Magazine article Public Finance

From Braveheart to No Heart

Magazine article Public Finance

From Braveheart to No Heart

Article excerpt

The Tories aren't the only party with an identity crisis. The Scottish National Party has been struggling to come to terms with the age of political apathy and the dominance of New Labour. For the past year, under their retread leader, Alex Salmond, the nationalists have been trying to move on from the emotional, 'Braveheart' nationalism of the past - to demonstrate that they can be trusted to run public services efficiently. To show, as Salmond put it in his conference speech last month, that the party can 'appeal to the head as well as to the heart'.

The SNP has ditched its old tax-and-spend agenda in favour of rigorous public accounting, bold tax cuts and even a version of the internal market for the NHS. Borrowing from the experience of Norway, the SNP is now committed to an incentive-based scheme of hospital funding whereby money will follow the patient. Hospitals that perform more operations will be allowed to keep the extra revenue.

At least, that's the theory. Some people in the party are pretty doubtful about this idea, which to an extent resembles the reforms being introduced by Labour south of the border. The SNP seems still to be rejecting any idea of hospitals being able to borrow money - like English foundation hospitals - and it is still intensely hostile to any private sector involvement in the NHS. Nevertheless, what has been suggested would have been impossible even four years ago.

The SNP is also reviewing its policy on taxation. It is now committed to slashing business taxes such as corporation tax and business rates to levels substantially lower than those in England. The SNP has also set up a commission to explore ideas like flat taxes. The former party leader, John Swinney, is 'seriously interested' in looking at whether collapsing all higher-rate tax bands would be in the Scottish national interest.

Small and newly independent Eastern European nations, such as Estonia, have introduced a flat tax with some success. The theory is that the abolition of higher-rate income tax will attract business people and promote entrepreneurialism and business creation. Advocates of flat tax even argue that it helps to increase government tax revenue because people are more willing to pay and economic growth is accelerated.

Scotland's growth rate has been little more than half England's for the past three decades. Some in the party think flat tax might be the shock therapy the country needs. However, Salmond says he is not convinced of its virtues. He fears antagonising middle-income earners who will have to pay for the policy.

Nevertheless, the fact that the SNP is looking at the policy at all indicates how fast the party has changed since Salmond took over a year ago. …

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