Last month Scotland’s First Minister took the, erm, courageous decision to announce on behalf of his nation that the Scottish people hadn’t minded the economic side of Thatcherism ‘so much’ and that it had been the lack of a social conscience to her policies that had so alienated people north of the border.
Apart from the basic political illiteracy of proclaiming such a clear seperation between economic and social policy, this statement amounted to a pretty impressive re-writing of history.
However, in the light of the Programme for Government set out by Salmond’s minority SNP administration this week, the reasoning behind the First Minister’s sudden apologia for the economics of Thatcherism has become a lot more clear. Unfortunately, he won’t be in a position to divorce the social costs of his economic policies quite as easily as he did in his glib statement.
The Abolition of Council Tax Bill that will be introduced during the coming session of the Scottish Parliament will replace the current property-value based council tax with a Scottish local income tax. Now, there is much to be said in favour of significant reforms of local government funding arrangements – and it would be hard for anyone claiming to be a socialist to oppose the introduction of a degree of progressiveness to the tax system. We can argue until the cows come home about the exact workings of an income-based system, but broadly its a good idea, which Labour would be well advised to develop our own coherent version of.
The key problem with Salmond’s proposals – and which may end up preventing them ever coming into effect – is that the SNP administration seems to have forgotten the key principle of local taxation – that its level is set locally. Currently, councillors vote for the council tax level each year. But under the new Scottish system, the level is fixed nationally – at 3p in the pound.
Leaving aside the fact that numerous Scottish councils have complained that this will be nowhere near enough to fund even current levels of services, this proposal strikes at the heart of the principle of local democracy – and indeed effectively renders local democracy moribund. The Animal works in local government, albeit a good 350 miles south of the Scottish border and is well aware that not only is the annual council tax setting meeting a crucial part of the democratic year for both the ruling administration and the opposition, but also that attitude to council tax rates is an important issue for voters in deciding which party should run their council. Setting the council tax rate goes much further than simply a tax rate – it is about setting strategic priorities and service levels for the council.
Setting the rate nationally will remove that ability from local government. What is being proposed by the SNP is a step beyond the anti-democratic rate capping imposed by Thatcher (and shamefully carried on to a limited degree by the Labour government). At least the Iron Lady allowed ‘loony left’ councils a degree of movement before her Secretary of State would deem their rate increase proposal illegal. The SNP are denying local authorities even this opportunity, having decided that 3p in the pound is good for everyone.
In general terms, council tax levels are highest in poor areas, simply because so many households are exempt from some or all of the tax. In order to provide necessary services, which are likely to be more expensive to provide in deprived areas, the remaining households need to pay more than their equivalents in wealthier areas. Now, the grant from central government is meant to even up the playing field in this respect (although the Tories have never quite understood this) and this will remain in place under the SNP’s plan, but it still leaves the strong possibility of deprived areas of Scotland losing out significantly on their council tax take – not a great way to start tackling poverty.
So, somehow, Salmond’s government has started with a moderately good idea and turned it into a piece of anti-democratic and socially dangerous nonsense. The insistence on a single rate may even mean that the Liberal Democrats, well known keen supporters of local income taxes, vote against the proposal, guaranteeing its defeat.
More seriously still is the prospect of a legal challenge from Westminster: by setting the local tax rate nationally, it effectively becomes part of the national income tax rate – and Scotland can only vary its income tax rate by 2p in the pound.
Notwithstanding the party political and legal difficulties of the proposals, the level of opposition to the proposals from all sectors means that either the local income tax will never happen or, if it does, will quite rightly mark the end of Salmond’s remarkable honeymoon. It would be a shame if the price of that were to be the raison d’etre of Scottish local government.
05/09 update: Oooh look – Simon Jenkins in today’s Guardian agrees with me.