MIND THE TAX GAP
It’s not an exodus – yet. But as the SNP makes Scotland less attractive and more expensive for the middle classes, are the country’s key generators of wealth getting ready to vote with their feet?
ATREMOR runs through Middle Scotland, a low grumble of discontent, spreading quietly but at a pace. You hear it over dinner with friends – not right away, but perhaps on the second or third bottle, when wine makes weak that Protestant modesty which has survived the churchgoing tradition.
After a few glasses of Chablis, talk turns to politics and because of the composition of the table – a doctor here, a headteacher there, perhaps a solicitor or two – the subject of tax is soon broached.
This won’t be a technical discussion or a detailed policy critique. Fully thoughtout alternatives are rather unlikely to be analysed over crème brûlée. Instead, diner after diner will share a similar story. They will recall how hard they studied to get their qualifications, and the sacrifices they made to progress in their profession.
If they own a business, they will talk about the long days, the bedtime stories read over the phone to children, the holidays missed and the car held together with scrap parts and crossed fingers because a new one just wasn’t in the family budget that year.
They will say all this and then lament that, just when they thought it was time to enjoy the fruits of their labour, those fruits are being snatched away. Their taxes are creeping up, it’s getting harder to turn a profit, school fees are threatening to rocket. They no longer feel like the squeezed middle – they are the hammered class.
Eventually, someone will utter the profane confession: ‘We’re thinking of leaving.’ Final gulps of claret will be sputtered, chocolate mints clattered onto saucers and the table will fall quiet enough to hear the steam billowing off the coffee.
Then, as the scandaliser makes his case, his friends will begin to shift in their chairs. He does have a point. It would cost less to live down south. £1,500? That’s a family holiday or new laptops for the kids. The credit card could do with paying down, come to think of it.
Soon enough, the admission will no longer shock – and when it is made, it will begin to attract echoes. The unthinkable will have become plausible and perhaps even desirable. Middle Scotland will be eyeing up a move to Middle England.
POINTING this out is not alarmism, although supporters of the Scottish Government’s tax policies would regard it as such. There is no suggestion that professional Scots are leaving or are planning to leave in significant numbers because they find themselves living in the highest-taxed region of the UK.
Nor are there indications of measurable behavioural change – there is simply a tremor. It might lack scientific rigour, but the accumulation of conversations such as these, whether over dinner or at the school gates or down the local, may be an early warning of trouble to come.
There will be more of these conversations this weekend, in the wake of Philip Hammond’s Budget. The Chancellor’s decision to raise the threshold at which the 40p rate kicks in from £46,351 to £50,000 a year, earlier than planned, was much more than a break for Middle England – it was a calculated stinger thrown in the path of Derek Mackay, who is scheduled to deliver his budget in December.
Having chosen last year to put up taxes, he is now faced with a dilemma. Does he match Hammond’s move, or does he allow the fiscal firth between Scotland and England to grow wider? Exploiting devolution to manufacture differences between Scotland and the rest of the UK is the modus operandi of the SNP – but now it comes with a price-tag. If the Scottish rate of income tax continues to kick in at £43,430, the Scottish taxpayer will take an even bigger hit. The Sturgeon Surcharge – the penalty incurred by aboveaverage earners who choose to live in Scotland – will see those on £50,000 (a headteacher’s salary) paying £1,560.50 more and those on £70,000 (roughly what your GP earns) forking out an extra £1,760.50.
One headmistress – Sharon McLellan from Dumfries and Galloway – challenged Education Secretary John Swinney at a conference in Glasgow, asking him how taxing Scottish heads more than their English counterparts would help recruitment and retention. She said: ‘Headteachers have seen their pay eroded over a number of years, even more so than promoted teachers and classroom teachers.
‘We are seeing higher pension contributions for decreased benefits, and no passing on of the increased higher-rate tax thresholds we see south of the Border, and that gap with Scotland will continue to widen.
‘My job is not all about pay, but suitable remuneration is important to do what is increasingly a very difficult, stressful job in challenging situations.’
It has been a long time coming, but SNP ministers are finally being confronted with
the consequences of their policy choices. And senior public sector staff are not the only ones put under the cosh by higher taxes.
The Sturgeon Surcharge must now be factored in by businesses looking to hire the best staff from elsewhere in the UK. Just as roles based in London attract higher salaries and relocation packages, Scottish employers have to offer more competitive terms to offset the cost of moving here. The problem with socialist nirvanas is you have to pay people to live in them.
This might explain why Scotland’s tax revenue last year was £700million less than forecast by the independent Office for Budget Responsibility. Its representative Andy King warned the treasury select committee earlier this week that those particularly stung by higher Scottish taxes may already be taking remedial steps.
He said: ‘If you are a relatively high income individual with property in Scotland and one elsewhere in the UK, writing to HMRC to say “I live more than half of the year in London rather than Scotland” is not a difficult thing to do.’
This was, Mr King added, ‘a particularly significant risk for the Scottish Government because, if someone changes their address, the Scottish Government loses all of that income tax’.
That sound you hear is a canary trilling in the coal mine.
‘Progressives’ who scoff at our dinner party mithering will probably hoot that all this bellyaching about tax is – horror of horrors – ‘Right-wing’. But just what is progressive about giving experienced, long-serving public sector workers and job-creating private enterprises a good shoeing is beyond the ken of most of us.
DON’T listen to us, though – after all, we’re only the voters. Have a look at what a senior Nationalist says about Scotland’s punitive tax regime. Kenny MacAskill is a staunch Left-winger, yet he warns Derek Mackay that, without action, the tax gap ‘will become significant and the differential with the South more marked’.
The former justice secretary reminds his old colleagues that ‘it’s sure as hell tough at the bottom but it ain’t easy in the middle either’ and that these taxpayers ‘don’t feel wealthy and would react with fury to being told they were’.
As such, he concludes, ‘raising the allowance – albeit not to £50,000 – may well be wise, taking the sting out of the issue for those affected but still emphasising the difference between the societies on either side of the Border’.
When you are soaking the middle classes too much even for Kenny MacAskill’s liking, you have gone very wrong somewhere.
Those who would dismiss us as penny-pinching Cassandras also contend that the costs incurred in moving South – as well as the stress, family upheaval, and bureaucracy – make it prohibitively difficult. It might not be the strongest argument for ‘egalitarian’ Scotland that, however hard it is on aspiration, it’s harder for the aspirational to leave.
In the end, it might not matter. Considerations of pounds and pennies is foremost in the minds of those thinking about a move, but they are beginning to notice something else – a mood, a sourness suckled on resentment that tries to pass itself off as ‘progressive’. Hence ‘middle class’, and all the values and instincts that implies, is becoming an anathema in Scotland.
The middle classes are routinely snarled at as ‘the rich’ and their beliefs and lifestyles derogated as outgrowths of greed and meanspiritedness. Where once those who worked hard, created jobs and made opportunities for their children were admired for their industry and pluck, such strivers are now singled out for confiscatory taxes, class warfare rhetoric and cultural condescension. Every other form of judgmental behaviour having been stamped out, only class-shaming remains acceptable.
The SNP’s relationship with these electors is an odd one. They have half-wooed, half-warred with Middle Scotland – pursuing its votes while picking its pockets. The Nationalists spent the first nine years of government freezing council tax – then whacked up the rates for anyone in band E or above to claw it all back.
They have doled out goodies such as free tuition, toll-free bridges and free prescriptions. Then, once they’ve got you hooked on middleclass welfare, they hector you about the need to pay more for all the services you receive.
At the same time as this economic bait-and-switch, they wage a culture war on you and your family. If they’re not telling you how to raise your children, they’re telling you how much pizza and prawn crackers you can eat.
THE market can’t be trusted to determine the price of alcohol – the state must do it. Parents can’t be trusted to know if their children are ‘changing gender’ in school – teachers must keep it from them.
Stop smoking. Cycle to work. You’re being transphobic. Another glass of wine? That’s the wrong bin. Some people like being pushed around, and pay good money for it, but the masochism expected of the Scottish middle class is of a different order. No wonder some of them are starting to scroll through the job listings for London, Birmingham and Manchester.
Does Scotland want its middle classes? It wants their money – more and more of it – but it seems to begrudge them for having it and for wanting to spend as much of it as possible on their own family. There is an antagonism in the air.
Ministers think they are building a land of milk and honey but, to those paying for it, the milk tastes sour and there’s a sin tax on the honey. The circumstances are ripe for flight by the strivers, a point where those who want to get ahead will conclude they have to get out of here.
CAN this disaster be averted? How should Scotland think about its middle classes? The answer originates here, but only came to fruition on the other side of the world.
Robert Menzies, Australia’s longest-serving prime minister, was one of the first politicians in the English-speaking world to offer himself as a champion of the middle classes. Margaret Thatcher was still a schoolgirl when Menzies delivered his seminal 1942 speech, The Forgotten People, in defence of ‘the great and sober and dynamic middle class – the strivers, the planners, the ambitious ones’. Menzies felt their aspiration keenly, for the same impulse had driven his grandfather, a Scottish crofter, to set sail for Australia during the Victorian gold rush of the 1850s.
A century later, grandson transformed grandfather’s journey into a political philosophy. A Scottish ploughman, Menzies told his audience, expected his son to become a farmer, while a Scottish farmer was determined his son would go to Edinburgh University. The middle classes, in his view, were distinguished by their yearning for self-improvement, but they would always have to overcome envy and politics to achieve it.
These were his people and he would be for them, saying: ‘They are for the most part unorganised and unselfconscious. They are envied by those whose benefits are largely obtained by taxing them. They are not rich enough to have individual power. They are taken for granted by each political party in turn… And yet... they are the backbone of the nation.’
That is the outlook the Scottish Government – and mainstream politicians across the board – need to adopt. Scotland’s middle classes are neither a burden to be borne nor a purse to be plundered. They are the backbone of the nation.
They run the schools, manage the wards, build the businesses, create the jobs and fund the public services we rely on. Yes, it’s right that those with means should pay more towards these services, but they should also get something back.
A society runs on risks and rewards, yet while higher earners continue to take the risks, the rewards are doled out sullenly and sometimes not at all.
December 12 – the date of Derek Mackay’s budget – may prove to be a turning point. He will either loosen the thumbscrews or he will risk provoking a great Scottish taxodus, the migration of some of our most talented (and their wealth) from Scotland to more promising lands.
As the Finance Secretary surveys his options in the coming weeks, he should ruminate on those conversations over dinner, heed their warning – and deliver a budget for the ambitious ones.