Scottish Parliament election is set to be a truly taxing affair

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By Alex Orr Alex_M_Orr

 

The issue of tax is set to form the key battleground for the political parties at the forthcoming Scottish Parliamentary elections on 5th May.

In April 2017, the Scottish Parliament will receive a package of powers. These include:

  • power to set the rates and bands of income tax on non-savings and non-dividend income
  • half the share of VAT receipts in Scotland being assigned to the Scottish government’s budget
  • and power over Air Passenger Duty and Aggregates LevySo, for the first time, significant powers will form a key plank of party manifestoes, and voters will face a spread of ideas and choices over the best balance of taxation and spending.

SNP

The SNP has said it will not adopt Mr Osborne’s announcement in the Budget to take anyone earning less than £45,000 out of the 40p tax rate. However, it does not intend to increase the 45p rate currently levied on those earning £150,000 or more a year.

The argument for not raising the top rate of income tax straight away is, according to Nicola Sturgeon, that this would see Scotland lose up to £30m a year due to income tax avoidance. She has however not ruled this out for future years and has asked the Council of Economic Advisers to see whether that risk can be mitigated.

George Osborne aims to put up the starting threshold for basic rate of tax from £11,000 to £12,500 by 2020. Nicola Sturgeon says she wants to put it up to £12,750 by the following year.

Scottish Labour

Scottish Labour has put on record that it does not want to see the threshold change north of the border. This is at odds with the UK party which has not objected to the Conservative government’s proposal.

Scottish Labour has also made clear that it wants to put 1p on tax rates in order to raise money “to protect public services”. It said it could give a rebate to those earning less than £20,000. In addition, it would like to see the highest rate of tax – affecting those earning more than £150,000 a year – raised from 45p to 50p.

Scottish Conservatives

A Scottish Conservative-appointed commission argued that the total tax burden should not rise any higher in Scotland than it is in the rest of the UK. It backs the Chancellor’s approach to thresholds, arguing that the proposals by the other political parties would make Scotland the most highly taxed part of the UK, but tax cuts look set to remain merely “aspirational”.

Scottish Liberal Democrats

The Scottish Liberal Democrats want a similar penny increase as Scottish Labour, aimed at protection of education spending. It also says it objects to the 40p threshold change.

Scottish Greens

The Scottish Greens have set out plans to introduce a new 60p rate of income tax for Scotland’s highest earners. The party wants the new rate to apply to those earning more than £150,000 and it also plans a new 43p rate, starting at £43,000.

The Scottish Greens have also said they want to reduce the income tax paid by those earning less than £26,500 a year.

Conclusion

Napoleon’s strategy of the centre has, rightly, become military gospel

The French emperor consistently put his army in the middle of two or more larger opponents, allowing him to fight, and usually defeat each army in turn, rather than facing an overwhelming combined force.

Like Napoleon, its tax proposals leave the SNP as broadly camped across the middle ground of Scottish politics as it could ever wish to be, opting for a tax policy that risks the minimum amount of harm, by having the minimum difference with Westminster. Nicer than the Tories, more responsible than Labour.

Though it may be tempting to raise the 45% rate of tax on those earning more than £150,000, that is a choice that it currently sees as more symbolic than useful in raising revenue.

Given its lead in the polls the SNP can almost certainly live until early May’s election with the tensions and inconsistencies of talking radical and redistributive on one hand, while acting safely centrist on the other.

Labour’s pitch looks like one that is aimed at its traditional core – a narrower appeal to a chunk of the more radical left, and is designed to outflank the SNP by being more “progressive”. That’s in the hope it can be peeled away from its recent adherence to the SNP but leaves its leader, Kezia Dugdale, being exposed on all fronts as being irresponsible for wanting to raise tax.

The Scottish Conservatives, in with a sniff of a chance of coming second in this election, are standing on a centre-right platform, positioning itself as the party of the UK and appealing to a traditional middle class following through opposing any proposed tax rises by other parties.

With the parties having set out their stalls on tax and spend, the Scottish electorate will for the first time face a spread of genuine choices in front of them when they enter polling stations on the 5thMay.

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Will a silent majority save the status quo again?

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By Graeme Downie @graemedownie

As one of my friends said, it’s hard to resist writing a blog when you already have a title with a Richard Nixon reference, just as it is impossible for anyone who lived through the Scottish independence referendum to write anything about the forthcoming EU vote without referring to the events leading up to September 2014.

Sure, much of the debate from both sides 18 months ago might have been uninformed and bitter but politics was front and centre in Scotland, something clearly shown in the turnout of almost 85%.  Observers were living and dying by the daily polls which were largely in agreement that the outcome would most likely be a “No” vote, one infamous poll notwithstanding of course!

And yet, the “Yes” campaign were insistent, their data were telling a very different story.  Their vote was higher than was being polled because they were engaging with new voters who were more likely to be on their side and more motivated to turnout.

That motivation is a key point when examining the forthcoming EU referendum.  The feeling prior to September 2014 was that “Yes” voters were more motivated to vote, whereas “No” voters were ambivalent – they might say “No” in a poll but they lacked the passion and belief in the Union to show up and vote.  As it turned out the “No” vote was every bit as engaged and passionate as “Yes” and that is probably what swung the result in favour of the Better Together campaign.

So, what does that tell us about the forthcoming EU referendum?  Unlike the Scottish Referendum, since the Prime Minister confirmed the referendum date, there have been polls showing both sides in the lead, making the 19% of consistently undecided voters even more crucial.  Both campaigns need to engage with that group of undecideds and convince them not only that their side is right that it is important they actually vote, meaning they will have to answer a key question from the electorate, “Why should I care?”.

This brings us back to a motivation and a few questions.  Are UK voters as engaged with the EU debate as the Scottish electorate was in September 2014?  How many of the 19% of undecided vote will vote?  Which set of voters will have the higher turnout?

In the Scottish referendum, both sides could appeal to identity and history, one with the Saltire and one with the Union Flag.  For the EU campaign, whilst the Leave campaign can wrap itself in the red, white and blue to encourage voters to their side, it is hard to imagine Remain doing that with the 12 stars to the same effect.  That could lead to a larger motivated vote to leave the UK, with many in the middle shrugging their shoulders and not showing up at all.

Remain must show passion and appeal to the heart as well as the head of electorate otherwise we could see a UK-wide turnout of around 55% with no silent majority out there to the rescue of the status quo as it did in September 2014.

Tax changes will harm rental market in rural areas

 

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Amanda Wiewiorka Owner / Company Director, Wardhaugh Property

With over 50 years’ experience, Wardhaugh has adapted to many changes in the housing rental market in Angus but we are currently facing a combination of tax changes which will hurt small investors, leading to an insufficient supply of suitable rental accommodation to meet demand in the area.

Unlike areas such as Dundee, where the largest demand is for flats, in Angus we see more families looking to rent larger homes.  The reasons for families choosing to rent are varied but can include the need to be flexible for employment reasons, concerns over interest rates or simply preferring not to be saddled with the extra responsibilities that come from owning a home.

Providing that type of quality housing in areas like Arbroath and Forfar, in common with other rural areas across Scotland, relies heavily on small investors.  Without the commitment of local landlords it is hard to create the necessary supply to meet demand.  Sadly, two new tax measures announced in London and Edinburgh have threatened our market here in Angus.

The first, dubbed the “Alice in Wonderland” tax, was announced by the Chancellor of the Exchequer at Westminster and restricts tax relief on residential properties owned by individual landlords to the basic rate of income tax.  This will disproportionately harm single-property and small portfolio landlords who, like other businesses, were previously taxed on profit but will now be taxed on their whole income.  I find it shocking that landlords with a small number of properties will be hit by this, whilst massive financial operations with thousands of homes under their control will be able to dodge this new tax entirely.

At the same time, the Scottish Government has announced that an extra 3% will be added to the Land & Buildings Transactions Tax (LBTT) for the purchase of second homes.  Whilst larger companies will be able to adsorb this cost through complex financial management, it will make life much harder for smaller players with tight margins looking to invest.

The joint effect of these changes could have a devastating effect on the rental market in Angus, driving small landlords out of the area and exacerbating the shortage of available properties.  I was recently speaking to one landlord who will be selling his portfolio of 4 properties very soon as a result of these changes.

At Wardhaugh, we are working to make sure our landlords are aware of these changes and doing all we can to make sure still feel able to maintain their properties in the area but it is difficult when many feel victimised and left at a significant disadvantage compared to the larger, impersonal investors from outside our community.

The importance of building a good reputation

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Alex Bruce @alexandersbruce

“No such thing as bad publicity” goes the old adage. But for the construction sector, conveying the right image is increasingly critical.

Many companies don’t give their reputation much thought. After all, order books are full and clients seem generally happy so why worry?

While true for now, most contractors also know from bitter experience how fierce competition for new business now is and how perilously thin profit margins have become.

Against that background, a little investment towards managing your reputation and promoting your achievements can go a very long way when it comes to winning your next contract.

Faced with a choice between a contractor who can actively demonstrate their credentials through regular media coverage and public recognition and one who makes those claims purely on paper, the decision for the client becomes a very easy one.

The issue of reputation doesn’t stop at the front line of new business opportunities either.

One of the biggest issues industry employers now face is to find suitably skilled workers to work for them. Faced with an ageing workforce and a chronic shortage of new talent, recruiting and retaining the skills your business needs to grow is a real challenge.

Ironically, statistics show that the average salary of someone working in the construction sector compares very favourably with other sectors of the Scottish economy, surpassed only by banking, finance and offshore oil and gas.

But preconceptions about the industry and career prospects within it have proved very difficult to shift. Careers advice in schools has come in for some sharp criticism from the industry in recent times. Some of it is entirely justified as politicians have sought to reduce the skills issue to a headline-grabbing apprenticeship numbers game.

Sadly, there is a lack of recognition for the superior quality of the four year indentured apprenticeship framework offered as standard in the traditional building trades. In that context, measures such as the suggested introduction of foundation apprenticeships risk devaluing the qualification and real damage to the development of specialist construction skills.

At the same time, the tradition of local officers from CITB going out and regularly banging the industry drum in local secondary schools seems to be on the way out as CITB’s remit adapts to new UK Government proposals for an apprenticeship levy on all large employers.

Hence, there is a growing expectation that building sector employers should be carrying out this missionary work themselves. What is more, your skills search will be that much easier if you can get in front of school pupils at an early stage and convince them why they should choose a career not only in the construction industry generally but with your company in particular.

Ultimately, it could mean the difference between having enthusiastic candidates approach you proactively about employment opportunities and having to go out and find those candidates, only to find they’ve already been put off a career in construction by their careers adviser – or worse yet, they’ve already taken an apprenticeship with a competitor that did take the trouble to come and talk to them in school when they were starting to think about careers.

What’s more, once recruited, your workforce needs to know they’re working for a company they can take pride in. Sustaining and promoting your company’s reputation is equally important to maintain internal morale and get the very best out of your team.

More than many other industries, building sector employers frequently suffer from having their own reputations tarnished by the poor practice of a small minority of rogue traders.

Once again, making the extra effort to manage your own company’s reputation can yield big returns with potential customers spooked by horror stories of botched jobs and bills spiralling out of control. At the sharp end, it could make the crucial difference between them going ahead with the work or putting it off for another day.

Whether to give you that crucial edge in the competition for new work, to attract and retain the skills and talent your company needs for the future or give customers the confidence they need to appoint you, managing your reputation and actively promoting your business has never been more crucial to future success.

This article first appeared in Project Scotland.

 

Is Scotland at risk of losing more than popular idols in 2016?

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Jordan Ferguson @jordanwferguson

2016 looks set to be remembered as the year we said goodbye to the Thin White Duke, the iron livered Lemmy and arguably the best bad guy Bruce Willis ever battered.  But this week has made me question if Scotland risks losing a lot more than popular idols in 2016?

Maybe less well known is that this week is the anniversary of Jim Sillars, John Robertson and Alex Neil forming the short-lived Scottish Labour Party (SLP).  Frustrated at the UK Governments inability to secure a devolved Scottish Assembly, on January 18th 1976 Sillars and Co. broke from the UK Labour Party but by 1979 had lost their seats in the House of Commons and, in 1981, fraught with infighting, the party was disbanded.

40 years later, the Labour Party in Scotland has rebranded as “Scottish Labour” seeking to avoid a similar annihilation but this time in the devolved Parliament to which the previous rebels were so committed. Polls this week predicted the SNP could repeat its General Election success swooping almost all of the 72 constituency seats and leaving Labour rushing around relying on the regional list system and trying to stay ahead of Ruth Davidson’s Scottish Conservatives.

Could this lead to Scotland losing an effective opposition?  

It would seem Nicola Sturgeon is the only one not taking an SNP win for granted.  In FMQ’s this week the First Minister thanked Kezia Dugdale for her assumption she would remain in office post-election.

Understandable as even the most optimistic of Labour voting optimists can’t deny a crippling General Election and a devastation series of polls.  The SNP Government look set to hold another five years in powered, and as leader the opposition the only hope Kezia has is to put together the best Shadow Cabinet she can and chip away at the crack in SNP policy.

Last year the Scottish people undeniably turned away from Labour leaving Ian Murray in a lonely positon. Flooding the party with new blood may rejuvenate the party and get some new policies but will this actually happen?  The regional list relies on the party membership deciding the order and likelihood of election but will those selected tend to be old faces?

Labours candidate list looks like a who’s who of failed politician, a mix of return candidates from the 2011 Holyrood elections and MPs who lost their seats in the 2015 General Election.  Can Anas Sarwar and Thomas Docherty, MPs voted out less than 12 months ago, really be the salvation Scottish Labour needs? Are they both hoping last year was merely ‘SNP mania’ and their experience can help lead the fightback?

It appears as though some existing Labour MSPs doubt this, with the politically experienced but still young Richard Baker retiring 10 weeks before the election for a job in the charitable sector.  Does Richard know something the others don’t?  However, others like Jackie Baillie, who was first elected in the maiden Scottish Parliament in 1999 remain.  Maybe she is right and all is not lost, maybe there is a long term strategy at play here or it could be it is too late and there are simply some in party not willing to accept defeat and force through the radical change in personality and policies needed to start a turnaround in the party’s fortunes.

This blog first appeared on PubAffairs

Beware political posturing on housing crisis

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By Graeme Downie @graemedownie

Housing is being setup as one of the key election issues in Scotland for May, as it rightly should.  Politicians, house-builders, landlords, academics and charities are all now agreeing about one thing – there are not enough homes in Scotland and the situation can safely be described as a “crisis.”

With such a grouping of people agreeing on a problem, you would think it would be relatively easy to find a solution for both the short and long term and that the solution should be equally simple – build more houses.  And, to some extent, everyone does agree that this is the solution but what no-one can agree upon is: Who pays? Where should new homes be built? What type of homes are needed? How quickly are these homes needed?

House-builders point out that they need planning permission in areas people want to live to make it economically viable to build new homes, but local authorities are struggling to grant permission in these areas due to the desired land being in a green belt or because of significant community opposition.  Charities argue for more affordable housing, often delivered as a condition of private housing developments but question if this is being delivered in a way which allows those on lower incomes onto the housing ladder.  Private landlords point out that they are able to provide high-quality homes now as well as in the future but feel they are being unfairly demonised, with many likely to scale back investment as a result.

As a result, politicians find themselves in a situation where the public realise there is a crisis and are demanding a solution but where there are no quick fixes available and a range of competing interests.  However, instead of presenting a reasonable plan for the long-term which seeks to balance those interests, the SNP and Scottish Labour have engaged in what appears to be a game of chicken with the numbers, constantly just upping the ante.  At their conference in Perth in October, Labour called for 12,000 affordable homes a year, a policy repeated just this morning with the aggregated figure of 60,000 such homes over the term of the next Scottish Parliament.  The SNP, meanwhile, have pledged 50,000 affordable homes.  Whilst this all might be effective politics and positioning, it is very one-dimensional and seems to imply there is a silver bullet solution to what is a complex and serious problem.

A comprehensive solution to a housing crisis surely needs more than just stating numbers which, even if implemented in full, would only address one part of the problem.  For example, it ignores the need to build mid-level homes to incentivise upgrading which would free up entry-homes and reduce prices lower down the scale.  There also doesn’t seem to be any detail provided by the parties about where these new homes should be built – if they should be in areas of high-demand increasing the overall cost, or in outlying areas to attempt to promote growth and reduce hot-spots.  There is also scant detail on how these homes will be paid for – will they be publicly funded through central construction and managed by local authorities or will additional requirements be placed on the private sector in exchange for a stream-lined planning system?

There have been some attempts at a long-term policy on these issues, particularly in the guise of the excellent report produced by the Commission on Housing and Wellbeing, chaired by former Auditor-General, Bob Black.  That report examined not only the complexity of solving Scotland’s long-term housing crisis but also the huge costs to the public purse through poor health and social problems that will result if action is not taken.

Most of all, the report emphasised the need to bring a whole range of different players to the table to agree a strategy and then stick to it for the generation it will take to deliver the desired results.  Sadly, it seems like political posturing will reign for the time being will win out for the time being but voters are smart enough to know when politicians are simply out-bidding each other rather seeking a proper solution.

Dutch presidency of EU will have positive impact on Scotland

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By Alex Orr @alexorr2016

At the beginning of this year the Netherlands took over the Presidency of the European Union, and there can hardly be a more critical time in the EU’s history for it to take the helm.

The Presidency, which lasts until the end of June, will seek to address current challenges facing the EU, of which there are no lack. These include the migration crisis, the UK Referendum on EU membership and the fight against terrorism.

In this role the Dutch presidency will shape policies and drive forward legislation that will impact on the futures of 500 EU million citizens, boosting growth and job creation through innovation, and delivering security.

The presidency work programme focuses on four key areas: Europe as an innovator and job creator; migration and international security; sound finances and a robust eurozone, and a forward-looking climate and energy policy.

As such its outcomes will clearly have an impact on Scotland. As an example, around half our international exports are destined for the EU, on which 330,000 Scottish jobs are dependent, and climate change is an issue that affects us all.

The European Union provides the biggest internal market in the world and is pledged to innovate in order to grow stronger and more competitive. In this respect Dutch are looking for red tape to be cut and rules that operate throughout the EU to be simplified and modernised, reducing bureaucracy and costs for citizens, companies and public authorities. This will clearly advantage Scottish businesses and consumers, as will be a renewed focus on greater cross-border co-operation in research and development.

There is also the small matter of the UK’s renegotiation of its relationship with the EU, the outcome of which will be put to the British people in an In-Out referendum, to be held before the end of 2017. As well as this is the ongoing refugee crisis and the desire to deliver common border controls and a co-ordinated asylum and migration policy as a solution to this issue.

While EU Presidencies can be seen as rather distant affairs, its outcomes should clearly be followed with interest here in Scotland.