The Road From Serfdom – read it if you dare

The Road From Serfdom – read it if you dare

by Bill Jamieson
article from Tuesday 17, June, 2014

I CANNOT recall a time when I have been more depressed about Scotland’s future. It’s not so much the prospect of independence, though it throws up a multitude of uncertainties. And it’s not just the hateful and vicious abuse being meted out to anyone who dares declare support for Better Together. 

If this is the “civic Scotland” that lies ahead post independence we might as well shut ourselves away now and don’t dare venture an opinion on anything. As in the fabulously popular East Germany, you never know who might be listening. 

But that’s not the main reason for my despair. It’s the dreary inevitability of a country setting out on independence with yet more borrowing and yet more tax. 

The political world that awaits us on “freedom”  is one that will be dominated, not by one but by two Left of Centre parties – the SNP, which has been desperately wooing Labour voters with high cost pledges on welfare and child care – and Scottish Labour, whose idea of fiscal autonomy is the freedom to adjust taxes upwards only. 

Am I being overly concerned? Jumping at imaginary shadows? Take two indications in the past few days. One was a declaration from John Swinney, Cabinet Secretary for Finance and “Sustainable Growth” that Scotland would borrow billions of pounds in the first few years of independence in a bid to kick start the economy and end austerity. 

Now the SNP administration has previously proposed increasing public spending by three per cent in each of the first three years. It has now confirmed the extra money would be raised through borrowing.  A recent Scottish government paper on Scotland's public finances said its proposals for a three per cent rise would require an independent Scotland to borrow £2.4 billion in 2018-19. 

Another was an admission by First Minister Alex Salmond that he is considering replacing council tax with a local income tax. The SNP had previously proposed an initial rate of 3p in the pound for a local income tax. But according to a leaked report this would create a funding gap of at least £380 million. 

I’ll pass on the proposals unveiled by the Deputy First Minister Nicola Sturgeon for a written constitution on independence, “guaranteeing” among other things the right to a home. Who could possibly not agree? But what other rights and entitlements would not soon be crammed in to such a paper constitution?

You don’t need to be paranoiac on tax not to suspect rather more by way of property tax. Remember that the total number of taxpayers in Scotland liable to the 50p top rate of tax in 2010 was just 13,000. Just how much more tax will we need to heap from this little group to plug a multibillion pound black hole?  The tax increases necessary on this small group to plug the government’s fiscal gap would drive them out of the country.

More likely is a new tax on that less mobile asset: property. Who would not welcome a hefty Mansion Tax on all those stinking rich folk with three bedrooms and more? It would be a bedroom tax - by another name. 

Note that none of this helps to promote enterprise and investment or lift our economic potential one iota – unless, of course, you believe that it’s the government that creates economic growth by more public spending. But the likely reason GDP growth in Scotland is set to lag the UK overall by some 0.5 percentage points this year and next is, the EY Item Club wrote this week, is because of higher government spending and a larger public sector. 

What price a Centre Right party in Scotland with the courage and boldness to campaign for some of the proposals set out by Lord Saatchi this week in a paper from the Centre for Policy Studies? It’s a Thatcherite think tank, so make sure no-one’s watching you when you download it from the website. 

Lord Saatchi has brought two great gifts as chairman of the CPS. The first is an intuitive understanding of how a low tax regime can work to spur economic growth – and boost the tax coffers. And the second is a clear and forceful writing style. The analysis of the economist is expressed with the clarity of a natural communicator. 

 He sets out how Big Companies pose as great a threat to freedom as Big Government. The paper, published to coincide with the think tank’s 40th birthday, proposes that corporation tax is abolished for small companies. And Capital Gains Tax is also abolished for investors in small companies. 

It’s worth remembering, Lord Saatchi writes, that the average UK company has five employees. “The Policy, as I call it, would therefore abolish corporation tax for 90 per cent of UK companies, reduce the deficit faster than predicted by the Office for Budget Responsibility, expand employment faster than it predicts, increase competition, challenge cartel capitalism and let millions of people grow tall.”

The nation as a whole, he argues, would benefit from a change in culture as big as Right to Buy was in the Eighties. There would be greater economic growth, more competitive market places, and more freedom and independence from Big Government and Big Companies.

Ah! “Not applicable here!” goes the cry. But for years Alex Salmond has extolled the main prop to Saatchi’s argument – the virtues of the Laffer Curve – the way in which lower tax rates can result in higher tax revenues through higher growth. 

And it is especially applicable in Scotland, where our business birth rate, while showing an encouraging rise, still trails that of the UK and where, as a joint report last week from the Royal Society of Edinburgh, Scottish Financial Enterprise and ICAS pointed out, we have a problem of small firm sustainability – helping SMEs obtain the financial wherewithal to move to being businesses of scale. 

In an inspirational passage, Lord Saatchi well grasps how such small enterprise-friendly policy “has the capacity to provide and express ideals which are at the heart of Western civilisation. Its driving motive is a belief in independence, individuality, self-determination. And it meets the claim of men, as Aristotle put it, “to be ruled by none, if possible”. Or, if this is impossible, to be as independent as they can reasonably be.”

It’s the near total absence of such thinking in Scotland that leaves me fearful of where we will end up. Indeed, for a public figure even to utter such ideas would be to invite derision and abuse. Without liberty, freedom is meaningless. You can quietly download the paper from the CPS website from today. Or request a copy in the post – well concealed in a brown paper bag and preferably delivered at night. 

 

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