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19 December 2023

Scotland looks closed for business

The SNP’s combination of high taxes and low economic growth is sending a negative message to the world.

By Chris Deerin

The Scottish budget began, as it always does under the SNP, with a prolonged whinge. There is not enough money, said Finance Secretary Shona Robison. This is all the Tories’ (read: the Union’s) fault. In the absence of complete control of the Scottish economy, she could only mitigate the damage inflicted by Westminster. Poor Shona, with her titchy £60m swag bag.

Given the SNP’s preference for penal tax rates, it’s hard not to be grateful that her powers are limited. Even within her curtailed remit, Robison was able to introduce yet another new tax rate of 45 per cent on earnings between £75,000 and £125,140. The Scottish tax system now has six separate rates, introducing a heroic level of complexity. Further, the top rate of tax will increase from 47 per cent to 48 per cent (meaning a marginal tax rate of 69.5 per cent on earnings from £100,000 to £125,000 owing to the withdrawal of the personal allowance). Oh, and the higher rate threshold will be frozen, ensuring fiscal drag will net the government a further £307m.

In all, Robison boasted that she has managed to plug the much-advertised £1.5bn gap in her £60bn spending plans. There will be more money for the NHS – and, at last, a national conversation on health reform – and although Humza Yousaf’s controversial council tax freeze will be implemented, local authorities will receive an above-inflation spending increase of 5 per cent.

Robison had warned in advance about “tough choices” having to be made. But there wasn’t much mention of tough choices as she tinkered here and tinkered there. Nigel Lawson (or even Gordon Brown) this was not.

As the Scottish Fiscal Commission said in response to the Budget, “economic growth will remain fragile in the near term with living standards set to fall between 2021-22 and 2023-24 by the largest recorded amount and not returning to their 2021-22 level until 2026-27”.

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Further, Scottish government changes to income tax policy since 2017 mean someone in Scotland earning £100,000 will now pay £3,346 more in income tax than they would in the rest of the UK, while someone on £50,000 will pay £1,542 more. 

Watch: Where is Yousaf’s SNP headed? Chris Deerin joins the New Statesman podcast live from the party’s national conference, to discuss.

Poor economic growth (and a lack of government interest in building growth), coupled with a high-tax regime, is sending a message to the world about Scotland’s direction of travel. Every Scot earning above £28,000 a year now pays a significant amount more in tax than their equivalent south of the border. Whether it is the message Scotland should be sending to the world, as it seeks investment and immigrants, is a matter for debate.

The SNP has made its choice, which is to spend, spend, spend and tax, tax, tax. It has ducked the reform challenge in every major policy area and, in the absence of economic growth, has chosen to fund its largesse by raising taxes ever higher.

And amid all this, despite the many powers available to the devolved government, it chooses to blame Westminster for every problem it encounters, whether that problem is a result of its profligacy or its own catastrophic errors.

Devolution turns 25 next year, and has yet to grow up. Under the SNP, it’s clear it simply will not be allowed to do so.

[See also: Humza Yousaf should bring back Kate Forbes]

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