Progressive Water Tax
The next item of business is a debate on motion S1M-2632, in the name of Tommy Sheridan, on the introduction of a progressive water tax, and one amendment to that motion.
The proposal in the motion is an excellent complement to the proposal in the previous debate, which dealt with the removal of an unfair system of taxation—the council tax. If we accept that the council tax is unfair to the root, it is also fair to assume that water rates are unfair, as they are based on council tax. However, water rates are even less fair than council tax, because there is no rebate system for water rates. The so-called relief system that the Executive intends to introduce from 1 April has rightly been condemned as pathetic by all independent observers, including the Convention of Scottish Local Authorities, which has said that the system is totally inadequate and will miss out 1 million of the poorest households in Scotland. Water and sewerage services are essential and should be properly resourced in a progressive fashion.
Tommy Sheridan's motion states that
"sewerage service charges to domestic customers should be paid for by using an income-based personal tax".
In my case and in the case of many of my constituents in rural Aberdeenshire, we have to take care of the sewerage ourselves—we do not pay sewerage charges. Is Tommy Sheridan suggesting that we should be taxed on personal income for a service that we do not receive?
As the member knows, only a very small proportion of the Scottish population are not connected to the sewerage system. With the extra £201 million a year that the progressive water tax would bring in for water and sewerage services, we could ensure that everyone in Scotland is properly connected.
The proposed tax would be fair and progressive. We have to ask ourselves, "Is this service essential? Should this service be recognised across Scotland as an essential service, similar to the police, fire services and health services?" If so, it should be paid for progressively via income. That means recognising the unacceptability of the burden of paying for water and sewerage services that is placed on the low paid and pensioners. Pensioners and poor households simply cannot afford it.
Since 1996, domestic water charges have risen by 105 per cent, whereas benefits and wages to the low paid have risen by less than 10 per cent. That represents a significant reduction in an already low disposable income, which is why we should move towards a system that taxes according to ability to pay. That suggestion is not rocket science; indeed, it is part of the post-war political consensus, which disappeared after Thatcher moved from a system with a preponderance of direct taxes to one with a preponderance of indirect taxes. New Labour has supported that. The move has been regressive, because it taxes low-income households at the same rate as high-income households.
If the water tax was combined with a service tax, a low-paid couple in Glasgow who earned £12,274 a year would save £628 on what they currently pay for council tax and water rates. A couple on average earnings who each earn £17,289 a year—despite the fact that the average annual wage in Glasgow is £15,000, we will take the higher rate of £17,289—would save £370.40 a year. Of course, those at the higher end of the income scale would pay more, but that is right and proper. For far too long, they have been getting away with paying too little.
I move,
That the Parliament believes that water and sewerage services are essential services which should be publicly owned and democratically controlled for the benefit of all Scotland's citizens; further believes that water and sewerage service charges to domestic customers should be paid for by using an income-based personal tax which would be progressive, efficient and easily understood; therefore endorses the replacement of the current unfair water rate system for domestic customers with a new individual income-based water tax that would be fair and redistributive, while raising more revenue for Scotland's water and sewerage services, and notes that this new Water Tax would be collected by the Inland Revenue in Scotland on behalf of the Scottish water industry.
I now call Ross Finnie to speak to and move amendment S1M-2632.1. Speakers in the remaining opening round have three minutes.
I listened with interest to the last two thirds of Tommy Sheridan's opening remarks. Of course, it is difficult to disagree with a general philosophy of progressive taxation. There is no difficulty in agreeing that we could fund the range of services that we want to provide through progressive income tax and apply the sum that is raised to a variety of purposes. However, the difficulty with the motion is that Tommy Sheridan is not proposing a general tax to pay for a variety of services; he wants to raise income tax specifically to meet a water charge. Where is the equity in that?
If we ask citizens to bear a form of taxation for a specific purpose, do we not have to tell them the amount that will be charged and their personal relationship to the tax? That relates to the point that Mike Rumbles made. The proposal for a specific income tax for water charges fails on two counts. First, the system would not tell citizens why an unspecified sum of money was being raised for water charges. Tommy Sheridan's calculation is that the sum would be £201 million, which is different from the sum that he has mentioned in committee meetings. Secondly, there is no way of identifying within the income tax system the link between the customer and what they are being asked to pay. Tommy Sheridan has presented no evidence on the link and on the amount that will be raised. There is no way that the citizen can be told that they should raise a general sum when they are being asked specifically to pay a water income tax.
I do not claim that the existing arrangements are perfect—far from it. For example, there are problems with collection rates and how to determine the quantity of water used, but I will come to those in a minute—sorry, I mean in three seconds.
I say to Tommy Sheridan that the creation of a specific tax from income tax would raise the collection rate for that tax to an unacceptable level. How would he change the current system so that it more equitably relates to use and the specific charge that is required? He has to accept that, although the current system may not be perfect, it is, through its link to the council tax band system, more progressive than any other utility charge.
The Executive's policy is far less cumbersome to administer. Scottish Water—if Parliament approves the Water Industry (Scotland) Bill—will have to consider carefully the way forward, because the present arrangements are not sustainable in the long run. However, the tax that is proposed in the motion would be far more cumbersome and difficult to operate. It would not be equitable, it would not relate to the cost, it would not tell citizens why they were paying it and it would not address the link between those who use water services and those who are being asked to pay.
I move amendment S1M-2632.1, to leave out from the first "believes" to end and insert:
"commends the efforts of the Scottish Executive in ensuring that the public water industry in Scotland is strong and efficient, bringing considerable benefits to all customers; recognises the Executive's continuing commitment to a public water industry; recognises that the best way to fund the Scottish water industry is through charges on domestic and non-domestic customers utilising the services provided; recognises that the current system for charging domestic customers already provides a degree of protection for lower income households and the most vulnerable through the link to council tax banding, and finally recognises that the reduction scheme provides help to those low income households facing the biggest charge increases."
We should ask why water charges are now an issue, as we have had them for many years. We had them in the form of an addition to domestic rates; we had the water community charge, or poll tax; and then we had the council tax. For many years, water charges have been a separate item. At best, the charge has been a minor irritant. It usually came with the main bill, but people always complained about the main bill and never said much about the water element. The imperfections of the water charge system could be safely ignored.
As with the rates, we all agree that the imperfections lie in the fact that the system is property based, as we discussed in the previous debate, and unrelated in any direct way to the ability of people to pay. We also all agree that water and sewerage services are a special case. By and large, they are not an option that one can buy into or buy out of; they are services that we must have.
The council tax, for all its faults, at least has a benefits mechanism—albeit expensive, cumbersome and slow to respond—that can mitigate the system's worst features, but that cannot be said about the current water charge arrangements. The imperfections of those arrangements have come to light because of the huge increase in charges that consumers have faced recently. That increase has come about because of the neglect of our water system infrastructure over decades. Our railways, roads, school buildings and most of the rest of our infrastructure have been neglected in the same way; in this debate, it might be appropriate to say that they have gone down the pan. Helen Liddell says in the introduction to the Scotland Office website:
"Through devolution, Scotland enjoys the best of both worlds."
If the running down of our infrastructure is an example of the best of both worlds, the sooner we get rid of those two worlds, the better.
Even that neglect is not the whole cause of the crisis. At the heart of the crisis is the insistence on paying for the necessary improvements to our water infrastructure out of current revenue. That is why charges have gone up so much, making consumers rightly annoyed. It is also why some groups of consumers are facing bills that are disproportionate to their incomes. In those circumstances, the anomalies and unfairness of the property-based system become an important factor.
To set up a separate tax-based system is not a sensible way of addressing the problem, even if that system is run by the Inland Revenue and is based on a different method of collection, which could have its own inconsistencies. If, instead of council tax, we had a local income tax system that was related to ability to pay, water charges related to tax might be a sensible option. Until then, we have to keep the pressure on the minister and the water companies to mitigate as much as possible the undoubted unfairness of the current system.
It has been interesting to hear Tommy Sheridan outline his proposals for the introduction of a progressive Scottish water tax. It has also been interesting to hear his proposal that the tax would be collected by the Inland Revenue. As the minister pointed out, those proposals display a considerable naivety about the real world.
The increased tax burden that Mr Sheridan proposes would certainly be redistributive, but it would also cause relocation. His tax would drive businesses and businesspeople from Scotland. If businesses were faced with greater costs in Scotland than in the rest of the United Kingdom, new businesses would not locate in Scotland. Unemployment would rise and fewer people would be left to pay Mr Sheridan's tax.
Although the Water Industry (Scotland) Bill is far from perfect, it at least makes a good attempt to deliver high-quality water and sewerage services on an equitable basis throughout the country. The bill is redistributive in that customers in the east and west of Scotland will pay for the redevelopment of the north of Scotland's water infrastructure. That burden, which we accept we should take on, will be hard enough for customers to bear. The suggestion that we go as far as is proposed under Tommy Sheridan's tax would provoke a public outcry and a mass exodus of business from Scotland. Keith Harding made a similar point in the previous debate.
The current system of charging for water and sewerage services already provides reliefs for lower-income households. In its own time, Scottish Water might introduce proposals for a different collection process—a process that will be subject to the scrutiny of the Parliament. When that happens, we will probably have to consider Mr Sheridan's proposals again. In the meantime, the Conservative party will not support the motion.
I have been driven to reflect on what the 22 contributions could have been the last time that we debated three separate issues in 22 minutes, as it seemed. I presume that at least a quarter of them were made by Mr Sheridan.
I caution Mr Sheridan. I trust that he will reflect on today's proceedings so that he does not end up being described, as the Earl of Selkirk was by Burns, as
"a man of immense vanity, bordering on insanity—and every corner stuffed with mighty self".
I make a serious, rather than a debating, point.
Does the member agree that there is a considerable amount of male vanity in the Parliament? I ask her to stop targeting Tommy Sheridan, who has made an excellent contribution. I am tired of the harassment of that member and the attempts to make him run out of time on one of the few occasions on which he has had the opportunity to secure a debate.
I would never suggest that vanity is solely a product of the Scottish Socialist Party. There are many expressions of vanity elsewhere. I was cautioning Mr Sheridan that the Parliament is a place where we have debate—it is not a platform or an opportunity to get headlines. I deprecate spin-doctoring elsewhere and I deprecate it in this debate.
Water charges are an important issue. I have argued on record that we need to address the problems of the poor and those on low incomes, particularly in the context of rising water charges. We have been put in the unfortunate position of not having the opportunity to reflect on the strengths of the arguments; we have been told what the solution is and we must like it or lump it. Frankly, that is not what the Parliament is for.
The proposals that are the subject of this debate and the previous debate have been scrutinised by our committees and, sadly, have been found wanting. In the time that we have had, we have not had the opportunity to expose that further. It is important to consider the Parliament's powers to address the needs of the poor in relation to water charges. We must question the credibility of getting the Inland Revenue to deal with the problem, which is a rather cobbled-together solution.
Iain Smith made the point about socialists no longer wanting to tax property. Mr Sheridan wants to tax property—that is why I find his proposals on the council tax and the water services tax unacceptable and not sufficiently thought through. We must acknowledge the importance of keeping water services in the public sector. I ask the minister to reassure us that the Executive will look seriously at how the proposed water charges will affect the poor. That central issue is not the monopoly of one person in the Parliament; it is of grave concern to Labour members. It is not simply a party matter; we must find a genuine solution to the problems, so that people can have a good water service that is affordable and appropriately delivered.
We move to open debate. It gives me inordinate pleasure to invite Mike Rumbles to speak.
It gives me inordinate pleasure to accept the invitation to speak.
I do not intend to take the full three minutes. I want to make it clear that I believe that income tax is the fairest form of taxation that we can have in this country. We should be prepared to pay more in income tax to fund proper public services. However, Mr Sheridan's motion betrays a complete ignorance of real life in rural Scotland. The Scottish Parliament is the Parliament for urban and rural Scotland. It strikes me that the motion could only have been lodged by a Glasgow MSP.
In my intervention, I explained to Mr Sheridan why his proposal is so wrong for people in rural Scotland. I will give an example of that. The number of people who are not connected to the public water supply is greater in Aberdeenshire than anywhere else. I am not connected to the sewerage system—[Interruption.] That is a great opportunity for humour. My situation is normal across rural Scotland. It is remarkable to suggest that we should be charged through income tax for services that we do not receive.
In answer to my intervention, Mr Sheridan said that the increase in income tax would pay to connect everyone to the public water supply and the sewerage system. I would be pleased if he would confirm that in his closing speech. Does he have any idea how much that would cost in Aberdeenshire, never mind in the rest of rural Scotland? His motion is oriented towards an urban agenda. It completely ignores the service needs of rural Scotland. I want him to answer that point.
Water is regarded as special by many societies. In some countries, that is because there is too little of it and wars are fought over it. In Scotland, we feel that there is too much of it. Traditionally, we have been proud of our drinking water and have contrasted it with the unpleasant-tasting water in other less fortunate countries, such as England.
Tommy Sheridan believes that redistributive taxation is the answer to everything in Scotland. The Scottish service tax for local services, which looks remarkably like a clumsy form of income tax, would be highly centralised and totally unaccountable at local level. For water, we are to have a new, centrally collected income tax—the service tax mark 2. As the socialist service tax and the water tax are to be decided on and collected centrally, I am not sure why Tommy Sheridan does not forget about the red tape and the administration and just double the rate of income tax. Why does he vehemently reject the move to community ownership by way of housing stock transfer, which will strike a major redistributive blow for resources in Scotland and involve billions of pounds of investment and the creation of thousands of jobs?
As Mike Rumbles said, the Liberal Democrats—more than any other major party—support an element of redistributive taxation, but that must be implemented nationally within fairly narrow limits. There comes a point at which there are no wealthy people left to soak, because they have taken their wealth elsewhere and their jobs and their wealth-creating enterprises with them.
Tommy Sheridan's taxation proposals, whatever their intention, would destroy jobs, erode pensions and reduce incomes. I urge the chamber to reject the motion.
I agree with Brian Fitzpatrick, who compared today to "Groundhog Day". I recall many similar debates with Mr Sheridan in the 1980s, when he was a member of Militant in the Labour party, about the number of angels who could dance on the head of a pin. In his attempt to hang a rather unsophisticated model for redistributing income, if not wealth, on the nearest passing vehicle, he has missed some fairly fundamental philosophical debating points.
A water charge is not a tax, but a payment for services provided. Charges must relate to the use of services, but Mr Sheridan's proposals divorce the level of charge from the service that is provided. Charges must produce sufficient resources to fund services, as the current system does. Mr Sheridan claimed that his scheme would collect more, but why should the Scottish charge payer be burdened with higher charges than are necessary?
In the competitive environment that the water industry is about to enter, there is a serious risk of the consumer opting to desert a high-charge, high-tax public service in favour of a low-cost private alternative. As ever, the losers would be the low paid and those who are on fixed incomes—the very people whom Tommy Sheridan hopes would benefit from his proposal.
I have heard nothing that substantiates any claim that Mr Sheridan has made, particularly the claim that his scheme could be cost-effective. Administrative costs would surely outweigh any benefits.
As Ross Finnie and Johann Lamont said, the Executive fully accepts that the current system is not perfect. Scottish Water will consider the future of billing and collection arrangements. We are therefore committed to ensuring that more work is done on affordability issues, including research by the water industry commissioner, whom we have asked to inform us of his findings. That will ensure that affordability issues are taken fully into account as Scottish Water considers options for tariff structuring, billing and collection arrangements.
However, the claim that, in the interim, Mr Sheridan's proposals represent an improvement on the current system is misguided. The current system has proved workable, fair, equitable and efficient. It successfully funds the Scottish water industry, relates charges to the service that is provided and ensures that customers remain at the heart of the system. It addresses ability to pay through a link to council tax bands and the transitional affordability scheme.
I commend the Executive's amendment to the Parliament.
I call Tommy Sheridan to wind up the debate, which we have timetabled to run until 10.30 am. If we do not make it to then, we will start the next debate immediately.
I thought that you were going to suggest that I should have a wee bit more time, Presiding Officer.
The Minister for Environment and Rural Development made an interesting point. He seemed to accept my argument that water and sewerage services are essential services. If they are essential services, I suggest that they should be paid for via general taxation or a specific tax that relates to a person's ability to pay, as represented by their income.
Although the minister accepted my point, he attacked the water tax. If a specific water tax was levied, the person who paid that tax would know that it was a water tax, because it would be denoted as a water tax on that person's wage slip.
The minister also said that we should relate charges to use. That is a dangerous principle. If it is accepted that water and sewerage services are essential services, like the police, fire and health services, it does not take much of a leap of imagination to say, "Why don't we relate those services to use as well? Perhaps those who do not use the fire service or the health service should not pay as much as others."
The water tax is appropriate for the political situation because of the Parliament's ridiculously limited powers. The Parliament has a power in relation to local authority taxation and services that allows it to raise revenue in different forms. In anticipation of the use of the 3p-in-the-pound variation, the Inland Revenue conducted an exercise in Scotland—
Will the member give way?
Yes—I am not sure whether it is Pinky or Perky.
I have heard that reference again, Presiding Officer—it is obvious that Mr Sheridan did not listen to your comments.
The main problem is that Mr Sheridan wants to centralise decision making and not take into account local factors. That is strange. This week sees the anniversaries of the deaths of three important historic figures—Louis XVI, George Orwell and V I Lenin. Of those three, who would most approve of Mr Sheridan's centralising ideas?
It is funny that Mr McAveety mentions Louis XVI. He may be aware that Louis's finance minister, Jean-Baptiste Colbert, once said that
"the art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least … amount of hissing."
It is unfortunate that, although new Labour used to agree that the rich should be taxed until the pips squeak, that is no longer on the agenda.
The proposed taxation system recognises the essential nature of water and sewerage.
I have taken two interventions during the debate.
Members must recognise that the service tax is democratically neutral, because in exchange for the loss of the right to set council tax, local authorities regain the right to set the business rate. I had to laugh when the Deputy Minister for Finance and Public Services talked about the current system for setting the business rate being redistributive. It is so redistributive that the poorest local authority in Scotland loses £83 million in net terms from it.
The Inland Revenue has coded Scottish workers, and the water tax system would allow an exercise that has been conducted to be used to generate even more revenue for the essential services.
Will Mr Sheridan answer my point?
I am just coming to it. Mike Rumbles was right to say that many rural citizens are not connected to the public water supply or sewerage system. I contend that we should have a campaign and should raise the resources to connect everyone in Scotland to the public sewerage system and water supply. However, I take umbrage at Mike Rumbles's suggestion that the water tax is only an urban issue. Low pay is one of the biggest problems in rural areas. The water tax would redistribute income to individuals in rural areas who are low paid but face high water charges and high council tax charges.
In combination, the two systems that I have proposed would redistribute income throughout Scotland. One tax would raise more money for local government jobs and services and the other tax would raise money for water and sewerage services in a fashion that is fairer and more efficient as well as transparent and clear. That is the type of redistribution of wealth that the Parliament should be responsible for.
I give members fair notice that they will have a chance to debate the issue next year, because it will be back on the agenda, as far as the Scottish Socialist Party is concerned. Members will then have another opportunity to defend the council tax and the water rate.