STURGEON’S TAX PLANS SAVAGED

Business leaders warn rates rise may send country into recession

SOME of Scotland’s leading business chiefs have issued a dire warning to Nicola Sturgeon that her plan to hike taxes will damage the economy.

They say the move could spark an exodus of skilled staff, deepening the recruitment crisis in schools and hospitals.

In a joint letter to the First Minister, the four bosses caution against using hard-working Scots as ‘cash cows’, and say the country could be plunged into another recession.

Former CBI Scotland director Sir Iain McMillan, former Scottish Enterprise chief executive Jack Perry, construction executive Anthony Rush and former PwC tax partner Rhona Irving also explain that increasing the tax burden north of the Border could damage investment and hit consumer spending.

It comes after Miss Sturgeon this month unveiled proposals to consider increasing the rate of tax paid by workers earning as little as £24,000 from next April.

The letter, seen by the Scottish Daily Mail, was last night described as another ‘dire warning’ to the SNP.

It says: ‘Scotland’s economy is already vulnerable and these proposals could cause further economic under-performance. Earlier this year,

we were already close to recession and we are concerned that this could happen again if tax rates rise.

‘We would, therefore, encourage you to be ambitious and help to grow Scotland’s economy by pursuing the right policies that include ensuring there are no further tax rises in the December Budget.

‘Any decision to raise taxes runs the risk of damaging our international competitiveness and any prospect of economic recovery.’

This year, Scotland became the highest taxed part of the UK when the Scottish Government froze the threshold for paying the 40p higher rate of tax at £43,000, despite it rising to £45,000 south of the Border, while any future increases will be limited to a ‘maximum of inflation’.

The letter states that the move has already ‘sent out a signal that Scotland will become a higher taxed place than the rest of the UK’.

But it says the new proposals, which could force people earning above £24,000 to pay a new 21p rate, as well as hiking the amount paid by higher and additional rate taxpayers, could cause ‘considerably more damage’.

It states that the proposals would ‘make Scotland a less attractive place in which to live, work and do business, and could serve to deter potential investors’.

The letter goes on: ‘We believe this proposal could well deter skilled individuals from relocating to Scotland and could

‘A less attractive place to live and work’

encourage those who currently live here to move elsewhere.

‘If investors see Scotland as a more expensive place in which to do business they are more likely to choose a more competitive location instead.’

The Government has funded a major advertising campaign attempting to attract junior doctors from England, and has been attempting to fill other gaps in hospitals and schools by recruiting staff from other parts of the UK and Europe.

But the business leaders, who have extensive experience of the public and private sector and were all members of the Independent Commission for Competitive and Fair Taxation in Scotland, warn: ‘The Scottish Government has, quite rightly, noted its intention to encourage more skilled workers to move to Scotland but increasing taxes will put at serious risk ministers’ ability to achieve this.

‘Workers should not be viewed as a cash cow by the Scottish Government as, while increases in income tax are likely to raise more money to fund public services in the short term, there is considerable evidence to show that in the longer term government revenues could actually decline due to reduced economic growth.’

The Government’s own chief economist, Dr Gary Gillespie, said in a report last week that household incomes are already ‘squeezed’ – and the response of families to interest rates rises ‘will be key to determining Scotland’s future economic prospects’.

Murdo Fraser, finance spokesman for the Scottish Conservatives, said: ‘This is another dire warning from business leaders about the impact of the SNP’s high-tax agenda on Scotland.

‘Nicola Sturgeon and [Finance Secretary] Derek Mackay should be particularly concerned about the reference to public sector staff such as nurses and teachers – some of the key worker posts that the SNP are trying to fill.

‘We have said time and again that imposing higher rates of tax is not the way to grow our econ- omy. As this important letter makes clear, we risk damaging our economy further and driving away talent and investment.’

All four proposals published by the Government include increases in the higher rates of tax, currently set at 40p, and the 45p top rate.

In addition, three of the options propose a new 21p rate of income tax charged on earnings of £24,001 and above.

The set of proposals also include options to introduce a new 42p rate on earnings above £75,000, rising to 50p above £150,000.

A Government spokesman said: ‘The serious economic threat posed by Brexit, coupled with continuing UK Government austerity, means we are seeing increasing pressure being put on our public services, and the time is right for a discussion about how we protect these vital services.

‘That is why we have started a conversation to look at how best to use our income tax powers.

‘It is not the case that those earning over £24,000 will face an increase... once the expected rise in personal allowance is accounted for, none of our illustrations would see anyone earning less than £31,000 pay more tax.’

Comment – Page 16

‘Revenues could actually decline’