Murdo Fraser, the craggy Tory who lives in the real world, pointed out sensibly that ‘hiking taxes will only make things worse’.
This is due to the Laffer Curve, as dramatically squiggled on a graph in 1974 by Arthur Laffer, a US economist with a brain the size of Minnesota and who was later an influential adviser to President Reagan.
Laffer argued that there is a certain sweet spot beyond which what we then generally called supertax should not be set. If a bold administration identifies it, and cuts top-rate tax to that point, the rich and aspirational will continue happily to create wealth and government revenue will stack up – as he illustrated in that curve.
Liability
But if it is too high, the rich will devote most of their energies not to becoming richer still, but desperately to minimise, as best they can, their tax liability.
This was seen most dramatically in the Britain of the late 1970s, when – at the height of Denis Healey’s understandable rapacity, we were on our economic knees – supertax was a cool 85 per cent and tax on unearned income an eye-watering 98 per cent.
Those of us old enough to remember the Seventies can attest that such cashgrabbing scarcely built a New Jerusalem.
Senior managers and top executives simply spent more and more time with their accountants, to the neglect of their businesses. Practically every best-selling pop star and novelist fled to a tax haven and thousands of our ablest minds emigrated to the US or the Antipodes.
The problem with socialism, as Margaret Thatcher deliciously put it, is that, in the end, it always runs out of other people’s money. She cut income tax from the start (though sneakily hiked VAT). In the March 1988 Budget, her Chancellor, Nigel Lawson, slashed the top rate of tax to a mere 40p.
There was dramatic protest from the young MP for Banff and Buchan, Alex Salmond, who was duly Named and forced to leave the chamber. But at 40p it remained for many more years.
The 1992 election was the last occasion – till its current ignominy – that Labour fought to regain power on a platform of tax increases and much blether about ‘society’.
Tony Blair was its first commander to grasp that his party could never recover office until it accepted people hate income tax, no one wants to pay more income tax and current levels had to be left well alone.
The issue, politically, is not so much that many of us are loaded but that most of us, one day, hope to be: it was on this coalition of the aspirational that New Labour came into its own. Salmond and his Nationalists, nowhere near the levers of power, could posture all they liked about equality, fairness and social democracy – as, rather more uncomfortably, they posture still.
The hard numbers of Scottish taxation make diverting reading. The majority of us – some 2,090,000 – pay only the basic 20p rate of tax. Fewer than 15 per cent – 372,000 – are liable to 40p in the pound and only 17,000, those making more than £150,000 a year, pay that top 45p tribute to HM Revenue and Customs.
That is barely the population of the Isle of Lewis and you could seat them all in Tynecastle Stadium. Yet these 17,000 people matter. They pay almost 14 per cent of Scotland’s entire tax take and the 40p brigade pay an even more whopping 38.3 per cent. The Scottish Government would not need to scare too many of them away before it started to lose a great deal of money.
Not for the first time, it is hard not to wonder what on Earth Nicola Sturgeon thinks she is doing – and on the tenth anniversary of the SNP’s assumption of Edinburgh power.
She is amid a General Election she did not expect and, unlike Ruth Davidson, did not anticipate. Momentum, for the moment, is against the SNP. Most of us have had it up to here with its constitutional obsession and are ever more aware of the problems in our schools, hospitals and cashstrapped local authorities.
Radicalised
The SNP is going to lose votes and seats on June 8 and its chief electoral threat comes from the revived Scottish Tories. The Nationalists must hold on to as much of their suburban, professional and aspirational vote as they can and yet, under a leader radicalised in the 1980s and who has never psychologically left the mental bunker of the student union, they get noisily tough on wealth and tough on the causes of wealth but worse still, have not the guts to hike tax themselves in their own domain.
Elections are about power, about priorities, about choices. They are not about praise in the columns of the New Statesman or posing for engaging selfies in Glasgow’s Buchanan Street.
Business is about the bottom line. The makers of widgets in Lanarkshire will not rejoice in yielding yet more shekels to the coffers of a caring-sharing Scotland. They will think about widgetmaking in Lancashire instead. The sort of people who have a mansion in Edinburgh and a yacht at Rhu may start thoughtfully to eye the lusher suburbs of Dublin.
Meanwhile, the First Minister still cannot decide if this is an election about independence or about Brexit – or about ‘defending’ Scotland from the Tories. She is heading straight for highly damaging electoral setback – and the biggest casualty on June 8 is set to be her own reputation.