The shadow chancellor is using the same arguments as the SNP on corporation tax. Photo: Getty
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Ed Balls’ corporate tax announcement is a pain for Scottish Labour

The shadow chancellor's recent praise of competitive rates of corporation tax makes life harder for the Scottish Labour party, which opposes the SNP's plan to reduce the corporate tax rate in Scotland.

The SNP’s plan to reduce the corporate tax rate in Scotland to 3 per cent below the UK rate has been subject to a lot of criticism – and with good reason. It’s a terrible plan. Just ask the Canadians. Between 2007 and 2012, Mark Harper’s Conservative government cut Canada’s federal rate of corporation tax from 21 per cent to 15 per cent in the hope companies would hire more staff, invest in research and purchase new equipment, thus boosting their profits and growing the economy. Instead, businesses hoarded the savings and hiked executive pay. Frustrated by such brazen corporate greed, the then governor of the Bank of Canada, Mark Carney, took the unusual step of telling Canadian firms to free-up the billions of dollars’ worth of “dead money” they were sitting on: spend it productively or return it to investors, Carney said, but don’t just let it rot in the bank.

Up until now, Scottish Labour has aggressively pursued the SNP over its corporate tax policy. It has argued that Alex Salmond’s obsession with slashing the tax proves an independent Scotland would not be the Nordic-style social democracy envisioned by many Yes campaigners. By contrast, it would be a low-wage, light-touch tax-haven run for the benefit of predatory multinationals. But that attack line (hopelessly overcooked, as ever, by Scottish Labour’s press team) was abruptly undermined this week when Ed Balls began singing the praises of low corporate taxes. During a speech at the LSE yesterday, Balls said: “The last Labour government left Britain with the most competitive rate of corporation tax in the G7 and we are committed to maintaining that position.”

To be clear, Balls is not talking about lowering UK corporation tax from its current rate of 21 per cent. Indeed, Labour remains committed to reversing the 1 per cent reduction planned by George Osborne over the coming 12 months. But the logic of Balls’ argument – that Britain can attract investment by undercutting other major economies with “competitively” low business levies – is indistinguishable from that used by the First Minister to justify his party’s position on corporation tax. Just substitute “Scotland” for “Britain” and “London” for “the G7”. (Incidentally, Labour’s UK-wide case for lower corporate taxes is every bit as weak as the Nationalists’ Scottish case: according to the TUC’s Duncan Weldon, British companies have built up a staggering £600bn corporate surplus over recent years.)

Balls’ announcement highlights one of the key problems for Scottish Labour as it attempts to bring its central belt and west coast heartlands back on side before September. For all the party’s talk of Scotland’s “progressive” future within the UK, it can’t disguise the fact that Balls and Miliband are almost as hawkish on the deficit, welfare reform and immigration as the Tories. It is no good Johann Lamont deploying the same-old exaggerated rhetoric against the SNP (“Look beyond the saltire. Look beyond the plaid … We are the crusading force in Scottish politics”) when the next UK Labour government intends to match the Coalition’s spending cuts pound for pound in 2015/16. Likewise, Gordon Brown can’t really expect people to take his warnings about SNP economic policy seriously when, as Chancellor, he presided over a debt-and-finance-fuelled boom that ended in Britain’s worst financial crisis since the 1930s.

In some respects, the obstacles Johann Lamont faces in trying to craft a progressive case for the Union mirror those of Ed Miliband as he heads into the next election. Both leaders have to explain what centre-left radicalism looks like in the context of tight budgetary constraints. Both have to cope with opponents who are more adept at communicating their core messages. Both are also, unfortunately, hogtied by the past. Just as the wider British electorate still seems to hold the Blair and Brown administrations responsible for the state of Britain’s economy, so the Scottish electorate looks back on eight underwhelming years of Labour rule at Holyrood and thinks ‘We can do better’.

Of course, the key difference between Lamont and Miliband is that Miliband actually runs his party. Lamont, on the other hand, has to work with the policy programme she is given. It is difficult to overstate how awkward this is for Scottish Labour. The SNP’s corporate tax plan was a gift. As the Canadian experience shows, cutting corporate taxes makes little economic sense – unless your goal is to boost company profits without generating additional revenues for the state. Nor does it make any real political sense. Scottish business remains overwhelmingly hostile to independence, while representatives of the broader Yes campaign have repeatedly expressed their opposition to the policy and resent having to answer for it at public meetings. Yet, from now on, whenever Scottish Labour attempts to raise these points, all the SNP has to do is refer them back to Balls’ speech. It’s a familiar argument, but one that bears repeating: the only viable future for the Labour party in Scotland is more autonomy. For as long as it remains anchored to Westminster, the SNP will have the advantage. 

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Commons Confidential: Dave's picnic with Dacre

Revenge is a dish best served cold from a wicker hamper.

Sulking David Cameron can’t forgive the Daily Mail editor, Paul Dacre, for his role in his downfall. The unrelenting hostility of the self-appointed voice of Middle England to the Remain cause felt pivotal to the defeat. So, what a glorious coincidence it was that they found themselves picnicking a couple of motors apart before England beat Scotland at Twickenham. My snout recalled Cameron studiously peering in the opposite direction. On Dacre’s face was the smile of an assassin. Revenge is a dish best served cold from a wicker hamper.

The good news is that since Jeremy Corbyn let Theresa May off the Budget hook at Prime Minister’s Questions, most of his MPs no longer hate him. The bad news is that many now openly express their pity. It is whispered that Corbyn’s office made it clear that he didn’t wish to sit next to Tony Blair at the unveiling of the Iraq and Afghanistan war memorial in London. His desire for distance was probably reciprocated, as Comrade Corbyn wanted Brigadier Blair to be charged with war crimes. Fighting old battles is easier than beating the Tories.

Brexit is a ticket to travel. The Independent Parliamentary Standards Authority is lifting its three-trip cap on funded journeys to Europe for MPs. The idea of paying for as many cross-Channel visits as a politician can enjoy reminds me of Denis MacShane. Under the old limits, he ended up in the clink for fiddling accounts to fund his Continental missionary work. If the new rule was applied retrospectively, perhaps the former Labour minister should be entitled to get his seat back and compensation?

The word in Ukip is that Paul Nuttall, OBE VC KG – the ridiculed former Premier League professional footballer and England 1966 World Cup winner – has cold feet after his Stoke mauling about standing in a by-election in Leigh (assuming that Andy Burnham is elected mayor of Greater Manchester in May). The electorate already knows his Walter Mitty act too well.

A senior Labour MP, who demanded anonymity, revealed that she had received a letter after Leicester’s Keith Vaz paid men to entertain him. Vaz had posed as Jim the washing machine man. Why, asked the complainant, wasn’t this second job listed in the register of members’ interests? She’s avoiding writing a reply.

Years ago, this column unearthed and ridiculed the early journalism of George Osborne, who must be the least qualified newspaper editor in history. The cabinet lackey Ben “Selwyn” Gummer’s feeble intervention in the Osborne debate has put him on our radar. We are now watching him and will be reporting back. My snouts are already unearthing interesting information.

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution