Last week’s Programme for Government left a key question unanswered: where will the money come from to drive progress on the First Minister’s stated priorities?
Just like many households, the Scottish Government is seeing its finances squeezed. But cutting child poverty and carbon emissions, or investing more in vital public services, cannot be sacrificed. Transformative change will require transformational investment.
That’s why IPPR Scotland, with Oxfam Scotland and 50 other organisations across Scotland, are calling on the Government to go further in the next budget - through new and innovative tax options.
Building on progressive, but insufficient, reforms to date, we estimate that each of our proposals could raise hundreds of millions of pounds every year. Extra funding to drive much-needed progress, ensure that those with the broadest shoulders bear the greatest responsibility, all while protecting the pockets of the poorest.
There are three obvious places for the First Minister to start.
Most immediately, is raising more through income tax, asking those with higher incomes to contribute more. Our research shows a new and additional rate and band of income tax, targeted at people in the 90th percentile for full-time gross earnings in Scotland, could raise up to an additional £260 million.
But income tax can’t do all the heavy lifting.
Scotland’s wealthiest households have, on average, 217 times the wealth of the least. With much of it locked up in property, a second priority should be reforming property taxation.
Council Tax is badly outdated and regressive - hitting the poorest the hardest. If fundamental change is to be legislated for, let alone begun, in this Parliament, as it should, time is fast running out.
One option is a new percentage of property value tax. Once rolled out, IPPR modelling shows it would be fairer and, at a rate of 0.75 per cent of value, raise around £350m more per year.
Finally, we shouldn’t shy away from using the tax system to incentivise better businesses. Doing more to help tackle pervasive in-work poverty, while giving the biggest polluters the choice of either changing their damaging behaviours or paying for them.
Action on tax is not only imperative, it’s consistently popular too, with polling showing that two-thirds of people in Scotland agree that governments should redistribute income from the better-off to the less well-off.
Yet too often, tax debates are pitched as a conflict between being pro-business or anti-business, for economic growth or against it.
A failure to cut poverty isn’t just bad for people, it hits public services and the economy too. And innovations like the National Minimum Wage show that social policy delivered through better businesses can be good for workers, employers, and the economy.
“Scotland is a wealthy country, but that wealth is not distributed evenly. To tackle poverty, we need to be even bolder on taxation, and the redistribution of wealth.” Not my words, but those of the First Minister.
He and we know the money is there. Now is the time to harness it.
Philip Whyte is Director of IPPR Scotland
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