12 February 2009

LIT put to bed

(A gold star to the first person to state why I might find that title mildly amusing)

Sadly, it seems as though the Local Income Tax will not be coming forward to Holyrood until 2011 at the earliest. It goes without saying that I am disappointed: out of the three models of local taxation put forward in the Chamber - LIT, LVT and the status quo Council Tax - LIT is by far and away the fairest as it's based on the money that householders have coming into their income. Land Value Tax is self-explanatory, and Council Tax is based on what your house would have been worth in 1991. Neither of those are progressive: you cannot 'spend' the land on which your house is built, so its value is absolutely meaningless as to whether or not you can afford the tax, and you cannot 'spend' the bricks and mortar either - especially not at 1991 prices. LIT, meanwhile, is based on actual, genuine, cash money.

Unfortunately, Labour and the Tories take the view that because you took out a financially crippling mortgage a while back to buy a nice pad, you must be minted - don't they know there's a credit crunch on these days? - while the Greens appear to be of the opinion that living in prime development land equals rolling in cash. Neither is the case.

Still, we are where we are. The three parties have made it abundantly clear - and did so in a Parliamentary debate, remember - that LIT is not their thing and as such, any Bill introducing it would die. Questions you know the answer to, you need not ask.

And even if it could get through, would it be right? The SNP thought that there would be money in the bank. And they weren't the only ones: no sane party with a prospect of forming a government wants to issue unrealistic promises, and that's partly why all the parties talk to the Civil Service in advance of an election, so that the administrators can work out how their policies can be implemented. If the SNP policy were unworkable, civil servants would have raised a red flag, and the party would have been absolutely stark raving bonkers to proceed under those circumstances. Therefore, we can assume that the folk at Victoria Quay also thought that LIT was do-able.

What no one was banking on was the elimination of £500 million from Holyrood's expected annual budget. Nor did people expect that a pot of money geared towards supporting ratepayers would stop supporting them in Scotland simply because the devolved Parliament decided that the rates should be paid differently. Frankly, I thought that was the point of devolution, that Scotland could employ its own policies, but he who pays the piper calls the tune, and Scotland, alas, is saddled with the Barnett formula: the political equivalent of a chauvinistic husband giving his downtrodden wife a tenner and telling her to get something nice. In this case, hubby decided that he didn't want LIT, so wifey couldn't have it either.

So the Government has neither the financial nor the political capital to deliver LIT at this time. And the Opposition have raised their hackles, as one would expect. Labour's reaction is borderline absurd: Julie sums up the madness more elegantly than I'm capable of doing.

But the LibDem reaction sticks in my craw. Firstly, they're blaming "SNP intransigence" over the point of variability. Now, they can't credibly claim that as even with LibDem support, the Bill is dead, and John Swinney went out of his way to hold out hope of LibDem support. That suggests that at least some form of variability would have ended up in the Bill: if it could have passed just on the basis of SNP/LibDem co-operation, the LibDems would have had serious questions to answer had they not backed the general principles of the Bill, while the SNP would have had to support the introduction of variability in either Stage 2 or 3. They'd also have had to take it to the Finance Committee rather than Local Government and Transport: an SNP casting vote would have advanced the Bill in the former; a Labour casting vote would have killed it in the latter. But my point is that the final Act would surely have set up a more localised tax than would have been proposed in the draft Bill. And in fairness to the LibDems, it would have been all the better for it.

Further, LibDem accusations of cowardice don't wash either. No party in its right mind would ditch their headline policy unless it proved absolutely necessary. But seeing as it wouldn't have been viable to set up the LIT now, John Swinney made the tough call and put the plans on hold. The cowardly thing to do would have been to keep stringing Parliament and taxpayers along, asserting that we'll get round to it at some point during the four-year term. John Swinney bit the bullet and admitted that it wouldn't be possible. That takes guts.

Finally, this LibDem zeal for the policy is sudden and unexpected: where was the rush when they were in Government? It's interesting, I think, that when they're negotiating with the SNP, they'll make one outrageous demand and flounce out of the room if they don't get it, whether it's the dropped of the SNP's very reason for being, or wiping £800 million out of the money available to the Government. Yet for Labour, they'll drop their pants for a cop-out on tuition fees (righted by the SNP) and a change in the voting system to Councils. Now, having Councils more closely resemble how people voted in the last election is a big step forward, but I can't imagine many struggling householders saying, "I'm skinning myself to pay my tax bill, but at least I have a fairer Council voting system!"

So my question to the oh-so righteously indignant LibDems tonight is this: where was your stroppy, fist-banging attitude in 1999? Where was it in 2003?

If their claim to being "the only genuine LIT-supporting party in Parliament" were even remotely true, this wouldn't be an issue now as the Local Income Tax would already be on the statute books, having been implemented in one of the two Partnership Agreements at the LibDems' behest.

Yet for eight years, they couldn't be arsed to press this. And now they're in Opposition, they expect us to do it for them even when it's not possible for anyone to do it at all.

They put this to one side when they were in Government. Sadly, they, like the rest of us, will just have to wait a little longer for the political and economic barriers to be cleared up. Gabriel García Márquez but it better than I did.

Él que espera lo mucho espera lo poco.


Brigada Flores Magon said...

Widnae be the Auld Alliance connection and the French tongue??

Will said...

Tu as raison, BFM.

Stuart Winton said...

"If the SNP policy were unworkable, civil servants would have raised a red flag, and the party would have been absolutely stark raving bonkers to proceed under those circumstances. Therefore, we can assume that the folk at Victoria Quay also thought that LIT was do-able."

But wasn't it HMRC in London who told Victoria Quay (when asked!) that HMRC had no jurisdiction to collect a local income tax through the PAYE system?

Will said...

Frankly, Stuart, I'm not sure there was any sort of communication between HMRC and Victoria Quay until it was far too late.

AFAIK, the legality point was on whether or not the LIT was a separate local tax or an extension of the tax-varying powers available to Holyrood. My guess is that Victoria Quay viewed it as the former so didn't bother to ask as they wouldn't have seen it as an issue, while HMRC saw the PAYE element and so took it to be the latter, therefore viewing the tax as a 3p increase on every rate of income tax, which as we know, is beyond Holyrood's remit (it can only affect the standard rate).

I daresay this would have ended up in the lap of the Privy Council.

Anonymous said...

"...the Barnett formula: the political equivalent of a chauvinistic husband giving his downtrodden wife a tenner and telling her to get something nice."

and then gave his mistress (England) £8.

neil craig said...

It is rather like their bringing down the budget because "we want 2p off income tax", and immediately dropping it when they had had a little publicity out of it. What they had wanted was to be the only party to vote against the budget (Labour abstaining which is even more fearty) & be able to say they promised us lower taxes. Labour failed to quite live down to expectations & the LDs were faced with the responsibility of success.

Had the 2p ever been honestly meant they would have been willing to say how it would be paid for & this would have got Tory support which would have quite likely forced the SNP to do it. Having been expelled from the LDs on the grounds that really supporting tax cuts is "illiberal" & "too right wing" to consider I think I can say with absloute certainty that they never intended to succeed.

Stuart Winton said...

Will - yes, there certainly seems to be a compelling case for construing it either way, so if you can do that then surely the mandarins at VQ should have flagged up this potential sticking point?

Thus there were either shortcomings in that regard or the potential conflict was identified and ignored, thus neither scenario seems particularly satisfactory.

Will said...

Well, I'm not sure: the 'there's some doubt' argument seems to be used to justify proceeding rather than stopping, for both this and the last administration. So the Referendum Bill found a wording of the question that neatly sidesteps Schedule 5 of the Scotland Act, and the smoking ban could have been considere illegal as it would have been an workers' relations matter - employee health and safety. Ministers went to great lengths for it to be viewed as nothing more than a public health matter, which wasn't reserved.

Similarly, LIT advocates have been keen to stress the policy in relation to the Council Tax, which is devolved, and to local government funding, which is also devolved, so based on the precedent of the smoking ban, the LIT is a policy for a devolved issue and so would be legal.

HMRC spotted (or claim to spot) a legal brick wall in the collection method, while Scottish civil servants perhaps didn't see an issue from their perspective.

But I feel my point stands: why go into an election promising to do something you know you can't do? And even if you do, why then say you'll go into the next election saying the same thing?