Big choices ahead to build on review

RICHARD BAKER addresses some key economic questions for Labour and argues against a 5 year Council Tax freeze

Electing a leader for the whole of Scottish Labour will be an important step on the road to recovery from our election defeat, but there is far more to do before we can be truly confident about the party’s future in Scotland. That is not to underestimate the importance of changes in our constitution. One of the reasons for our failure in May was our inability to act with a unity of purpose between our parliamentary and council groups. A new leader with a new mandate can change this. Our failure to devolve our party structures seemed odd for a party who had taken forward devolution of power in the country, and led to a perception that we did not have autonomy of policy in Scotland, even if this perception was largely mistaken.

People in Scotland want to vote at Holyrood for parties putting forward policies determined here which are clearly focussed on Scotland’s needs. Now we will be better able to meet that test. Yet there is far more which needs to be done over the next five long years of opposition for us to be ready for 2016.

The important changes we have now made must not divert us from the need to analyse what went wrong in this election. Mistakes must not be not repeated. In retrospect (and of course everything is easy in hindsight) winning was always going to be an uphill task and our poll lead was illusory. Beating Alex Salmond and the SNP was a lot to ask when, bar the important support of the Daily Record, the media was against us, we were hopelessly outspent and comparing the SNP’s approach to Cameron and Clegg’s, Salmond was always going to be able to portray himself as offering something different and therefore attractive. But the scale of our defeat was huge. Self-evidently our campaign did not work, and did not have the clarity of message we needed. The responsibility for this is collective and those of us who were in Shadow Cabinet must accept we did not make a persuasive case that the SNP had underachieved nor did we provide an attractive, distinctive set of policies.

In future we have to set out a credible political alternative to what is being offered by the SNP. But I believe the real challenge which faces us is to change the terms of the debate in Scotland. Both Labour and the Tories have responded to the election by seeking to create more autonomous parties. This is the right thing to do, but we need to realise that if the next election is all about which party is most distinctively Scottish, who is most parochial in their political approach, then we will not win. The SNP have that territory sewn up. So we need to frame a different debate about what Government at Holyrood should do to create the Scotland we want to live in. Beyond independence, the SNP’s ‘vision’ of Scotland’s future is incoherent. When they talk about fiscal autonomy, as evidenced by their plans on Corporation Tax, they are describing a Scotland where business taxes are low but social investment is high – a traditional ‘Scandinavian’ approach to public spending but with Reaganite low taxes. Of course this simply doesn’t work, and their arguments for lowering Corporation Tax have unravelled on this basis. They have postured as being a social democratic party, but succeeded in getting Tory businessmen like David Murray to support them because of their support of a right-wing economic model in an independent Scotland. Far from protecting public services their recent Spending Review has put a sword to them. At a time of rising youth unemployment they have slashed funding for Further Education. They are freezing the council tax, awarding Local Government a settlement which is a real terms cut of over £700 million over the Spending Review period, while at the same time instructing councils to meet the SNP’s election pledges. The result will be huge cuts to local services, particularly in education and social work.

This is not sustainable and I hope the candidates for leadership will accept that it is not. We should be clear we will take a different approach. Yes we pledged a council tax freeze next year and so we should stand by that. But after 2013 central government should not impose a freeze on local authorities. With the gap increasing between funding for council services and the demands placed on, this is an increasingly regressive policy. It leaves our elderly paying high charges in sheltered housing, our disabled people receiving less care, and hits educational provision for our children. It is damaging socially and economically. The council tax freeze is now clearly saving far more money for those who can afford to pay more than those who can’t, many of whom receive council tax benefit anyway. When I hear SNP politicians defending the freeze for the wealthy they sound like Tories defending the poll tax in the eighties. No-one likes paying more taxes but we should make the case everyone is paying for this freeze through the withdrawal of local services or extra charging for them, be it car parking or use of sports facilities. Yes, let us reform local taxation. Let us make it more progressive, let us ensure those on lower incomes get a better deal. We should continue to oppose a local income tax, but other changes should be considered. What is clear is that a five year council tax freeze is wrong.

While pursuing policies which we believe will make Scotland a fairer society, we should also be clear that growing our economy is at the heart of our approach. In the debate over what new powers the Scottish Parliament should have, the goal should not be new powers for their own sake but how they will benefit the Scottish economy. In light of the SNP’s victory and the forthcoming referendum prominent figures in Scottish Labour have rightly sought to provoke debate over what our future stance on the constitution should be. Both George Foulkes and Henry McLeish have suggested we should endorse a more federal UK and devolve more tax powers. We have to take such proposals seriously and cannot ignore this debate. But I would want to urge that we think carefully about what new powers we should support. If we devolve responsibility for welfare spending to Holyrood what impact will this have on the Scottish Government budget? Will it be a more or less generous system? There are key questions on tax as well. If all responsibility for taxation is devolved to Scotland this will create tax competition within the UK. Scotland could set lower top rates of tax to entice high earners to live in Scotland. This might benefit us but it would be to the detriment of other parts of the UK and could provoke other devolved governments to cut taxes for high earners as a response. Similar fears have been expressed over devolution of Corporation Tax and a race to the bottom over tax rates across the UK. This is why the STUC have warned in their excellent paper on Corporation Tax that the danger lies not only in the proposal to cut the tax but in creating unhealthy tax competition across the UK.

I do not say that we should not support more powers for our Parliament. Indeed, I do not believe the current Scotland Bill goes far enough in giving the Scottish Government borrowing powers. My argument is that we should not support new powers because we believe it is politically expedient to do so, but because we believe it will benefit Scotland and our people. Because I joined the Labour Party not to be a Unionist or a even a Devolutionist, but to be a Socialist (despite what the Scottish Left Review will tell you).Nationalism should be the politics of the past. A political creed based on national identity rather than equity of opportunity is regressive. Our vision is universal and the idea that we should focus only on a fairer society in Scotland while the welfare of working people in Cumbria and Newcastle is somehow irrelevant is ludicrous. At the last election we should have been more confident in our own politics. If we argue for the fairer and more just society we believe in, with the policies to make that case, then we will have an alternative vision for a better Scotland which we can take to the people with confidence.

Richard Baker is an MSP for the North East of Scotland Region and Labour’s Shadow Cabinet Secretary for Finance