This is the eighth of a series of blog articles looking at what we know about the direction of tax policy following this year’s political party conference season. While the other articles in this series have been thematic this one looks at the policies of the SNP and Plaid Cymru.The CIOT is strictly politically neutral and nothing in this article should be interpreted as endorsement for or opposition to any of the policies mentioned.
Scottish National Party (conference 14th – 15th November)
Referendum result notwithstanding, the SNP continue to call for the Scottish Parliament to have full control over tax and fiscal policy. This includes control over not only income tax but national insurance, corporation tax, capital gains tax, fuel duty, air passenger duty and inheritance tax. The party has quoted polling showing seven out of ten Scots favour the Scottish Parliament having control of all taxation raised in Scotland.
The SNP reacted with disappointment to the report of the Smith Commission into further devolution at the end of November. Finance Secretary John Swinney claimed the UK parties’ pre-referendum vow of substantial devolution “has simply not been delivered”. He did welcome the devolution of air passenger duty, more extensive power over income tax and a range of benefits, among other things. He promised the SNP would take a constructive approach to implementing the Smith proposals: “Whilst the Commission may not have given us all the tools we want and for which we will continue to argue, we in the Scottish Government stand ready to play our part, and we now look forward to the next steps in Scotland’s journey.” Some SNP members take a stronger stance – three councillors posted footage online of themselves burning a copy of Lord Smith’s report to show the contempt in which they held it; the party leadership responded by suspending them from the party.
The SNP Government recently announced the rates for Scotland’s new property tax, the Land and Buildings Transaction Tax (LBTT), taking criticism for the scale of increases on the most expensive properties (a 10 per cent levy on the purchase price over £250,000). It was announced that buyers of residential property worth less than £325,000 would pay less than under the current system (Stamp Duty Land Tax) and buyers of property worth more than £325,000 would pay more, once the new tax comes into effect in April 2015. However, the reforms to SDLT announced by George Osborne in the Autumn Statement, which cut the tax for 98 per cent of house sales, and which took immediate effect, including for Scotland, change the economics. Anyone buying a house at a value of £254,000 or above now has an incentive to buy before LBTT comes into effect in April. While Osborne’s reforms are at one level a form of flattery, imitating the Scottish Government’s scrapping of the slab structure, cutting the tax take by £800 million has allowed Osborne to make the Scottish revenue-neutral reforms look distinctly ungenerous. For example a buyer of a house worth £350,000 will pay about £5,000 more in tax north of the border.
Tensions between Westminster and Holyrood were further inflamed when George Osborne announced, in the Autumn Statement, that he intended to devolve corporation tax to Northern Ireland but not Scotland. John Swinney said that there was “absolutely no good reason” why Scotland should not have the power to adjust corporation tax in the interests of growing its economy. The Westminster Government argues that Northern Ireland is distinguished from Scotland by virtue of being in direct competition with a neighbouring state, the Irish Republic, which has an exceptionally low rate of corporation tax.
The SNP have revealed that their manifesto for the 2015 UK General Election will include proposals for a 10p a gallon cut in fuel duty and an income tax increase for those earning more than £100,000 per annum, as well as a pledge to transfer control of corporation tax to Holyrood. The manifesto will also contain a commitment to deliver more welfare powers on top of those recommended by the Smith Commission, including powers over tax credits. The manifesto is expected to restate the SNP’s belief in independence, but not to contain a commitment for another referendum.
The SNP’s 2015 manifesto is also expected to propose the devolution of the income tax personal allowance, arguing it would give Holyrood the power to increase the money in workers’ pockets. The party’s opponents, however, argue that the Smith Commission’s proposal to devolve all income tax bands and rates would give a Scottish Government the power to manipulate the tax system to achieve the same effect. Scottish Lib Dem leader Willie Rennie said: “The Scottish Parliament will have the power to cut tax by putting the personal allowance up through a new zero rate. The parliament would only be prevented from cutting the allowance and increasing income tax.”
Some light has been cast upon the approach the SNP will take in the event of the 2015 general election producing a hung Parliament. New party leader and First Minister Nicola Sturgeon stated in her party conference speech: "My aim is that the SNP wins the General Election in Scotland, and there is every prospect of a hung parliament at Westminster. The SNP would never act to put the Tories in power. In these circumstances, our constructive approach is that the SNP will seek common cause in a balanced parliament with progressive forces across the regions of England, Wales and Northern Ireland to rebalance the UK in political and economic terms.” Recent polls have shown the SNP with a staggering lead of 20-30 per cent over Labour, which would give the party more than 50 of Scotland’s 59 Westminster constituencies (compared to just six at the moment).
The SNP, Plaid Cymru and the Green Party are working increasingly closely together. Nicola Sturgeon, Plaid leader Leanne Wood and Green Party leader Natalie Bennett held talks today (Monday 15 December) in London to discuss their strategy for the coming months.
Plaid Cymru (conference 24th – 25th October)
Wales’s nationalist party Plaid Cymru enthusiastically welcomed amendments from the UK Government to the Wales Bill to devolve to future Welsh governments more flexible income tax- varying powers (removing the ‘lock step’ which requires all rates to change by the same amount). . The green light for the proposals will be dependent on a referendum. However Plaid Treasury spokesman Jonathan Edwards MP has argued that no referendum should be needed, and warned it would fail to generate the levels of enthusiasm and engagement seen in Scotland. Asked about Plaid’s demands in post-hung Parliament negotiations the party’s Westminster leader Elfyn Llwyd put “moving on taxation without a referendum” at the top of his list, followed by a better deal on the Barnett formula, which is widely believed (not only in Wales) to give Wales a raw deal.
More broadly Plaid argues that Wales should have the same tax powers as Scotland, and has had significant success in winning other parties in Wales over to this position. Immediately after the party conferences a perhaps surprisingly strong joint motion on devolution was agreed by the leaders of Labour, Conservatives, Plaid Cymru and Liberal Democrats in the Welsh Assembly. The parties agreed that a future Welsh Government should have the same powers as Scotland, including control of air passenger duty and corporation tax if that is devolved to Scotland and Northern Ireland. The leaders called for talks between the governments in Cardiff and Westminster to begin immediately and be concluded by the beginning of 2015, and for proposals to be published before the general election.
In her conference speech Plaid leader Leanne Wood argued for the Welsh Assembly to have the power – similar to that currently available in Canada – to offer tax breaks to pension funds prepared to invest in their own communities. She noted that public sector pension funds in Wales have £6 billion in assets, hardly any of which is invested in Wales. “Investing 2 or 3% of our own workers assets in Wales would help transform the Welsh economy,” she said.
CIOT Head of External Relations
Monday 15 December 2014