Tag: think tank

REFORM SCOTLAND: Time for action instead of ‘perpetual talk’ on local government powers

Think tank calls more financial controls to be devolved from Holyrood to local authorities

Reform Scotland, the independent, non-partisan think tank, has today released its response to the Local Government, Housing and Planning Committee’s call for views on the sustainability of local government finances.

The think tank suggests that successive Holyrood governments have failed to create the conditions for sustainable local government, and that political discourse has been dominated by “perpetual talk without action”.

For example, nearly 15 years ago the Christie report highlighted the necessity of early intervention and preventative spending programmes. The importance of that report is regularly highlighted by politicians and policymakers, yet it has not been delivered upon.

To make matters worse, prevention programmes are often delivered by the third sector in collaboration with local authorities, and with councils’ budgets under growing strain, all too often these programmes are first in the line for cuts.

In its response, Reform Scotland calls for:

  • Collaboration on new approaches for financing local government activity, such as social bridging finance
  • The end to central government interference in the setting of Council Tax rates, and an empowerment of local authorities to consider the adjustment of bands and exemptions
  • More fiscal powers to be devolved to local authorities to allow them to respond to local needs

Reform Scotland Director, Chris Deerin, said: “During the 25 years of devolution, we have focused on the transfer of powers between Westminster and Holyrood, but we have taken our eye off the ball when it comes to the power of local authorities.

“Unfortunately, in that time we have seen Scotland become further centralised. This approach must end. Scotland is too diverse to presume that the solutions which can work for Edinburgh can work for Elgin, or those that work for Glasgow can work for Gairloch.

“We need to shift away from a drip-drip approach of devolving small, occasional powers, which simply encourages councils to come cap in hand to the Scottish Government, and towards empowerment and recognising that local communities are best placed to meet local needs.

“We have seen years of broad agreement that a one-size-fits-all approach cannot work, yet this has amounted to little more than perpetual talk, without action. Now is the time for action.”

The full response can be read here.

Spring Statement: Lack of support will see 1.3 million people pushed into absolute poverty next year

In his Spring Statement, the Chancellor promised to support families through the cost of living crisis today, and to cut their taxes in the future. But his failure to deliver on both of these means that absolute poverty is expected to rise by 1.3 million people next year, while only one-in-eight workers will see actually see their tax bills fall by the end of the parliament, according to the Resolution Foundation’s overnight analysis of Spring Statement 2022 today.

Inflation Nation shows that faced with an unprecedented squeeze on family’s household finances and a significant boost to the public finances, the Chancellor opted for a big but poorly targeted policy package focused on partially offsetting some of the big tax rises he’d previously announced, rather than on supporting those families hit hardest by the cost of living crisis.

Key findings from the overnight analysis include:

  • Families face £1,100 income losses. The scale of the cost of living squeeze is such that typical working-age household incomes are to set to fall by 4 per cent in real-terms next year (2022-23), a loss of £1,100, while the largest falls will be among the poorest quarter of households where incomes are set to fall by 6 per cent.
  • Absolute poverty rises by 1.3 million. The scale and distribution of the cost of living squeeze, coupled with the lack of support for low-income families, means that a further 1.3 million people are set to fall into absolute poverty next year, including 500,000 children – the first time Britain has seen such a rise outside of recessions.
  • Tax rises for seven-in-eight workers. Considering all income tax changes to thresholds and rates announced by Rishi Sunak, only those earning between £49,100 and £50,300 will actually pay less income tax in 2024-25, and only those earning between £11,000 and £13,500 will pay less tax and National Insurance (NI). Of the 31 million people in work, around 27 million (seven-in-eight workers) will pay more in income tax and NI in 2024-25.
  • A £11,500 wage loss. With real wages in the midst of a third major fall in a little over a decade, average weekly earnings are on course to rise by just £18 a week between 2008 and 2027, compared to £240 a week had they continued on their pre-financial crisis path. This lost growth is equivalent to a £11,500 annual wage loss for the average worker.
  • A parliament of pain. Typical household incomes are forecast to fall by 2 per cent across the parliament as a whole (2019-20 to 2024-25), making this parliament the worst on record for living standards, beating the 1 per cent income fall over the course of the 2005-05 to 2010-11 parliament.
  • Rapid fiscal consolidation. The decision to bank much of the borrowing windfall set out by the OBR sees borrowing set to fall rapidly from 14.8 per cent of GDP in 2020-21 to 1.3 per cent of GDP in 2024-25 – lower than it was expected to reach pre-pandemic. This increases the Chancellor’s fiscal headroom at the end of the parliament from £18 billion to £28 billion, the equivalent of a further 4 to 5p cut in the basic rate of income tax.

Torsten Bell, Chief Executive of the Resolution Foundation, said: “In the face of a cost of living crisis that looks set to make this Parliament the worst on record for household incomes, the Chancellor came to the dispatch box yesterday promising support with the cost of living today, and tax cuts tomorrow. Significant measures were announced on both counts, but the policies do not measure up to the rhetoric.

“The decision not to target support at those hardest hit by rising prices will leave low-and-middle income households painfully exposed, with 1.3 million people, including half a million children, set to fall below the poverty line this coming year.

“And despite the eye-catching 1p cut to income tax, the reality is that the Chancellor’s tax changes mean that seven-in-eight workers will see their tax bills rise. Those tax rises mean the Chancellor is able to point to a swift fiscal consolidation and significant headroom against his fiscal rules.

“The big picture is that Rishi Sunak has prioritised rebuilding his tax-cutting credentials over supporting the low-to-middle income households who will be hardest hit from the surging cost of living, while also leaving himself fiscal flexibility in the years ahead. Whether that will be sustainable in the face of huge income falls to come remains to be seen.”

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Pay as you Drive?

Reform Scotland says electric vehicles dictate new system of paying for roads

Reform Scotland, the independent, non-partisan think-tank, has called for a revolution in how Scotland pays for its roads, to match the upcoming revolution in the cars that are driven on them.

The think tank has called for all political parties, ahead of the Holyrood election in May, to commit to a feasibility study for a pay-as-you-drive system, whereby people pay according to which roads they use and when. This would replace Fuel Duty and Vehicle Excise Duty. Reform Scotland is also asking the parties to commit to the devolution from Westminster of those two taxes, in order that they can be abolished.

With the UK Government having recently committed to phasing out the sale of new petrol and diesel cars and vans by 2030, and with the advancement of production and battery technology rapidly leading to more affordable EVs, Reform Scotland sees Fuel Duty as a tax living on borrowed time, as well as a tax which fails to take account of which roads are being used, and when.

Vehicle Excise Duty (VED), meanwhile, while addressing carbon emissions through its grading structure, punishes those who drive infrequently by charging them the same as motorists who drive on a regular basis.

Reform Scotland’s pay-as-you-drive system would require drivers to pay based on which roads they use and when they use them. This builds on an earlier report, Pay-as-you-drive: The road to a better future.

Reform Scotland’s Research Director Alison Payne said: “The way we currently charge drivers is bad for the environment, promotes congestion and is unfair on low-mileage motorists and those in more remote areas. 

“It’s also the case that the taxes which underpin the charging system are becoming increasingly irrelevant as electric vehicles become more prominent.

“We believe that pay-as-you-drive, with central and local government pricing roads and being accountable to their electorate for their level, would be fairer and more relevant to the future of motoring.

“It would also be highly likely to reduce congestion, as people changed their driving behaviour to make better use of road space at times when it is cheaper to do so.”

Reform Scotland’s 2013 report, Pay-as-you-drive: the road to a better future can be read here.