Hey, pal – fancy 75 quid in yer pocket, nae questions asked? Just vote for me on May 6. Cheers.
OK, Labour isn’t exactly bribing potential voters with hard cash, but it has offered them a £75 voucher to spend in the high street as part of Anas Sarwar’s Covid recovery plan.
He’s also offering money to help pay for “staycation” holidays. These two policies alone could cost over £400 million, according to a BBC calculation. We thought the SNP were the masters of retail politics, but Labour have taken cash for votes onto the next level.
It doesn’t stop there. Labour’s manifesto promises free bus travel for under-25s, TV licences for pensioners, a £500 grant for those on furlough, a £100 water rebate, interest-free loans for electric cars. And that’s only the small change. The big-ticket items include a minimum income guarantee, a jobs guarantee, and 50 hours per week of childcare all year round plus free school lunches all year.
Labour matches the SNP on doubling the child payment to £20 a week, and setting up a National Care Service – plus abolishing non-residential social care charges. They’ll increase the pay of social care workers, mostly women, to £15 an hour, or over £31,000 a year. About the only thing Labour haven’t included are the SNP’s promise of free bikes to poor children and laptops for all, but no doubt that’s in the small print.
What’s not to like? The trend of Scottish governments since devolution has been to extend universal rather than targeted benefits – like free personal care, free tuition, free prescriptions. The roof hasn’t fallen in, so why stop there? Everyone says that social care is a national disgrace, that there is too much child poverty and that people should all have enough to live on. Don’t we want the high street to recover? Children to be properly fed? The unemployed to retrain rather than languish on the dole?
It is hard to argue and, in this election, no-one is – not even the Scottish Tories. They’ve even criticised the Scottish Government for not spending enough on the NHS. Indeed, the only people asking awkward questions are the Institute for Fiscal Studies. Its reaction to Labour’s plans (as with the SNP’s last week) could be summed up as: you’re having a laugh. “It is hard to see how they could be delivered without substantial increases in Scottish taxes,” said the respected fiscal think tank, “affecting not only those with incomes over £100,000”.
The IFS baulks at the “unprecedented” jobs guarantee to under-25s, long-term unemployed and the disabled. They are all promised a well-paid post in the public sector. This could mean 60,000 individuals being paid the national living wage at a cost of around £1.4 billion.
Yet, like the SNP and the Tories, Labour have promised not to increase taxes at the basic or higher rate. Nor is there any commitment to increase taxes on those earning over £100,000. Labour say they will support such a supertax “only if it is needed”.
Nicola Sturgeon has, of course, rejected restoring the 50p tax band on the highest paid because it would actually reduce tax revenues though “behavioural changes” – i.e. people either avoiding paying it or leaving the country. Mind you, voters might not miss those in the public sector earning six-figure salaries – like Ms Sturgeon’s Permanent Secretary, Leslie Evans, on £175k.
Perhaps surprisingly, neither Labour nor the SNP advocate wealth taxes. The only party grasping that nettle are the Scottish Greens who want a 10 per cent tax on millionaires. Nor have any of the main parties addressed the real elephant in the fiscal room which is council tax. Everyone realises that it is out of kilter with house prices over the past 30 years, but no-one wants to increase it substantially, or introduce that local income tax the SNP used to promise in their manifestos. Labour now promise a “fairer alternative” but give no details. No party has managed to square the council tax circle or seems likely to.
So, how is this all to be paid for? Just to pose that question nowadays is to invite accusations of “austerity” and even “Thatcherism”. There has been a remarkable shift in political attitudes to spending during this pandemic. “Tax and spend” has been turned into “don’t tax and spend”.
Some of this may be down to the growing popularity of what is called “modern monetary theory”, a branch of economic thinking that is fashionable among Democrats in the USA. MMT, as it is usually called, claims that public spending is not limited by anything other than a government’s willingness to print money. There is no need for governments to only “spend what it can afford” because that is highly flexible.
Rishi Sunak has delivered the highest budget deficit in history. Yet inflation has not taken off. And that has come on top of over £600 billion in money printing or “quantitative easing” by the Bank of England in the past 10 years. Nothing untoward has happened. Indeed, interest rates remain at their lowest levels in history.
MMT has many critics, including left-wing economists like Paul Krugman. But the theory anyway doesn’t really apply to Scotland because the spending and borrowing powers of Holyrood are strictly limited by the Barnett Formula. The SNP would like to change that, of course, with independence. But for the foreseeable future, spending in Scotland has to be paid for, either by taxes or by the block grant from the UK.
Scotland gets about 20% more per head in spending than England. But that credit line has been maxed out long since. The Scottish Government, and now Labour, seem to be using the £8.6 billion in Covid relief money to build the foundations of socialism. The only problem with that is that it expires at the end of the pandemic. Labour’s manifesto talks optimistically about unspent Barnett money, as if there is a stack of it behind the Scottish Government’s sofa, but that is not exactly a sound fiscal approach.
There is another problem. Scotland’s politicians may have become advocates of modern monetary theory, but it isn’t entirely clear that the voters agree with them.
After all, Jeremy Corbyn’s big spending manifesto, of which Anas Sarwar’s is a direct descendant, was comprehensively rejected by voters in the 2019 General Election. Brexit was an issue there too, of course, but so is independence in this one.
Voters may be old fashioned, but there is a lot of evidence that they expect their governments to be cautious spenders – to observe “prudence”, as Labour’s former leader Gordon Brown always promised when he was Chancellor.
New Labour avoided giving uncosted hostages to fortune, because voters know perfectly well they eventually have to pay for them. Perhaps things have changed, but I’m not so sure.
When Labour’s election leaflet dropped through my door last week, I noticed that it avoided listing too many of Labour’s spending commitments.
It kept mainly to generalities about combating climate change, improving schools, generating jobs. Could it be that Labour think they need to underplay their spending so as not to frighten the electoral horses?
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