ON Wednesday, we find out if George Osborne will make changes to the government’s proposals to cut tax credits.
The Chancellor has promised that he will respond to widespread criticism from all parties in his Autumn Statement. Let’s hope he doesn’t come up with something even worse.
As they stand, the proposals are a cruel attack on those least able to defend themselves. It’s worth remembering that the people worst affected by these changes are those working long hours for low wages and struggling to bring up a family. Around 18,500 families will be affected across Edinburgh, losing up to £3000 a year from a household income which barely covers the basics as it is.
All of Scotland’s MPs, with the exception of lone Tory David Mundell, voted against the government’s plans on tax credits. I, and my SNP colleagues, also pressed for control over the tax credits regime to be transferred to the Scottish Government. This, like all of our other suggestions for greater powers during the debate on the Scotland Bill, was voted down by the Tories with their Westminster majority.
What was more surprising was that our plans were opposed by the Labour Party. It would be fair to say that Labour is in disarray on a number of fronts, but on proposals to transfer powers over tax and social security to Scotland it needs a rethink. It resists devolving tax or social security powers, repeating the mantra that it believes in the “pooling and sharing of resources across the UK”.
Sounds good. Until you realise that the Tories’ view of pooling and sharing resources is to cut taxes for the richest and benefits for the poorest, creating an even more unequal society. Actually, in arguing that the Scottish Government should top up Tory tax credit cuts, Labour must logically accept that the “pooling and sharing of resources” isn’t working.
It’s just a pity that it won’t tackle the problem at source. It’s a bit like the sink overflowing and water pouring on to the kitchen floor. Labour is demanding that the Scottish Government mop up the spillage – whilst the SNP would like to turn off the tap.
We will see on Wednesday exactly what the cuts are and have a better idea of how much money would be required to mitigate them. I’ve no doubt that the SNP government at Holyrood will do what it can to protect the poorest and most vulnerable – as it has done by creating the Scottish Welfare Fund and defending people from the bedroom tax.
But this will be a lot harder to do than it would have been had we had control. For one thing, up to 80,000 Scottish families may simply be taken off the system altogether. The Scottish Government will get the power to create new benefits in the current Scotland Bill – but not until 2017 or 2018. The tax credit cuts hit next April!
And we still do not know whether the government would use the universal credit system to simply cut other benefits if the Scottish Government were to bring in top-up payments for people losing tax credits. This could mean that whatever the Scottish Government gave the UK government would take away, leaving people no better off.
But the biggest problem is this. Without the powers to stimulate and grow the Scottish economy, the Scottish Government’s overall budget is set by the very same George Osborne. And he has been cutting it. That means that mitigating loss of tax credits means cuts elsewhere. There’s a limit. We cannot forever compensate for Tory cuts – whether to public services or to individual household budgets.
I’m not against those who can afford it paying more tax but Labour’s suggestion of a flat rate tax increase on everyone will penalise the poorest most. Moreover, putting up taxes in Scotland to fund Tory cuts effectively means a transfer of money from basic rate taxpayers in Scotland to higher rate taxpayers in England. That would be a pretty perverse form of pooling and sharing indeed.
Tommy Sheppard is SNP MP for Edinburgh East