Focus: Tax cut the right way to help Scots through credit crunch

The Scottish Government needs to listen to sound financial ideas rather than rely on soundbites, says JEREMY PURVIS

NO-ONE watching the events of the past week can now think that Scotland is immune to the credit crunch and global financial crisis.

Of course, families in Scotland knew that long before news of the collapse of Lehman Brothers first hit the headlines. They had already seen the credit crunch hit hard in their own household budgets.

I have met with representatives of HBOS and Archie Kane of Lloyds TSB to put the case for workers and the need for competition for customers and businesses in Scotland. I also attended the SCDI meeting to discuss Scotland's reaction to the crisis at HBOS and its implications for the Scottish economy.

Important meetings both, but equally important were some of the ordinary people I've met in the past month. Like the constituent who told me that her fuel bills have rocketed. She lives in a rural area with no public transport alternatives and few job opportunities. If petrol prices don't drop she won't be able to buy the fuel to drive to work in the first place.

I met a young man who told me that because his low-interest, fixed-rate mortgage is coming to an end, he faces a 200 a month increase in his mortgage payments. He's worried that he might lose his home.

These personal stories are the tip of the iceberg. Our economy is facing a serious downturn and families across Scotland are worried.

In the face of these pressures, families across Scotland are tightening their belts and cutting out waste. It's right that government does as well. Families are having to make sacrifices just to make ends meet. It's the measure of a political party – and of government – that it can respond to urgent new demands.

Yet what people see from Gordon Brown and Alistair Darling is dithering and indecision. The Prime Minister's speech to the Labour conference last week may have saved his skin for now, but it did nothing to save Scottish families money.

Liberal Democrats will respond to the pressures people are facing now.

Across Britain, Liberal Democrats will give tax cuts for people on low and middle incomes. But we can do more here in Scotland to help out and put money back into peoples' pockets. That means looking at the powers that this parliament has at its disposal now.

We should use the Scottish Parliament's power to cut income tax by 2p in the pound. That would save the average Scot more than 300 a year. Two adults on national minimum wage would save 160. A fireman and a teaching assistant could save around 500. That will put money back in the pockets of people who need it most, at a time they need it most.

Anyone who pays basic-rate tax will benefit – that's more than two million people in Scotland. It will help people to meet rising costs of living and decide how best to spend their own money. The answer to the current crisis is not just more "government knows best" centralised spending.

That is our challenge to other political parties as we approach this year's Budget process. This Budget cannot be "business as usual". It has to cut the cost of living and put families first.

Even Gordon Brown has now admitted that he was wrong to abolish the 10p tax rate – doubling tax for those on low incomes. But putting his hands up at a Labour conference is not enough. Labour MSPs have the opportunity to help undo the injustice caused by Brown's tax grab on the poor. They can support us and put money back in their pockets by cutting income tax.

The SNP has trumpeted freezing the council tax as the biggest tax cut for a generation. The reality is that it is not enough. Instead of blaming Westminster, or pretending that an independent Scotland would be a land of limitless milk and honey, the SNP can join with us to use the powers that this parliament already has to help people out at this difficult time.

Last year the Scottish Tories backed the SNP's budget in return for winning concessions that John Swinney described as "marginal" and "the equivalent of what the government spends in one morning of one day". This year, instead of simply selling out to the SNP or seeking to feather the beds of the super rich, the Tories can work with us to weed out the waste and put money back into the pockets of low- and middle-income earners.

That is our challenge to the other parties. So far they have chosen to attack us rather than work with us. The hypocrisy of attacking us for seeking savings from government is incredible. Last weekend, Alex Salmond was reported as saying that he would have instructed an independent Scottish Central Bank to pay out hundreds of billions of pounds to save HBOS. Scotland is not independent, there is no Scottish Central Bank and it does not have hundreds of billions of pounds. It's an uncosted promise which dwarfs even the broken promise to write-off student debt.

So our focus is on rooting out government waste and misdirected resources like the two wasteful new quangos the SNP wants to set up at a cost of 40 million. We believe that the government simply has to do more to realise savings from an infrastructure programme worth 14 billion and that around 2 per cent per annum savings is achievable. We've also taken a very cautious view of the extra money likely to accrue to Scotland over the coming years from Westminster. In the medium term, mutualising Scottish Water can deliver real benefits to consumers and release significant amounts of government money.

It's exactly because we are able to identify these kinds of savings that we are able to cut income tax by 2p and ensure that schools and hospitals are protected.

That is why the Scottish Liberal Democrat Leader, Tavish Scott, has laid down a challenge to Scotland's other parties. Are they up for helping people across Scotland? Do they support hard pressed families at this tough time? Will they work with us to make it happen?

• Jeremy Purvis is the Liberal Democrat spokesman for finance in the Scottish Parliament.