First Minister needs to grasp the tax nettle without delay

TAX and munitions have always gone together in newspaper headlines. Tax bombshell, tax blitz, taxmageddon. We’ve had a lot of that in the past few days. But to be fair, Nicola Sturgeon’s long-range Programme for Government (PfG) has detonated at the heart of Scottish political debate. It’s also a sharp reminder of the potentially lethal nature of tax to politicians.

Running for US President in 1988, George HW Bush’s big idea came down to one endlessly repeated soundbite. “Read my lips: no new taxes.” Two years later, President Bush did raise taxes, and two years after that he was ousted by Bill Clinton, who never let him forget it.

Closer to home, Chancellor Philip Hammond tried to raise National Insurance in this year’s Budget, only to U-turn when reminded he was breaking a 2015 Tory manifesto pledge. “I predicted the Chancellor’s budget would come back to haunt him and it duly has,” crowed SNP MP Stewart Hosie. “Perhaps he should read his manifesto next time.”

There is little doubt the First Minister read her 2016 manifesto. So the line on page 17 that “we will freeze the Basic Rate of Income Tax throughout the next parliament to protect those on low and middle incomes” won’t be a surprise to her. But nor, it seems, is it sacrosanct.

Announcing the PfG on Tuesday, she said it was time for an honest debate on “progressive” use of Holyrood’s tax powers. Given the manifesto, that was taken as rises for those paying the 40p higher rate (earnings over £43,000) and the 45p additional rate (over £150,000). But on Thursday, after being challenged directly by Ruth Davidson, Ms Sturgeon refused to rule out also hiking the basic 20p rate, which people start paying above £11,500.

Smelling a broken promise, the Tory leader was almost as delighted as Mr Hosie had been. “Anyone in Scotland who earns less than £43,000 a year just heard the First Minister’s message loud and clear – she is coming for their pay cheque.” The Tories are now promoting a clip of Ms Sturgeon on social media. Eerily like Mr Bush at the Republican convention, she tells an SNP conference: “We will not raise the basic rate of income tax.” Ouch.

“Well, we’re a minority government,” say people close to the FM. “The budget has to be consensual.” In other words, some manifesto promises are negotiable. The promise to hold a second referendum after Brexit wasn’t negotiable, oddly enough. That was a “cast-iron mandate”. But tax is evidently a tinfoil mandate, readily crumpled up and tossed in the bin.

Ms Sturgeon knows this is dangerous ground. Voters have better memories for promises broken than promises met. Governments also tend to take unpopular steps like tax hikes or ratting on pledges in their first year, in the hope they’re forgiven by the next election.

Nevertheless, a Government paper will soon emerge to inform the draft budget for 2018/19, setting out options around new rates, thresholds and numbers of bands. The PfG says ministers will take “careful, considered and responsible” decisions, but adds ominously: “We do not underestimate the impact which changes to taxation can have.”

Tax rises are an explosive issue. To avoid being blown up alone, Ms Sturgeon has cannily invited other parties into the blast zone. Officially, she wants to hear their ideas and co-operate on the budget. Unofficially, it’s about sharing the blame around. As bait, she’s included a lot of the opposition’s policies in the PfG to make it harder for them to fight the budget.

As the Tories want Scottish tax rates static or cut, they’re out the equation. But Labour (1p on the 20p and 40p rates, the 45p rate up to 50p), the LibDems (1p more on all rates) and the Greens (a five-band system with no one earning under £26,500 paying more) are in the mix.

There is some scepticism at Holyrood. The delay between Ms Sturgeon announcing the PfG and confirming all rates were in play suggests an instinctive aversion to being bold. Her “open mind” is seen as a pose. But despite her party’s mousey record, I think this time it’s serious. After the SNP’s stinging election losses, the PfG barely mentions independence. It’s about building a better Scotland with existing powers or perhaps a form of devo max, which the FM suggests could flow from a cross-party consensus on adding immigration, employment and trade.

The noisiest argument against more devolution is that Holyrood doesn’t use the powers it has. A big move on tax would muffle that.

With her party’s fortunes on the turn, Ms Sturgeon also knows she needs results to win back voters. Passing Bills at the current four a year won’t do it, nor will tweaking services with the same old budgets.

But she can’t be too late on tax – her plan to fine polluting motorists from 2020 is risky enough before an election. She has to go now. The PfG rightly says “taxpayers value certainty”. So she’ll want to avoid frenzied annual haggling over bills. If tax is to go up to fund long-term change, it needs a lasting deal with the other parties as soon as possible. That’s the prize. If genuine change is coming, it needs to start next year.