As many will know I take an interest in issues relating to Scottish independence, and have written for Common Weal on the taxation and currency aspects of this. I am unapologetic for doing so, despite not being a Scot. If Scotland is to be independent (and I happen to think it will be) then I want it to succeed. And I want it to deliver for all Scots.
What I would also want is a Green New Deal in Scotland, as elsewhere. This is why I am sharing this piece from Robin McAlpine, the director of Common Weal. His concern is a report on the future economic policy of the SNP to be debated by it in April. The official line is support for a plan out forward by the so-called Growth Commission. It is not committed to an independent currency. It is committed to policies that will require considerable economic austerity. It is deeply neoliberal. And it would, in many ways, reproduce all the economic travails of Ireland for about forty years after independence. I have made clear my opposition to this before now. Robin does it eloquently, making clear that the Growth Commission precludes a Green New Deal and the econ9miv, social and environmental change that Scotland will need to embrace. He does so, eloquently, as usual.
THERE are now two planets SNP members can live on. On one of those planets we are facing massive social and environmental catastrophes which can only be avoided through major, coordinated public action. On the other, the priority is providing comfort for international bankers.
At the SNP's Spring Conference the only planet on the agenda is the planet of comfortable bankers. The planet where we work together to transform ourselves will become alien.
Let me assume that you believe the International Panel on Climate Change and that there is a very high probability that in 15 years time or so we will have passed a tipping point and preventing the collapse of the planet's ecosystem will no longer be possible.
The question then is what do you do? Roll up your sleeves or put your fingers in your ears?
Thank god for a new breed of US politician like Alexandria Occassion-Cortez who are fiercely independent and strategically focussed, ready to take on her own party when her own party is the barrier. (Oh for such a politician in Scotland).
They have said the words that the previous generation of politicians were afraid to say - only massive, coordinated, collective public action has any chance whatsoever of addressing climate change. We must raise taxes on big business and the very wealthy (who are disproportionately responsible for this crisis anyway) and we need to invest it to change how we live.
We need energy that doesn't poison us. We need houses built to keep us warm (rather than to enrich developers). We need transport that is clean and efficient. We need a food system which is healthy and local. We need an economy that creates equality (and in doing so we'll substantially tackle the mental health problem). We need to reduce consumption and sharply reduce waste.
We need to transform how we live, before its too late — and yet none of this is doom and gloom. Because if we make the transition necessary to achieve this we do great things.
We make houses warm and great to live in. We build a consistent, reliable energy system. We travel faster and in more comfort. We eat better and feel healthier. We live among less litter and waste and ugliness. We reduce the terrible social pressures to consume that lead to poor mental wellbeing.
But above all we invest and create an embarrassment of riches of high-quality new jobs, a new generation of manufacturing, an incredible economic stimulus which would enrich us all, truly 21st century infrastructure. A Green New Deal offers not only survival but real, pure, distilled hope.
There is not a single coherent plan for how to do this via the free market. The best free market advocates have come up with are various forms of regulation and incentive to be less bad, reduce the damage somewhat. They still condemn you to extinction but at a slightly slower rate.
Advocates of the Green New Deal have a term for this — not Climate Change Deniers but Climate Change Delayers. And many people now believe that they're more dangerous than the deniers, because they allow people to believe that this is being taken seriously when it isn't.
And that is the reality of the Growth Commission. It's in the name — it's from a planet where we can just keep doing more and more of what we're already doing because profit comes first and somehow it will be OK if we place our full trust in the bankers.
There is no way any government stuck in an informal Sterlingised monetary system could begin to contemplate transformational collective investment of a fraction of the scale necessary. It's not even a feasible argument.
If you boil away the endless rhetoric in the Growth Commission it acknowledges this in no uncertain terms. It makes 'providing comfort to international lenders' a primary goal of the nation's fiscal policy.
In case that's not clear, let me unpack exactly what that means. Scotland would have no currency and no central bank (what is referred to in the report as a 'Central Bank' is nothing of the sort and wouldn't be recognised as such internationally). It could not create so much as a ten pence piece — so it has to borrow all its money from somewhere.
Scotland would have to 'buy' its money from the London's private finance markets. But the London finance markets will set borrowing rates according to what they see as the 'risk'. And we know from past practice that finance markets see public investment as a risk. They always expect constant downwards pressure on public spending.
That's because finance markets are exactly who has been making profit from privatisation, deregulation and outsourcing — and from tax avoidance. They simply wouldn't allow Scotland to invest on anything like the necessary scale.
And before I hear any spluttering about this, and in case you are in any doubt, the report reinforces the point by compelling Scotland to cut sharply its fiscal deficit. It's there in black and white, and its the absolute opposite of the Green New Deal.
So it will be back to 'Non-Plan A' — offer the same financiers preferential access to Scotland's renewable energy (it's almost all privately owned) and then pretend this is a 'green move'. It's not, it's the opposite. It's failing to take coordinated control of our energy system.
READ MORE: 5 big ‘rock the boat' ideas the indy movement could take from Alexandria Ocasio-Cortez
My heart really goes out to SNP members. I spend a lot of time with SNP branches all over the country and they really think that the party is committed to serious, bold action to prevent climate change. They don't like the Growth Commission but I've met some who have reluctantly tried to tell themselves that, if it passes, political priorities can change in the future.
It's why its so important to be clear that passing this motion is not only a failure to achieve what these members believe in, it's doing completely the opposite. It's a flat-out rejection of the very idea of a Green New Deal.
And so, bit by bit, drip by drip, the hope and optimism and determination to talk about a better future which so brought the independence referendum alive is drained from the SNP. All that is left is the claim that, if we're willing to reign in our aspirations for 25 years we too could be like Belgium.
It really is time for members of the SNP to look deep into their hearts. What got you into party politics? What is your hope for the future? What inspires you?
Land reform? Bringing our transport system into public ownership? Banning fracking? Major investment in our town centres? A Citizen's Income? Ending corporate tax evasion?
Well all of these are the absolute opposite of giving comfort to international lenders. You are locking your party into an economic framework which makes it impossible for the things that you believe in to happen. You can certainly vote in favour of the Growth Commission motion, but you couldn't credibly pretend that you believe in a transformational vision for Scotland.
There is only so long that the party machine will be able to disguise this relentless rightwards drift with progressive rhetoric, especially as it is increasingly at odds with the direction of travel of real progressive politics internationally.
A generation of young people will start to see the SNP as the failed past. An existing generation of people who were inspired to join the party because of the optimism of the indyref will be left with little to cling on to.
Even the efforts of the London commentator class have been unable to sustain any interest in 'The Independent Group'. I can't imagine that, if it becomes a political party, it will make the slightest dent in Scottish politics. So why on god's green (currently) earth does the SNP seem to want to remodel itself in their image?
If this motion passes, at some point in early May SNP supporters will have to ask themselves how they ended up on the opposite side of world politics from Bernie Sanders, Alexandria Ocasio-Cortez and Elizabeth Warren.
And with that, Scotland will be filled with people asking themselves what political home is left for them in Scotland. I doubt it will be a bankers' party. And I doubt it will be a party that has effectively rejected a Green New Deal for Scotland.
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“I am unapologetic for doing so, despite not being a Scot.”
I’m not a Scot either, though I now live here and wouldn’t willingly go back to live in an England which thinks Brexit is even worth discussing, irrespective of whether it comes to pass.
…….but I can see the potential for an Independent Scotland to be the crucible for a new economic enlightenment based on a modern understanding of how currency works within a national economy and can provide what is needed to allow that nation to thrive.
The UK could have led the charge after the 2008 debacle but refused to meet the challenge and crawled back into a hole of broken and oft-proven stupid economic orthodoxy.
Scotland will have it’s currency and its independence or it will have neither, and remain bogged-down indefinitely trapped by its lack of courage and vision.
Good insight as always, I know personally I am looking into the green alternatives with more than a few propositions for solutions, so welcome this instance on urgency for a few reasons.
First, your mention of 15 years if 5 too many, most trends say we are going to be beyond the point of return in under 10 which makes it all the more serious and alarming when looking at Westminster’s policy.
Second, is that the foundations of my trying to realise these green plans have hit endless hurdles, a major one being landed gentry happy to use power and connections to block, but also matters of environmental protection (which I have no complaints about), and legislative apathy where I have tried to find ways around with local councils.
Third annoyingly is where power lays, I have found more than one occasion where any decision ends up being split between the 2 governments of westminster and holyrood (imagine one government hell bent on meeting the environmental objectives?).
Fourth is local politics, something you wouldn’t have thought of but is there none the less. Where certain green leaning people are pushing are suffering push back from vocal locals who are at best minorly inconvenienced by something as simple as recycling bins. But also vocal minorities against turbines, against hydro, against heat pumps, against any form of hybrid farming, against public transport. People who are given too much time and consideration.
Fifth, is the structure of this. The Highlands has had plenty of means, and subsequent funding (feasibility) to try and drive community owned energy and installations. Obviously a great idea in itself, but is burdened heavily by all of the above, with the turnaround for a relatively simple, low powered hydro being near a decade. Something we dont have time for, but also means the alternative solution is private interest and installation. The route I am personally looking at which could alter this to a more comfortable 3 years.
Obviously the fact this requires finance and being an individual adds additional problems in itself, example being a bias towards “community owned” on every level ensures there will be a certain hostility to this approach IF you dont happen to own the land already. The lack of funding for feasibility studies, the financial burden in general and a risk of a loss in feed in tariffs unless direct sales can be assured where energy is concerned.
There is, in short, so much that needs to be done, and very little support for it.
I just hope young people will tip that balance
And people like Robin McAlpine
Perhaps you have you links, preferably short reads, that explain how economy works, the list of models, the realistic options, and suggestions for going forward.
Perhaps the topic of a future article?
When I worked in science many years ago most phenomena could be boiled down to a mathematical equation.
Economy has always mystified me as for example Keynesian theory which itself was always mysterious to me
Try Ha Joon Chang for now…..
Kes says:
“When I worked in science many years ago most phenomena could be boiled down to a mathematical equation.
Economy has always mystified me as for example Keynesian theory which itself was always mysterious to me”
If you wish to boil down the economy to a neat mathematical equation I think you would be better employed searching for the ‘philosophers stone’.
And I’ll explain why; it’s not just because I always struggled to understand maths. 🙂
It is a fallacy to believe that the economy of a nation state is primarily about money. The proper business of economics is to understand the management of natural resources. Money is not a natural resource, it’s a man-made construct which acts as a unit of account and can tell us how well we’re doing, it’s also the currency (think electric current) that provides power to do work within that economy…..and a few other things…such as ‘banking’ work done now for an income in the future… It’s clever stuff money, but it’s a device; a tool, not the be-all-and-end-all; not the end in itself, but a means to an end.
The revelation of Modern Monetary Theory is that we can control the economy to produce outcomes which we agree are desirable. Or at least that’s the theory of behind democracy. What those desirable outcomes are is the business of politics.
Presently ‘we’ have been bamboozled into thinking we can only organise society in ways that are constrained by how much money is available. This is fundamentally not true. We are able to create as much currency as necessary to make the economy function as we wish it to, to produce what we want or need, subject to the real constraints of the management of our available natural resources.
Politics will be able to function as it should to produce ‘the good life’ when politicians, the public and economists understand what real constraints we face, and what real choices we have. In the meantime we are playing silly games predicated on collecting worthless money tokens and pretending they have value.
Many thanks
Appreciated
Andy,
Thanks for your thoughtful reply which I have studied.
Very much of what you say – if not all of it – makes very good common sense.
While driving in the car yesterday, I was again thinking, as I sometimes do, “can we actually model the economy. It must be possible”.
This occasional though is not about the broad economic model that we have, and which I refered to above, with all 17,000 pages or so of leaky tax code, becasue I accept that modeling straight forward every day finances is almost impossible as things stand; I have never yet met an accountant who can model financial outcomes on an ongoing basis given the correct inputs. They will only ever model end of the financials becasue of the size of the task.
Such a situation leaves many ppl not knowing what their wage is on an ongoing basis. It’s an unsatisfactory system to say the least. Even using all the modern software avaliable this problem is not solved.
So I have accepted that this is a minefield that small business suffers.
Small business which is a large part of the economy but does have the advantages of large tax depts like exist at Google, Apple, M&S, Sainsburys etc.
Small business has no capacity, time or resource to study and take advantage of tax loop holes.
Instead tax is instead paid in full, as it should be.
Let me indulge myself a bit more in this:
I know of one small business that had two directors, a turnover of £500k pa, and paid 1/6th of that sales total in VAT. Their particular business – hospitality – meant a key cost, food, which is zero VAT rated could not be claimed back. The VAT *was the profit margin, ie all the profits went to the Uk central government. After all costs the two owners were able to only draw half of minimum wage each per annum.
In reality the two owners were government slaves.
1/6th of 500 is £83k which is not an insignificant p.a. contribution of tax by 2 ppl, to say nothing of local business rates, NIC’s and other taxes, all of which were paid in full.
The current economic model in the Uk, and probarly across the world, is deeply broken, and I can’t think this situation will continue much longer without deep reform.
An independent Scotland gives us an opportunity to start with a clean sheet.
I agree that the economic environment we have for now is impacted by an almost indeterminate number of variables, including non-financial effects, as you outline, never the less I am interested to know if any level of modeling, even simple modelling – sometimes called rule of thumb – can be done that any man or woman in the street can readliy understand in an intuitive way.
The fundamentals as they exist are surely simple and not smoke and mirrors as they appear in various Uk media channels.
I will follow up Richard’s recommendation of Ha Joon Chang.
I agree with your statement:
“Politics will be able to function as it should to produce ‘the good life’ when politicians, the public and economists understand what real constraints we face, and what real choices we have.”
Hmmmm…..I think you have VAT wrong……
But let’s not worry about that for a moment
Thnk on something else. was this business best off doing tax planning or working out where the profit margin might really be and how to improve it? I always sold profit planning. The rate of return was so much higher than on tax planning. And very few accountants had a clue how to do it.
Whether something is zero rated or not does not matter for a business. For your people with the restaurant what is the difference between buying £100k of food with no VAT and buying £120k of food including VAT and claiming back £20K?
Who actually pays a tax such as VAT depends on the Elasticity of Demand. It is not the case that the tax is added on to the price therefore all the tax is paid by the customer. In reality part of the tax is paid by the supplier and part by the customer. That is because the higher price reduces demand which means the supplier sells less than they otherwise would. If demand is very inelastic (e.g. for petrol) then most of the tax is paid by the customer. In other words they buy more or less the same whatever the price. If demand is elastic (champagne perhaps) then most of the tax falls on the supplier. In other words a price increase means the customer buys a lot less. I suspect restaurant meals have quite an elastic demand so the higher price caused by VAT means folk eat out less, though obviously there can be a substitution of e.g. going to Pizza Hut rather than a proper Italian.
Hi Richard,
Thanks for that.
My understanding of this situation was that more or less all sales were vatable at 20%. That’s 1/6 of the sales, give or take. The major cost item was wholesale food which is zero rated so there was in essence no vat that could be reclaimed to offset. More or less.
That was my understamding.
If I missed something there I’d appreciate a critique.
I’ve never before heard of a small business being offered sensible tax or profit planning.
Accountants I’ve come across have offered more advanced services. However being unable to perform the basic tasks given the inputs any of these services would surely be a waste of hard earned money. A sure sign the whole system is complicated beyond breaking point.
Certainly a robust profit planning service in this broken complicated environment would help many hard working ppl struggling to know if they actually have a working income or not.
You are assuming VAT is a business cost
It is not
In a catering business it costs the business nothing
It puts up the price to the consumer
But it should not be impacting margins
The smaller business not charging VAT will be cheaper but they are in a different market I suspect
For the business you describe VAT is a throughput, not a cost