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John is a senior consultant at Media House International (MHI) and the views of the column are John McLellan’s and not that of MHI.
UK Budget: Middle-class taxpayers are under attack by Labour. Here’s why it’ll be even worse in Scotland
Definitions are tricky chaps when you’re a left-wing politician. ‘What is a woman’ flummoxed John Swinney and Sir Keir Starmer, and now pinning down who is or isn’t a working person is a conundrum worthy of Call my Bluff for the Labour party ahead of the Budget.
Someone who goes out to earn a living, said the new Queen of VAT Mean, Education Secretary Bridget Phillipson, which for the most part can’t include me because like many people I can go months of working and never have to leave the house. But as I don’t employ anyone or have shares or property other than the house in which I live, maybe I do count as the salt of Bridget and Sir Keir’s earth after all.
But it doesn’t appear to include someone who gets up at the crack of dawn to open their shop or café if they have been dumb enough to employ people and therefore pay the employer’s National Insurance contribution. And it might be only the beginning of their problems when a raft of new laws is imposed through the Employment Rights Bill, which has every potential to become a sick note charter.
‘Sleekit’
On Sunday, Ms Phillipson couldn’t even bring herself to admit that a small business owner clearing £13,000 a year was a working person, and the Cabinet’s political enforcer Pat McFadden was at it on Radio 4 yesterday, insisting that defining a working person wasn’t the right question. The groundwork has been laid for “sleekit” Chancellor Rachel Reeves, as Scottish Conservative leader Russell Findlay described her Budget, to clobber employers with higher NI contributions, but less so to persuade people that ramping up the cost of doing business has no knock-on effect on working people, however they are defined.
It’s hard to tell if the public dislikes broken manifesto promises more than politicians squirming with sophistry to avoid admitting a pre-election pledge isn’t worth a screen image, but from Labour’s plunging poll ratings I suspect it’s the latter.
People aren’t so stupid as not to see that higher prices, lower wage settlements and recruitment freezes are the likely outcome, and that the so-called £22 billion black hole has been created by inflation-busting, public sector pay increases. The gamble appears to be that throwing the proceeds of a tax raid worthy of King John at a so-far-unreformed NHS will sweeten a very bitter pill.
Depressing reality
It will certainly be very welcome in St Andrew’s House, where an NHS bung worth billions in England and Wales will generate more cash for the Scottish Government in Barnett consequentials, but without any need to pump the loot into the Scottish NHS if the SNP choses other priorities. Of course, spending the cash elsewhere could come at a political cost, but using it for other public sector pay settlements, to avert school closures from strike action for example, will be tempting.
But north and south of the Border, the depressing reality is that neither the Labour nor SNP administrations have much appetite for genuine public services reform ─ Budget tax rises are expected to dwarf savings by a ratio of seven-to-one ─ and even if they did, it would be kept well under wraps with what looks like a knife-edge election in 19 months. With 22 per cent of Scottish workers employed by the state, neither party has much incentive to take on the public sector unions to reduce the burden on private sector taxpayers who ultimately foot the bill, nor to accept that with “only” 17 per cent of the workforce in England and Wales in the public sector ─ who on average are paid £2,000 a year less than their Scottish colleagues ─ we get significantly less bang for our buck.
Indeed, it’s quite the opposite, with the Sunday Times reporting the civil service head count in the Scottish Government has rocketed by over 80 per cent from 5,120 in 2015 to 9,222 this year, with over £4 million going on press and communications officers alone. In fact, over 32,000 people are employed in Scottish Government agencies, with 4,500 in the Scottish Prisons Service, the biggest, and just over 4,000 in Social Security Scotland.
Whacking higher earners
Whatever the Budget reveals, the real sting for Scottish voters is likely to come in December when Scottish Finance Secretary Shona Robison sets her Budget and Scottish income tax at her disposal. With cuts being resisted at all levels and public sector unions steadfast in their opposition to compulsory redundancies, whacking higher earners might seem like an easy option, all the usual stuff about the broadest shoulders carrying the biggest burden as if they don’t already.
But it will only add to the growing sense that ambition and aspiration are there to be capped and crushed as soon as people achieve any degree of comfort. Green MSP Ross Greer’s call for a “mansion tax” of 15 per cent on the purchase of houses worth over a million, and for the 12 per cent Land and Buildings Transaction Tax band to kick in at £600,000, has not been dismissed by Ms Robison who needs to horse-trade to to ensure her Budget is passed. With Labour’s VAT on private schools from January, plus the likelihood that Scottish councils will be freed to “let rip” on council tax and there could be an unprecedented financial assault on the Scottish middle classes. Meanwhile, taxpayers are supporting some 270,000 Scottish working-age people who have never had a job.
Parroting her predecessor George Osborne, Ms Reeves wrote in the Sun on Sunday that hers would be a Budget for “the strivers”, and even if they are on NHS waiting lists and unable to own their own home, which seemed to be her definition, unless they work in the public sector ─ or not at all ─ they can strive all they like but, like the rest of us, the taxman will get them in the end.
