Scottish Service Tax

Part of the debate – in the Scottish Parliament at 9:31 am on 30 March 2000.

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Photo of Tommy Sheridan Tommy Sheridan SSP 9:31, 30 March 2000

I am disappointed, given that the subject matter we will be discussing affects some 2.3 million Scots, at the turnout. I hope that we can encourage a debate that in future will inspire even more interest.

I am pleased and somewhat excited that we have the opportunity today to bring a motion to the Parliament that, from a socialist perspective, offers Scotland an opportunity significantly to redistribute the income of our country. Some members may be aware that, as an elected socialist, I stand for an independent, socialist Scotland in which our country's massive wealth and resources are commonly and collectively owned and controlled for the benefit of all our citizens.

Currently, society is horribly divided. Obscene wealth coexists with shameful poverty. Too many pensioners are poor; too many workers are low paid; too many children live in poverty. As a Scottish Socialist party representative, I stand firmly for a complete transformation of our society. My vision is of a democratic, socialist society based on provision for need and the promotion of human solidarity and co-operation, not the continuation of the creed of greed and the worship of profit.

The problem is the limitation of the Parliament. Unfortunately, instead of the adult Parliament that was envisaged by the Scottish Constitutional Convention, whereby Scotland would raise and retain all of its taxes, we have a sort of parental guidance Parliament that has to seek permission from its adult cousin, Westminster, if it wishes to spend more than its allotted block.

The beauty of the Scottish service tax proposal that is to be discussed this morning is that it would breach the restrictive fence. We have managed to get under the wire, so to speak, in that we have been able to make a proposal that concretely and clearly promotes progressive taxation and the redistribution of wealth, despite the restrictions of the Scotland Act 1998.

Many in Scotland say that they support income and wealth redistribution. Indeed, that used to be a cornerstone of the Labour party before its Blairite conversion to the market and to the worshipping of wealth and profit. Today, despite the restrictions and despite the limited resources available to our small party, we are able to present an academically researched proposal that would redistribute income in Scotland and drag the principle of progressive taxation and redistribution back on to the political agenda, where it should be.

Let us be clear: the council tax is deeply unpopular. It is regressive; it is extremely costly to administer and collect; and its associated rebate system is prohibitively complex. What does the Institute for Fiscal Studies say about it? Its figures illustrate that the richest 10 per cent in society pay a lower fraction of their income on council tax than the poorest 10 per cent. The richest 10 per cent pay 1.22 per cent of their income; the poorest 10 per cent pay 7.5 per cent of their income. Even after benefits are taken into account, the poorest tenth still pay 1.86 per cent. They pay more in council tax than the richest tenth.

In the past 25 years, there has been a massive shift in wealth and income from the poor to the rich. It is shameful, but the wealthy not only pay less in taxation generally, but pay less as a proportion of their income than the poor. Wealth has not trickled down over the past 25 years of increased growth. The rich have merely got richer while the poor have, unfortunately, got poorer.

The richest 1,000 list in The Sunday Times recently recorded a staggering statistic: over the past 12 months, the richest 1,000 in the United Kingdom increased their wealth by 27 per cent to a combined total of £146 billion. I repeat: £146 billion among 1,000. In this Parliament, we are trying to meet the needs of 5 million Scots and our total budget is £16 billion. The richest 20 people in Britain have a combined wealth of £14 billion; they have a combined wealth that is almost the same as the budget for this Parliament, which has to cater for 5 million people. It is no wonder that I am a socialist. We have to try to cater for essential services in health, education and local government, and we have to look after our children and our elderly, yet our budget is less than the combined wealth of the top 20 people in the country.

The wealthy are not paying enough in either income taxes or local taxes. With the Scottish service tax, we want to start to change that in Scotland. The Scottish service tax would replace the council tax. It would be levied on each individual according to their income; it would therefore be related to their ability to pay. It would be set nationally, collected by the Inland Revenue via the pay-as-you-earn system and then distributed to each local authority according to a much improved distribution formula that must be worked out in conjunction with the local authority, trade unions, the Convention of Scottish Local Authorities and community groups.

In return for the loss of the fiscal control that the council tax system offers—even though it is a very low level of control in the setting of the council tax—each local authority would be allowed, under the Scottish service tax proposal, to set its non-domestic rate and to keep its non-domestic rates. If such a system were in place in Glasgow, given the amount of non-domestic rates we collect, the city would be £64 million better off.