Scots Tories setting out a positive vision for post-referendum Scotland

Andrew Morrison

On these pages in November 2012, I predicted that the Scottish party leader Ruth Davidson would eventually reverse her ‘line in the sand’ position on devolution of further powers to the Scottish Parliament, namely powers over the levying and collection of taxation.

The concept of our party supporting the transfer of additional powers was first espoused by Murdo Fraser. Alex Fergusson - who endorsed Murdo Fraser’s leadership bid – has also set out his support for this move on Egremont and sits on the board of the DevoPlus campaign group to further that objective.

I had predicted that this breakthrough would come during Ruth Davidson’s leadership – and I use the term breakthrough very deliberately – but not until the ‘Yes’ camp were defeated at the Scottish Independence referendum, now fixed for 18 September 2014.

Put simply, the Scottish electorate needs a more compelling vision of exactly what Scotland they can expect to see after voting ‘No’ at the referendum, and they need that vision set out for them now, before the referendum.

Ms Davidson has stepped up to the plate and furnished a centre-right vision for Scotland’s constitutional settlement within the UK post-2014. No longer would the ‘tax and spend’ members of the Scottish Parliament be allowed to practice fiscal irresponsibility unchecked. No longer pursuing blanket policies of free NHS prescriptions and free concessionary bus travel for all - including fellow MSPs and millionaires - without suffering from the discipline of having to raise the necessary tax revenue to pay for those policies.

Whether the Scottish electorate decide policies such as universal free benefits during times of fiscal constraint, or not, is up to them to decide. Our role is merely to argue our case. We should not deny a legislature the democratic rights which a growing number of electors would like to see it gain because we fear the governing party would use those powers to the contrary of what we would do (i.e. they raise the burden of taxation whereas we would reduce it). We lost that basis of argument in 1997 on the referendum on Scottish devolution, and are still suffering from it. It is time to get ahead of the curve for once and all on this particular issue.

With greater fiscal autonomy, the Scottish budget would directly benefit from policies which help promote economic growth and simplify the tax system, thereby increasing tax compliance and collection rates. The Scottish Conservatives hand is strengthened because it is our message of sensible tax rates, a pro-enterprise economy, and cracking down on tax evasion which chimes perfectly with this type of devolution settlement.

Ruth may well have alienated figures such as Lord Forsyth, whose backing was instrumental to winning the leadership of the Scottish Conservatives in the autumn of 2011, but this is silly. We are all Conservatives first and foremost - our core values are the same. The reformist wing of the party should believe in reforming political institutions to further our beliefs of fairness, democracy and progress. Allowing a Parliament to determine its own taxation levels to pursue its own political priorities naturally follow from that belief.

The job of the TRG throughout the Scottish Conservatives’ review on greater devolution for Scotland must be to represent our grassroots members’ views and to ensure the process is not hijacked by figures such as Lord Forsyth, and some of the others who previously backed Ruth Davidson’s leadership bid, all of whom could potentially put the brakes on what has been a breakthrough announcement today.

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Andrew Morrison is a member of TRG Scotland, serves as the current Vice-Chairman of the Scottish Conservative & Unionist Party West of Scotland Regional Council, and stood for election recently at the Local Authority elections in May 2012. Andrew previously stood for the Holyrood constituency of Glasgow Pollok, being ranked number three on the Glasgow regional list.

Self-defeating ritual of ever-higher beer duty must end

Nik Darlington 11.11am

Beer duty has bilged by more than 40 per cent in the past four years, which means when you buy that satisfying pint of ale in your local pub, around 190ml belongs to the taxman.

Meanwhile, more than 5,800 pubs have shut up shop since 2008 at a rate of eighteen per week. Quite frankly, it’s miserable, the sort of news to drive even the most abstemious to drink.

MPs, pub and brewing industry groups and campaigners have made a number of attempts in the past to quash the beer duty escalator, including a successful debate in the House of Commons last November, but to no avail. The Chancellor plans to go ahead with a further increase in next month’s Budget.

Another increase in beer duty would compound the folly of minimum unit pricing and put ever-more pricing pressure on pubs. There’s a semi-plausible argument from some publicans that MUP could chip away at some of the supermarkets’ competitiveness and send punters back through their doors. Yet any gains from that are surely offset by the pain in everyone’s pockets of a dearer pint.

There is a certain silver lining. Politicians have always tinkered with booze taxes, and we can be pleased that Mr Osborne doesn’t wish to follow the lead of his Liberal predecessor Sir William Vernon Harcourt, who in 1895 tried to balance the budget on the back of beer duty alone.

In that November debate, economic secretary to the Treasury, Sajid Javid, hinted that beer duty was simply too lucrative to freeze or reduce, garnering £35 million this year and £70 million the next. Furthermore, it’s Labour’s tax. True, but it would not be the first time this Government had reversed a fiscal act of the previous government.

One gets the feeling that there’s a moralistic streak at play, similar to that driving the MUP policy. I have no truck with being slightly moralistic about alcohol, which is as dangerous a substance as any if in the wrong hands, in the wrong volumes, at the wrong time.

Yet that is why further inflating the price of proper beer in pubs is so self-defeating. Surely it is reasonable to encourage the survival of pubs as focal points of the community, and relatively safe, secure and well-monitored drinking environments. You don’t have a publican withdrawing that second bottle of Buckfast as you slouch on your sofa on Wednesday morning.

So to finish up, register your support with the Mash Beer Tax launched today and request the Chancellor calls time on ever-higher beer prices in pubs.

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Mansion Tax: a self-indulgence to make a point, not fix a problem

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Nik Darlington 11.10am

In the 1920s and 1930s the sociologist Elton Mayo conducted a series of experiments to test the productivity of workers at the Hawthorne Works in Chicago. Later in the 1950s, Henry Landsberger interpreted the data to show how people change their behaviour when being studied closely. It is a crucially inherent human bias, called the ‘Hawthorne Effect’ after the location of its first monitoring.

Translate it to the public realm today and it can go some way to explaining why figures of public attention and certain significance embrace a stance on an issue purely for political effect. A psychological underpinning for ‘triangulation’ tactics, perhaps, to wrong-foot opponents; or simply self-indulgence, in the knowledge that one’s every utterance is being watched and measured by others.

Something like a mansion tax is such an indulgence. The only problems it solves are those embedded in its proponents’ own thinking.

True, there is a concerning malfunctioning of the free market in property in Britain. We live on a small archipelago, which as much as it might surprise cultural apologists is actually a very popular archipelago. Demand for scarce land and property is great, compounded by our little archipelago containing some of the most ravishing sylvan scenery known to man.

It is correct for any good Tory to question the proper functioning of free markets. Perhaps the most invidious Tory fallacy of recent decades has been the conflation of capitalism with free market libertarianism.

Yet let’s not chuck the proverbial cherub out with the bath water. Penalising the owners of expensive homes is not the proper way to correct property market imbalances. The unintended consequences of an arbitrary tax ceiling are well-explained by Toby Young here.

Furthermore, while it is true that the London property market is a bit berserk in parts, many marketplaces have their relatively crazy quirks. Should we whack a super tax on the salaries of footballers at Manchester United, because they collectively outweigh the wages of all players plying their trade in the lower leagues of Wales, Scotland and Northern Ireland? Actually, if anyone has proper stats on that, do let us know.

But of course not, that would be daft. What’s more, while we ought by default to dislike the coarse linguistics of ‘mansion tax’, who is the arbiter? This country house is a bit mansion-like; this dearer two-bed flat isn’t. The ‘problem’ of high property prices is not confined to London either. Even the good burghers of provincial towns like Cheltenham could fall prey to the punishments that shall befall ‘unearned’ wealth (again, who is the arbiter of whether wealth is ‘earned’?).

The the fact that good ‘working people’ might one day want to work so hard that the fruits of their labour reap a £2 million property is of no concern to proponents of a mansion tax; albeit such a purchase would most likely be weighed down by several years of mortgage debt and the onus to work on and on to pay it off. Moreover, the fact that someone, somewhere, is being hammered at approximately £80,000 a pop for owning an expensive home is little consolation to the person on an annual salary of one-quarter that figure (if you can identify a consolation, please say it).

The mansion tax’s introduction would be a policy of momentary significance and soon forgotten - relegated into the midst of myriad other taxes and conveniently forgotten by a succession of politicians drawn to the windfall begotten by negligent fiscal drag.

Ultimately, if the sole intention of a mansion tax is to send a message - and I cannot discern a practical fiscal rationale - it is philosophical navel gazing, not pragmatic policymaking. In other words, the type of approach followed by socialists supped on grand ideas and structural-theoretical solutions. Merely meaningless gesture politics.

Yet people can do funny things when they know other people are watching.

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At last, the Scottish Tories seem to be moving in the right devolutionary direction

Nik Darlington 3.02pm

At long last, the Scottish Conservatives are moving in the right direction on devolution.

Nearly one year ago, when commenting on the launch of the unionist Devo Plus group, I wrote that the Tories have to embrace greater devolution if they are to make any meaningful inroads in Scottish politics. Ruth Davidson assumed the leadership with a supposed "line in the sand" and little more than lukewarm acknowledgement of the Scotland Bill (which received Royal Assent last May). That line in the sand had to shift.

Now it seems to be doing so. Ms Davidson is already undertaking an internal review of devolution, though that in itself is only encouraging in part. More so is the recent intervention by Scotland Office minister David Mundell, the sole Tory MP north of the border.

The Scotsman reports today on research compiled by the Centre for Public Policy for the Regions, calling for MSPs to take control of £22 billion worth of extra tax-raising powers. And indeed they should. I’ve long maintained that a Tory revival in Scotland is largely dependent on Holyrood becoming as responsible for raising money as it is for spending it. What’s more, greater tax flexibility could be the making of Scotland.

Mr Mundell appears to have embraced this position and claimed that the pro-union parties will have put a proper devolution offer on the table long before the SNP gets round to spelling out its own case for independence (the amateurish efforts over the past year frankly do not count - or at least Nat supporters should hope so).

Scots will vote to remain in the Union, of that I have little doubt. Yet without a compellingly pro-devolution case put in advance, many shall do so begrudgingly. That is why this is a crucial moment for the Scottish Conservatives. Remember, however Scottish he himself is, David Mundell is merely an ‘English minister’ in the government of an ‘English Prime Minister’. To resonate truly, the party in Scotland must follow his lead.

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Autumn Statement 2012: A lot of Balls and a bleak midwinter?

Nik Darlington 2.57pm

I was on BBC Radio Scotland earlier talking about the Autumn Statement and just before I was due on air with the Daily Record's political correspondent, the weather report told tales of snow drifts, icy condition and road closures - painting a generally bleak midwinter picture.

In isolation, that report could’ve been about the British economy. Those heady summer days of Olympian achievement and a return to growth seem ever-more distant. This is the backdrop to what the Chancellor had to say to Parliament today, and the inclement economic weather should never be forgotten.

Indeed, Mr Osborne is set to break his own fiscal rules. Yet Gordon Brown also did that, but in the boom years - a symptom of the budgetary misbehaviour that characterised the Treasury under the feckless oversight of Mr Brown and Ed Balls.

The former Prime Minister might have lost a stick insect, but his former lieutenant was not grieving. Cheeks puce and puffed out, he berated, bewailed, gloated and tore into the man who’s office he might have had if only Alistair Darling were a lesser man.

When Ed Balls is good, presentationally at least, he is very, very good. Yet George Osborne is rarely better than when sparring with his opposite number (one gets the impression they enjoy it). I’m as unconvinced about the ‘blame Labour for all the economy’s ills’ line as I was at the time of the 2011 Budget, however Mr Osborne continues to play the card strongly, persistently and - judging by the looks on the faces of Eds Miliband & Balls - effectively. How well it plays with the public is another matter.

Former Tory whip Michael Fabricant relayed to the Chancellor the instantaneous thumbs-up from the bond markets, stating “it is the markets that matter”. Apt, to the point and certainly good news - though what voters think cannot be taken lightly either. I know what someone as acutely political as Mr Osborne will be thinking about first thing he wakes up in the morning.

Conservative MPs will be pleased with the scrapping once again of a 3p rise in fuel duty. Harlow’s MP Rob Halfon has led backbenchers on a spirited and tireless campaign against the duty, though one has to question how much gas is left in that tank. Can fuel duty rises be fought forever?

The lower threshold for income tax continues its rise towards £10,000, as expected. The personal allowance shall be £9,440 come next April.

Also to be welcomed is the further cut in corporation tax to 21 per cent. Let us not forget that it was as high as 28 per cent when the Coalition took office. Businesses can invest a greater proportion of their profits into the likes of expansion and employment. This is very good news.

The hit on working-age benefits will not play well, of course. Shrieks of unfairness can already be heard around the tenured ranks of social policy think tanks, the opposition and the like. And indeed it doesn’t look good. However, there is also the moral argument that at a time when wages are struggling to keep up with inflation, if rising at all, should welfare handouts continue to outpace? It’s a tough call, but I think it is the right one. It shall save nearly £4 billion. We can slice and dice this, that and t’other bits of public expenditure but until welfare payments are properly addressed, that ruddy old deficit shan’t budge much.

Those are my two-pennies’ worth. Plenty of ink shall be spilt and trees felled elsewhere in pursuit of explaining today’s Autumn Statement. I shall just finish with a brief thought on shale gas. I’ve had my concerns in the past about fracking for shale gas. I’m still not convinced of the safety record but I’m open to being so; and if it is the energy panacea some claim it to be, then by all means it should be pursued. Though not at any environmental cost.

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General Anti-Tax Avoidance Principal offers a new judgement-based approach tax

Matthew Robertson 10.39am

"The hardest thing in the world to understand is the income tax." - Albert Einstein

The list is never-ending:

  • May 2012 - 2,000 senior public officials on more than £58,200 were found to be paid “off payroll”, which could minimise their tax bills, according to a leaked letter obtained by Exaro, the investigate website and the BBC’s Newsnight programme.
  • November 2012 - A tax avoidance scheme, marketed by Ernst & Young, that claimed to license newspaper mastheads to avoid tax, has been thrown out by a tax tribunal.
  • November 2012 - Amazon, Google and Starbucks accused of being “immoral”, “manipulative” and of “practising tax avoidance on an industrial scale”.

It is difficult to find someone who doesn’t have an opinion on tax,  a meritocratic society relies on the idea that everyone pays their fair share yet there must also be incentives for individuals and companies to create wealth.

This dilemma has troubled governments for as long as tax has existed and the above examples show that they are not always successful. The onslaught of globalisation and multinationals has further hampered the ability of national governments to tax efficiently as the question of residency becomes less clear.

The constant attempts to avoid tax by individuals and corporations has created a behemoth of tax legislation with some rules dating back centuries. In 2009, Lexis Nexis revealed that the UK’s tax code has more than doubled in size since 1997, going from 4,998 pages in 1997, to 11,520 in 2009, making UK tax code the longest in the world.

Many have called for HMRC to have more powers and better resources to tackle tax avoidance as government initiatives have failed to prevent both individuals and corporations from ‘bending’ the rules. The implementation of IR35 is a prime example of misplaced tax legislation. It took effect in April 2000 and was designed to eliminate the avoidance of PAYE and National Insurance contributions (NICs) by ‘contractors’ who for all intents and purposes are employees.

As the BBC example above illustrates, IR35 has not delivered on its promises and moreover, it has had a negative impact on some businesses as clients become reluctant to engage with some professionals for fear of them being liable for PAYE on their fees. Furthermore, in some instances the legislation is unfair on certain freelancers as employer NICs at 13.8 per cent need to be paid as well as employee NICs and income tax of up to 50 per cent. IR35 has been found out to be unworkable and there is no evidence that it raises any income for the Treasury.

The failure of IR35 is similar to why Albert Einstein could not understand income tax but could comprehend quantum physics. That is, applying a rules-based approach to tax is always likely to fail as rules are open to abuse by their very nature. Rules cannot be applied to individuals in the same way that the laws of physics can be applied to atoms. The wording of any rule can be interpreted to have been complied with or not and it is because of this that many have been able to work within the rules to minimise their tax liability.

The Institute of Chartered Accountants in England & Wales (ICAEW) realised this a while ago and adopt a principles based approach to ethics:

"The ICAEW pioneered the principles-based threats and safeguards approach to Codes of Ethics in the accountancy profession internationally. We believe that this approach is flexible but robust because it focuses on the spirit of the guidance and encourages responsibility and the exercise of professional judgement. The guidance can be applied to the infinite variations in circumstances that arise in practice and can be adapted to rapid changes of the modern business environment."

Professional judgement is the key; HMRC should be able to analyse the economic substance of transactions to determine whether the behaviour represents the true nature of the business or whether it is merely avoiding tax. It is encouraging to see the ‘General Anti-Tax Avoidance Principal’ Bill being debated in Parliament on Friday. Richard Murphy, one of the main contributors to the bill, makes a good case for how successful a rule such as this could be.

One of the main ways Starbucks was able to make a loss in the UK was to pay a 6 per cent royalty to another Starbucks company for the use of intellectual property attached to the brand.

Murphy argues: “The profit stays within the group, and it cannot be justified as commercial since no one would pay a royalty for thirteen out of fourteen years to make continuing losses.”

In other words, economic substance has nothing to do with actual trade and is merely being pursued to avoid tax. An anti-tax avoidance principle would allow HMRC to apply a greater degree of professional judgement instead of following set rules.

Furthermore, it would dampen the obsession of creating more and more rules to close ever more elaborate loopholes. There is nothing inherently wrong with individuals and businesses managing their affairs to minimise their tax liabilities; no one would argue that investing in an ISA is immoral tax avoidance.

Nevertheless, there is a difference between arranging your business in the most tax-efficient way and creating transactions that merely exist to avoid tax. The complexity of the tax system is emblematic of such efforts to create loopholes, it is time for a new approach, one that allows more judgement to be applied.

Finally, I gave him the first word, so I shall give him the last.

‘We can’t solve problems by using the same kind of thinking we used when we created them.’ – Albert Einstein.

Follow Matthew on Twitter @FlatFootTory

No obstacle to Tories’ supporting more devolution after Scottish independence referendum is won

Andrew Morrison 10.48am

There are many things to be encouraged by in Ruth Davidson’s leadership so far. It is fair to say that Ruth is seen as a moderate, especially due to her pragmatic positions on social issues such as same-sex marriage and minimum unit pricing for alcohol.

The first stance is a recognition of a majority view and the fact Conservatives should not waste political capital on taking unpopular stands on social issues that are of no consequence to the truly pressing issues in our society, such as slowing social mobility, growing inequality between the best and worst performing state schools, and an increasingly inefficient Scottish NHS while life expectancy in some pockets of Glasgow is as bad as third-world nations.

The second stance is necessary in order to try and curtail Scotland’s disproportionately high alcohol consumption. A dogmatic approach against all forms of state intervention is not actually helpful if we are to achieve Conservative objectives such as reducing the number of problem households and cutting anti-social crime.

As for the pledged ‘line in the sand’ on devolution, this was offered during the leadership election and was designed to counteract fellow contender Murdo Fraser’s pledge to form a new pro-devolution centre-right party.

The Unionist camp will win the independence referendum, and win it by a clear enough margin to kill the issue dead for a generation. The campaign headed by the cross party Better Together group and the Scottish Tories’ Friends of the Union are designed to attract non-party political folk to our cause and are focusing the minds of all activists and elected politicians.

Ruth’s big challenge shall be the reversal of the ‘line in the sand’ position, to recognise that post-referendum a significant number of Scots shall sympathise with that point of view, especially as the mechanisms for administrating the tax-generating powers bestowed by the last Scotland Act are implemented and the public are made fully aware of the changes taking place.

For nearly everyone in the Union, the elephant in the room is the funding arrangement. The Barnett Formula. As a Conservative, I believe an organisation charged with the responsibility of representing the people also has the responsibility to show it is spending the people’s money sensibly.

My biggest criticism of the Scottish Parliament – one shared by others in the United Kingdom – is that the policies implemented by the Scottish Government have no impact on the tax revenue received by them because it is supported by the UK Treasury.

There is no incentive to rejuvenate Scotland’s under-performing economy because it will not translate into a direct boost in tax revenue. The Economist once compared MSPs to ‘teenagers living on an allowance’ – and like teenagers, that usually leads to discussion on whether they earn their keep sufficiently or not.

Tory reformists believe in reforming public services, welfare and the tax system in order to achieve a fairer, safer, more prosperous and coherent society. This reforming instinct extends to reform of the constitutional settlement that exists between Northern Ireland, Scotland, Wales and England. It naturally follows that moderate Conservatives would not blindly rule out any further devolution of powers.

I believe Ruth Davidson is a moderate, reforming Tory and will accordingly construct a compromise on greater fiscal autonomy and further devolution but only after the independence campaign is soundly defeated.

After doing so, the centre-right in Scotland can realise it’s full potential by talking about how one raises the taxes which are spent on public services, and consequently get Scottish political discourse on to discussing what we get out of public services such as housing, education and health rather than merely what we put into them.

Andrew Morrison is a member of TRG Scotland, serves as the current Vice-Chairman of the Scottish Conservative & Unionist Party West of Scotland Regional Council, and stood for election recently at the Local Authority elections in May 2012. Andrew previously stood for the Holyrood constituency of Glasgow Pollok, being ranked number three on the Glasgow regional list.

Scotland’s unionists have to spell out what a ‘No’ vote means for devolution

Nik Darlington 11.25am

Today in Edinburgh, David Cameron, Prime Minister of the United Kingdom, meets Alex Salmond, First Minister of Scotland, to sign off the terms of an independence referendum to be held in autumn 2014.

Some are calling it historic. Not quite. The referendum itself shall be historic. Nonetheless, the occasion demands more gravity than it is being given. Britain’s summer of all summers has neutered the separatist cause; the polls consistently suggest a comfortable victory for the unionists. But with two years until the vote, the dangers remain.

Alistair Darling is right to favour next year. It is just one of the regrettable oversights of the Prime Minister’s negotiations. Though on balance, despite my criticisms of Mr Cameron on the radio yesterday (approx 1hr33’ in), presentationally speaking today has been well-handled. He has largely got what he wanted to achieve, and done so in a way that does not look like an overbearing Englishman - indeed, he has even permitted the appearance of his kowtowing to Mr Salmond.

Yet we are where we are. There shall be a vote, it shall be a straight ‘yes-no’ gunfight, and it shall take place approximately seven hundred years after the Battle of Bannockburn.

Over at the Spectator, Alex Massie worries about the absence of a second question - that outlet for the majority caucus of Scots who desire more devolution within the Union. This was put to me on the radio yesterday and I have to say that I agree. I’m not necessarily in favour of a second question because that could result in a close and indeterminate outcome, and subsequent re-match. However, like Alex, I worry about a unionist campaign that offers a bit more devolution if Scots vote to stay, but doesn’t spell out what it looks like.

Mr Cameron is guilty of making such a fudged offer; his Scottish party leader, Ruth Davidson, is guilty of making little such offer at all, as I have said on these pages before. Refusing to countenance further devolution within the Union is not so much drawing lines in the sand, as putting one’s head in it.

Principally here we’re talking about taxation. Holyrood currently spends money that it hasn’t raised. Until Scottish politicians have to raise taxes as well as spend them, there will be no fiscal impetus for a Tory revival. That much is simple. The Devo Plus campaign ought to be considered.

But putting party concerns aside, now that we have the terms of the referendum campaign, the unionists have to make a case for a better Union settlement once Scots have voted to stay.

Also putting party concerns aside, I do believe that there needs to be a more prominent role for Gordon Brown. Alistair Darling is an excellent choice to front the unionist campaign. Yet if the former Prime Minister desires a central role (and I understand that he does), one should be found. Fraser Nelson dismisses the notion entirely, though for reasons that seem to me discontinuous. Whatever his image down south, Gordon Brown retains a certain following and respect in Scotland.

Follow Nik on Twitter @NikDarlington