Muscatelli – Time for a grown up debate on tax

By Professor Sir Anton Muscatelli

Devolution was always said to be a process rather than an event. Over the past eighteen years, Holyrood, perhaps after hesitant beginnings, has more and more come of age.

Free personal care, a ban on smoking in public places, free prescriptions, an end to student tuition fees and, most recently, confirmation of minimum unit pricing for alcohol, are examples of a different approach and a different direction. These policies tell us much about how Scotland sees itself as a nation, and Holyrood’s now crucial role in our national story.

Yet until now there has been something missing – whilst Parliament could take important decisions on spending, MSPs did not have to grapple with the issue of raising the public money which they spend. True there has always been the power to vary the basic rate of income tax, but for the first time since the delivery of devolution, the Scottish Government is now able to give serious thought to the raising of additional revenue.

In my view, this represents a significant milestone. Holyrood should not just champion landmark social legislation or seek to manage public infrastructure better, but it should, and now can, take real and meaningful steps to reshape Scottish society for the better.

The temptation may be – as it often has been in the past – to view the decision facing Scotland through the prism of wider-UK politics and associated partisan point-scoring. This must be avoided.

Already, too much of the discourse around potential moves to increase the tax-take in Scotland has focussed on external factors. While lines around ending austerity or plugging funding gaps can be politically and even economically seductive, decisions should be based on more than that.

Rather than a discussion based on deciding which holes left by cuts handed down by others to plug, the opportunity now facing Scotland is for a great, national debate about what our society can look like, the quality of public services we want to see delivered – and how best we as a nation can turn this vision into a reality.

No government – in Scotland or elsewhere – ever implements tax rises for the sake of it. Instead, societies take the decisions to meet certain collective aims. These goals in Scotland’s case are essentially twofold – to help deliver a stronger economy, and a fairer place for us all to live in.

Using the taxation system as a key tool in the delivery of sustainable and genuinely inclusive economic growth is the challenge and the great prize facing us. How can we use the levers at the disposal of government to invest in public services, but also to help develop and stimulate those key sectors in which Scotland has the real potential to lead the world for decades to come?

Raising additional revenues through income tax – if done properly – doesn’t just have the potential to reduce inequality and support public services, but gives the Scottish Government vital room to invest in support for key sectors which could secure the future of our economy for generations.

In areas like precision medicine, a new field of science that brings together academia, business and the NHS to deliver the right drugs at the right time to the right patient, Scotland genuinely leads the world.

Scotland also excels in the digital space, with thriving and increasingly important clusters of activity. In quantum and nano technology we are also amongst the best in the world with specialists, scientists and industry all working collaboratively across the country.

These exciting, innovative and skilled sectors have the potential to be to Scotland’s 21st century economy what shipbuilding and heavy industry were in the 19th and early 20th centuries – but the competitive advantages we need won’t simply fall into our laps. We will need to pay for them.

The principles put forward by the Scottish Government in the discussion document on taxation are, in this context, very worthy of debate and scrutiny – including commitments that any changes will maintain and promote the level of public services, make the system more progressive, support economic growth and ensure that the lowest earning taxpayers do not have to pay more.

After almost two decades of devolution, the time to decide on what we are prepared to pay for the services we value and our ambition for the future of our economy and society is now.

The Scottish Government has set out a number of indicative examples of how changes to tax bands and rates which meet their four tests might work. Depending on which, if any, of these options is chosen, we could see somewhere between £80m and £290m raised for public investment.

Even at this early stage, there are clear indications of majority support in the Scottish Parliament for some form of change to the tax regime – and specifically for changes which are likely to see those at the top being asked to pay slightly more.

Those who are likely to be shouldering this slight increase should not see it as a burden – merely as the cost of living in a civilised society in which we all have access to the top class public services we deserve, and as an investment in our future economic growth.

From the NHS we all rely on at the most difficult times in our lives, to the schools that educate our children and endow the next generation of the workforce with the skills they need to ensure Scotland is able to compete in an increasingly hostile global economy, we rely on taxation simply to ensure society can function and thrive. Without it, those who have been lucky enough to garner wealth would very likely have been unable to do so.

Living in a society in which everyone has access to quality public services as well as opportunities to advance themselves and their families, benefits everyone. Or to put it simply as President Kennedy said in his inauguration speech in 1961: “If a free society cannot help the many who are poor, it cannot save the few who are rich.”

The decisions on tax that our Parliament will make may be controversial. Some may end up paying more. But the simple truth is that if we want a country and society to be proud of, we need to be willing to pay for it – and our politicians have a duty to be honest in conducting a debate and constructing an argument that is in the long-term national interest, rather than for short-term partisan gain.

That is what we have the right to expect – and I hope and expect it is what our Parliament will deliver.