Anthony Rush, a retired industrialist and Labour Party member, has an alternative view of how Jim Murphy can deliver economic justice in Scotland.
In his speech to the David Hume Institute, Jim Murphy articulated some causes of inequality and to some extent – obviously limited by time – he sets out answers. He said:
“My case is that Scotland flourishes when the people of Scotland flourish. That Scottish business does well, when workers do well. And that greater equality is not just the goal of a prosperous economy, but rather a prerequisite for it.”
In a fair society all people should do well.
Scotland’s business is heavily reliant on companies who are not domiciled here. To flourish, Scotland has to be an attractive place to work and to invest. A more equal society will make Scotland such a place. But transforming our society cannot be achieved overnight and it can’t be achieved by marginalizing and punishing those who are seen as “fat cats”.
Implementing the outcomes of a fairer society will not cause equality to happen. Creating a more equal society has to be driven by society, not just by politicians. Politicians have to assist economic and social changes without marginalising institutions, firms and individuals who may be changed or even replaced.
The deterioration of our educational standards is a result of failures by successive governments. I question whether too much universality is the antitheses of equality. Jim puts forward ideas which are compliant with the aims of the Education (Scotland) Act 2000 – to develop personality, talent and physical abilities – yet a full school lifetime has gone by before a Scottish political leader advocates the need for curricula to fit the need. Such is the need and urgency that I am left asking why Jim is somewhat bashful in his proposal.
When Jim refers to “before tax interventions” he isn’t at all bashful. He is clearly against the exploitation of the labour of the working man. Fairly rewarding a man’s labour is an essential to a fair and equal society. Any abuse is a wrong – though perhaps not always indictable – and governments have a duty to outlaw it.
The misuse and abuse of migrants in any shape or form is and should be legislated against. But Jim has to be careful not to be too selective. There are many consumers who use services not only provided by low or no-pay migrants but also by the wider black economy.
Transformation to a more prosperous and happy society will require our education and health institutions to change. Both are devolved and Jim refers to the need but does not cost the changes. Whilst the responsibility lies with the Scottish Government, Jim proposes solutions which are in the hands of the Westminster Government – a Mansion Tax and tax on “Bankers’ bonuses”.
Assuming there is a Labour government in Westminster, adopting a solution which relies on capping run-away rewards for high income earners can be changed by successive governments or prevented by coalition partners. Politicising rewards make them grounds for dissent and dissatisfaction. Conflating punitive taxes with essential improvements in education and health will not create a change in social attitudes for the good. Conversely it will create resentment and increase envy across our social spectrum.
Nations enjoying greater income equality have the very rich and very poor. Jim is proposing measures to redistribute wealth and to address unwarranted reward. He opens himself to criticism. The Mansion Tax can be seen to have the same unfairness as the so-called “Bedroom Tax”. As for “Bankers’ Bonuses”, why pick out just one section of society who are paid obscene and unwarranted rewards? Only by convincing and persuasive reasoning will higher earners be persuaded that higher taxes to pay for better education and health services are a price worth paying and those that propose them are a party worth electing.
Scottish Labour has to see “business” as a partner in social transformation. It has to recognise that the structure of business in Scotland limits the potential effectiveness of employee share ownership. Pay differentials and demarcation have been a cause of disharmony at least since the end of the Great War. Trade Unions sought to aggressively protect them.
Harmony can be promoted by a culture of information and consultation between all levels working together. Mutual understanding of the value of individuals’ contributions creates a culture in which exploitation is eliminated. Company sponsored SVQ programmes can assist in correcting the educational deficit suffered by individuals. They can be a route through which new careers and companies can be created to the benefit of the economy. Moreover, enlightened employment practices may encourage better self-awareness and provide a measure of preventative health care.
Jim must present evidence that raising the top rate of income tax to 50p will have any of the desired results. In the last 30 years, revenues from income tax have consistently been a little short of 30% of the total. In that time there has been a substantial increase in the income of the top 10 percentile relative to the lower 10 percentile. And, the proportion of tax paid by the top 10 percentile has increased.
The last three recessions have resulted in substantial changes in the labour market including the employment rate of women and more married women. In addition there has been a boom in the number of pensioners despite that they work longer on average, maybe because on retirement their earnings fall by 40% on average.
Changes in taxation, which is regulated by more than 8,000 pages of rules, needs more thought before it can be seen as being fair. The rules have developed hugely since the beginning of the 20th century, to raise sufficient revenue to pay for increasing public spending. At the same time it has been necessary to regulate against evasion and aggressive avoidance. Tax law is further complicated by provisions to incentivise investors and to protect the incomes of certain sections of society.
Using our tax system to address inequality needs to take account of the labour market and the type and balance of the economy. Moreover, it has to be designed to attract new and replacement inward investment as well as encourage organic growth through increased productivity and new ventures. And it cannot sweep away the measures which are intended to prevent hardship.
Jim has thoughts on the need to grow the economy to generate wealth and thereby additional tax revenues. He also takes cognisance of the potential for detrimental changes caused by the decline of oil and gas. The importance of a growing skills base is also on Jim’s radar. If Scottish Labour are to be believable in their aim to create a fairer society they need to make a convincing case on how they are going to deliver a successful growing economy.
What Jim doesn’t address are those issues which are causes of indignation – Trident and privatising the NHS – issues which give rise to strong and opposing views and which are poorly explained by politicians. Explaining the added value to Scotland’s economy of retaining Trident and having a clear strategy to get best value from the NHS must be a dividend in the fight for a fairer society.
I have no difficulty with Jim not comparing our Gini coefficient with those of our Scandinavian neighbours. However, if we are to reduce inequality, a reduction in our coefficient should follow. It is gratuitous to portray the Scandinavian model as being the perfect society. But that is not to say that we shouldn’t learn lessons from them and others. Some of those lessons will be an anathema to those who hold fast to red lines such as the “NHS should be free at the point of delivery”.
Equality may have improved when there are no longer parents willing to make the cost of privately educating their children their largest item of expenditure; when totally free health care is not regarded as a universal right; and when an aversion to work is not subsidised by the majority who see work as a duty. That is how the Scandinavian model works and they all give up substantially more as a proportion of earnings in direct and indirect tax for it.
I fear that increasing the top rate of income tax, imposing a Mansion Tax and taxing bankers’ bonuses will not bring the benefits Jim suggests. To the contrary I am minded that they will detract from attracting investors and entrepreneurs.
I believe that Jim Murphy is the only party leader in Scotland who can tackle inequality. The other leaders are characterised in my mind as sometimes not having advanced from being middle class students who never left home. I also believe that Scottish Labour are the only party who are not intrinsically divisive. But they need to have ideas which are in their control if elected in Scotland. The challenge is whether Labour’s members – past, present, new, old – are prepared to accept that when Jim says inequality is immoral it is a criticism of our whole society, not just “fat cats”.