Alex Salmond delivers his speech to delegates at the SNP's spring conference on April 12, 2014 in Aberdeen. Photograph: Getty Images.
Show Hide image

To challenge nationalism, liberals must be bolder about what they can achieve

Progressive parties should use the opportunity of the economic recovery to suggest that politics can lift its sights. 

Returning to London last week after a trip to Glasgow to see family, I had the words of Alex Salmond ringing in my ears. Speaking as the European election results were coming in, he remarked: "I’m not going to spend the next few months or years talking about the difference between good Romanians and bad Romanians." This is what he is able to offer the Scots, an opportunity to talk about something else, while they watch us in the south squabble about immigration and Europe.

Though I’m Glasgow-born and studied law in the city, I’m no nationalist. Yet I have seen some of the best minds of my generation resuscitated by the SNP. While the UK was tumbling into one war after another, the SNP spoke to people who were uncomfortable about the implications of those wars. Now with the referendum on independence just a few months away, Salmond and his colleagues are describing an imaginarium of freedom and prosperity. I’m pretty sceptical about their claims - for example, I find the Treasury's analysis on the cost of independence more persuasive than the Scottish government's paper on the "independence dividend" - but the idea that an independent Scotland might become a progressive beacon to the rest of the UK became more plausible on Sunday night every time another English region reported its votes.

Then at 3am, something happened. London declared. We’re alright Scotland, said the capital, stick with us. Perhaps we hatch a plan to speed up the building of HS2 and then we can all secede together, the liberal metropoles with the progressive north.

But this is likely to be fantasy. This is a small enough country as it is, with a declining proportion of world GDP. Splitting it up into parts is unlikely to work, though the direction of travel in policy towards stronger city-regions and "devolution max" for Scotland potentially provides all the same benefits over time without constitutional and economic ruptures.

Meanwhile, the urgent question for English politics – with a feedback effect in pre-referendum Scottish politics – is whether the liberal imagination is up to the job of confronting right-wing populism and, just as importantly, the views and attitudes that it speaks to. Talking about racism is important. Frankly, and for the most part irrationally, I’ll be thinking about the fact that almost four million fellow citizens voted for Ukip the next time I travel outside a major city. I don’t believe that most of them are racist but I’d prefer to know for certain and, if they are, then I’d like to persuade them to reconsider their views. Progressives have fought and won other battles on rights and recognition in the past two decades, going all the way back to the introduction of the Human Rights Act in 1998 through changes in the law to recognise the acquired gender of transsexual people and more recently gay marriage. It looks like we have to restart a discussion about race.

On immigration, on the other hand, all the major parties have been talking about it without stop and they are in a tough stance already. Yet the likelihood is that they now try out initiatives that are damaging to the economy and the prospects for integration of immigrants. But the economic risk in particular will be difficult to illustrate over the next year as GDP growth out-performs many of the forecasts. Writing in the Times last week, John Hutton and Alan Milburn suggested that limiting immigration will lead to a 3 per cent drop in GDP per capita by 2060. That’s not a compelling argument right now. The same appeal to narrow economic margins undermines the Better Together campaign. Yes, Scotland may benefit by £1,000 per person per year by being in the Union but when GDP per person is more than £25,000 per year then this can seem slight.

The better approach to winning over voters – and those people who didn’t vote at all last week – will be to use the opportunity of the recovery – the change in mood as well as the uptick in investment – to suggest that politics can lift its sights. It is to follow Salmond in talking about something other than the difference between good Romanians and bad Romanians.

For him this will be creating a sovereign wealth fund from oil revenues to invest in the future, attracting entrepreneurs to Scotland and revitalising public services. Can UK politicians make visions too? They could match the idea of a sovereign wealth fund and raise it, by committing future shale gas revenue on top of the oil money. If we’re taking assets out of the ground, let’s use them to make new ones in their place. Could we use half of the money to create a fund that pays for nature reserves and the other half is a start on the largest education endowment in the world?

Scotland is rightly proud of its science and research base. In truth, the links between scientific institutions north and south of the border are pretty deep. So let’s be positive about this part of our public realm too. Other things being equal, it’s still possible for the government to run a small budget surplus by the end of the next Parliament even after it has doubled the science budget. Earlier I wrote flippantly that we could speed up the building of HS2. Perhaps that isn’t feasible. But it would be quite a signal if we started building the northern end at the same time as the southern one. And presumably, as a rich country with cheap debt, we can invest in more than one grand project at any one time. I don’t know what the next one should be but could we start a competition to decide?

This might not be the right set of policies but the underlying point is simply this: if liberal politics – the idea that freedom and progress are possible and desirable – is to prevail over the next year, first in the Scottish referendum and following that in the general election, then it has to give some powerful examples of what it can achieve. Mere talk about "reconnecting" with the electorate or sub-poetic speeches about why together is better will not be enough.

Emran Mian is director of the Social Market Foundation

Getty
Show Hide image

Taxation without benefits: how our tax system increases inequality

We often hear the progressive income tax used as a proxy for all tax when it actually accounts for just over a quarter of the tax take.

Tax may not be the burning issue on everyone’s minds over the next month, but the Panama Papers leak has proven that the thorny issues of who pays what, and what level of tax is fair, are ones that are never too far away from the public consciousness.

One of the most important annual publications on tax is the Office for National Statistics’ Effects of Taxes and Benefits on Household Income. Published today, it shows, among other things, the proportion of income paid in tax by people at different points on the income spectrum. This may sound like the natural domain of the data nerd, but it actually tells us some rather interesting facts about our system of taxes and benefits.

First, the good news. Our much maligned welfare system is in fact a beacon of progressiveness, drastically reducing the level of income inequality we see in this country. In fact, overall, taxes and benefits are quite substantially redistributive. Without them, the income of the richest 20 per cent of households would be 14 times higher than the poorest 20 per cent. With them, that gap falls to only four times.

The benefit system as a whole decreases the Gini coefficient, the most frequently used measure of inequality, by 14 percentage points. For anyone who sees taxes and benefits as a key component in reducing economic inequality, or boosting the incomes of the poorest, or, frankly, tackling social injustice, this is rather welcome news.

But now for the bad news.

While our welfare system is undoubtedly progressive, the same cannot be said of our tax system when looked at in isolation. The poorest face a disproportionately heavy tax burden compared to the richest, paying 47 per cent of their income in tax, compared to just 34 per cent for the richest. Last year (2013/14) this difference was 45 per cent – 35 per cent, and the year before (2012/13) the gap was 43 per cent – 35 per cent. So while the proportion of income paid in tax has fallen slightly for the richest, it has increased for the poorest.

While some taxes like income tax are substantially progressive, those such as VAT and Council Tax are not. Even after adjusting for rebates and Council Tax Benefit, the poorest 10 per cent pay 7.1 per cent of their income in council tax while the richest 10 per cent pay only 1.5 per cent.

Should this matter, if our system of benefits continues to narrow the gap between rich and poor? Well, yes, not least because that system is under severe pressure from further cuts. But there are other good reasons to focus on the tax system in isolation from the benefit system.

Polling by Ipsos MORI has shown that the public believes that the tax system by itself reduces inequality, and it is often spoken of by politicians as if that is the case. We often hear the progressive income tax used as a proxy for all tax, for example, when it actually accounts for just over a quarter of the tax take.

Understanding why the tax system does not by itself reduce inequality is therefore important for both thinking about how tax revenues could be better raised, and for understanding the importance of the benefit system in narrowing the gap between the richest and the poorest.

John Hood is Acting Director of the Equality Trust