Why SNP needs to cut taxes for middle-earners if it's to win again

Indeed, it’s worth remembering that he was panned for saying exactly that back in 2007. Swinney was right then and he’s right now. But any serious attempt to do so requires a rethink on tax.

Having lost around half a million voters at the recent general election, the task of winning in 2026 can’t be overstated. It will require vision, boldness and a level of hard-headedness that has been absent over recent years.

Logical approach to taxation

There are many moving parts to building a new and modern offer for today’s volatile electorate. Undoubtedly, we need to see swift action on improving the health service and public services more broadly, as well as investment in a public realm where the infrastructure is tired.

Housebuilding, decarbonisation and digitising Scotland are redolent with opportunity, but require greater strategic thinking. But we also need a new offer on tax: one that’s less about posturing as politically progressive but is instead more logical.

The Cowglen estate was the sort of place I enjoyed strong support over my nine years as the MP for Glasgow South. A mixture of semi and detached houses, Cowglen is home to mostly middle-income public-sector workers – nursery teachers, NHS workers, police officers and local government officers – as well as private-sector workers and self-employed sole traders, such as electricians, mechanics and plumbers. There are estates like this up and down the country and, like many of them, Cowglen was fertile ground for the SNP.

Broken social contract

That was until the recent general election campaign, when I could feel Cowglen moving away from us. As well as being angry at the party over the state we were in – a police investigation, a collapsed government and three leaders in one year will have that effect – they felt that the social contract had broken down.

These were the exact sort of people on middle-incomes – they certainly could not be considered wealthy – that we were asking to pay more in tax than their counterparts south of the Border. The deal was that they would get a Scottish state that could boast well-performing public services, a modern public realm and better living standards. And although we have many achievements in office, too many people felt we hadn’t upheld our side of the bargain to the standard they expect.

Sure, I could tell them that Scotland’s health service was better performing than England’s, but that didn’t matter if they could point to their own experience of the Scottish NHS not serving them any better than it did five years ago. It was unanswerable.

The pressures on households and the public purse are well understood. Global inflation, a disastrous UK mini-budget and, as the Scottish Fiscal Commission somewhat uncomfortably pointed out, a lack of planning on the part of Scottish ministers, have all caused real strain for everyone.

Sole trader tax problem

So, when designing new tax-bands in these circumstances, governments of any stripe should tread with care. Instead, and for too long, we have taxed these very voters with an air of indifference, insisting that this was the politically progressive thing to do and anyone who argued otherwise was a regressive Thatcherite. It’s a canard.

To be clear, I am not talking about the rich who, correctly, find themselves in the ‘advanced’ and ‘top’ tax brackets. Instead, I’m talking about those in the ‘intermediate’ and so-called ‘higher’ brackets who earn £26,562 to £43,662, and £43,663 to £75,000 respectively.

One group who require a second look are Scots earning between £43,662 and £50,270. Due to differences in tax and the reserved national insurance, they pay significantly more in marginal rates of tax than south of the Border.

Let’s take a sole trader who makes profits of £44K. They'll pay a marginal rate of 48 per cent (42 plus six National Insurance) on their next job. Whereas in the rest of the UK they would pay 26 per cent (20 tax plus six NI). That difference of 22 per cent cannot be considered logical.

At that point you could well understand why they might opt not to take on the extra work and, when they do, start to question if the concord between taxpayer and government is really hitting the right balance. I would suggest it is not.

Council tax reform

These are the exact sort of voters that First Minister John Swinney talked of recently when he said we had to have an offer for the aspirational Scot. If my party is serious about winning them back, then logical taxation must be part of that offer.

But any rethink on tax needs to be about more than just income tax. As David Heald, emeritus professor in the business school at Glasgow University, told MSPs this week, it is “ludicrous” that our system of council tax is based on evaluations from the previous century. It is long past time for parliament to act on council tax reform.

I’m also attracted to former MSP Alex Neil’s proposal to raise revenue with a one-off land tax on the largest estates in Scotland – many of which are owned by incredibly wealthy individuals who live overseas. This would surely be a better, and certainly more progressive action, than raiding the ScotWind account.

Changing the zeitgeist

My party has little to lose by making a more attractive tax offer to middle earners and showing some boldness on reform where it’s long overdue. Just this week we’ve had polling that has the SNP neck-and-neck with Labour and, bluntly, the party needs a positive turning point and a change in the zeitgeist.

It’s said that you should never let a crisis go to waste. If this isn’t a time of crisis, then I don’t know what is.