Why Scotland can’t afford the SNP’s high-tax obsession
They’re taking more out of your pay packet. Raising your council tax bills. They want you to pay to park at work – and tourists are in the firing line, too. As the nationalists (and their Green minions) force through another cash-grabbing Budget...
AS you cut up along the A68, past the Cheviot Hills to the east and the Sitka spruces of Wauchope Forest to the west, you come to a lay-by ten miles south of Jedburgh.
This is Carter Bar, and marks the point where England gives way to the Southern Uplands of Scotland, a Border guarded by nothing more than a doughty stone bearing the legend ‘Scotland’. It’s where the tourists stop for ice cream and to pose for pictures.
Next to the rock stands an oversized road sign, coloured in ivory and cobalt with the greeting: ‘Welcome to Scotland, Fàilte gu Alba.’ The Scottish Government unveiled new signs at four border points, including Carter Bar, to mark the 2014 Commonwealth Games, with then transport minister Keith Brown saying they would ensure ‘visitors get a warm welcome from the moment they arrive’.
That is what Carter Bar is supposed to symbolise: Scotland, the nation that welcomes all-comers who want to make a life for themselves and their family. ‘Welcome to Scotland’ – we’re open for business.’
But that sentiment is slowly being replaced by an indifference to attracting the best and brightest. Instead of enticing workers and job-creators north of the Border, Scotland is making it more costly to move here.
An overhaul of income brackets has made Scotland the highest-taxed region of the UK. Meanwhile, on Thursday, MSPs will vote on the most confiscatory Scottish Budget since devolution began.
If the measures pass, the cap on council tax hikes will jump from 3 per cent to 4.79 per cent. Local authorities will be granted the power to levy a workplace parking tax on employers, which can be passed on to individual staff.
The very same Scottish Government that once boasted about giving visitors ‘a warm welcome’ will give town halls the right to impose a tourist tax on overnight accommodation.
These wrenching changes are advanced in the face of thunderous opposition from rival parties and members of the public. But that probably will not be enough to stop them going through. The minority SNP government has cut a deal with its faithful friends in the Green Party, and the Budget is all but guaranteed passage.
SCANT concern has been in evidence for the effects of these fiscal impositions – on workers, businesses, and those considering a move from down south. Politics requires a tax grab, ideology justifies it – and economics hardly gets a look in.
When the votes are counted on Thursday, it seems the Scottish parliament will be rewriting that Border sign so it reads: ‘Welcome to Taxland.’
How did we get here? How did the nation that gave the world Adam Smith and his invisible hand of the market turn into the nation of SNP Finance Secretary Derek Mackay and the all-too-visible hand of a grasping, insatiable taxman?
When the SNP came to power in 2007, it did so on an unapologetically pro-business, prowealth creation manifesto.
Not for Alex Salmond the stale statism of Scottish Labour and its technocratic fetish for running everything – often badly – as one giant government project.
Instead, the SNP would slash business rates, and abolish them altogether for some, while freezing the council tax to give households some breathing space. Growth, not just spending, would be the watchword of the Scottish Government.
How drastically that has changed in 12 years. Today the SNP preaches from the same gospel of envy as Labour and, if anything, it now goes in for the more fire-and-brimstone passages.
An agenda of easing the burdens of household and business levies has morphed into a manifesto for the sixthform common room: Higher taxes, more taxes, taxes to improve us, and taxes because they’re good for us.
The SNP has gone from agitating to abolish air passenger duty to levying a tax on visitors who dare come to Scotland. Labour may languish in the polling doldrums but Corbynism is already in power at Holyrood.
The mindset guiding this abandonment of ambition is one that says tax increases are desirable because those they will affect are ‘the rich’.
Yet anyone earning more than £27,000 is being stung in the hip pocket. That is not the salary of a banker or business magnate but of police officers, teachers and nurses.
The Scottish Government has expanded the definition of ‘the rich’ to include almost all professionals.
Income tax was the first front in this war and Derek Mackay’s decision to redraw the brackets has made it more expensive to live in Scotland.
Introducing elevated rates of 21p, 41p and 46p ensured this in itself, but Mr Mackay’s refusal to match Chancellor Philip Hammond’s increase in personal allowance for the higher rate created a still-growing chasm between Middle Scotland and Middle England.
While taxpayers south of the Border must earn £46,350 before they are hooked into the 40p higher rate, those in Scotland need only clock in at £43,430 – and for the pleasure they are taxed at 41 pence in the pound.
Remember, though, these are ‘the rich’. They can afford to pay. That is the logic of a protection racket, not a democratic government. It is also a damning indictment of ministers’ aspirations for the
country. A salary of £43,000 is close to what a headteacher earns in their second year in the job. Few headteachers consider themselves part of the jet-set crowd.
As for the argument wheeled out by Mr Mackay – that 55 per cent now pay less tax – it is clear that, even on the most generous reading of the figures, those earning between £15,000 and £26,000 paid only around £20 less this year than they would have done in England.
THAT’S the price of a single Chinese takeaway – and at least Theresa May doesn’t nag you about how many prawn crackers you eat.
This is not just a pettifogging debate about semantics. Scotland is in the midst of a professional recruitment crisis. One in four GP surgeries has a vacancy, but the urgent task of recruiting from England and Wales to fill these openings is hindered by our less favourable tax rates.
This year GPs in Scotland, who earn between £58,000 and £87,000, paid at least £755 more in tax than they would have done elsewhere in the UK.
At the same time, ministers last week again shelved their plans to address the NHS recruitment crisis, which has seen a third of consultant posts left unfilled for over six months.
A consultant with 15-19 years of experience earns £100,000 – and would face an income tax bill £1,155 higher if they transferred to a hospital in Scotland.
Supporters of higher taxes often fall back on the lifestyle argument, which is to say that Scotland is perceived as a better place to live and raise a family. The ‘culture of free’ means more middle-class benefits, too. That might have been the case up until now, but Scotland in 2019 is a very different proposition – with higher taxes, underperforming schools, poor NHS waiting times.
Free prescriptions and personal care are jealously guarded by older voters but are hardly likely to convince healthy thirtysomethings to uproot their family and move hundreds of miles north.
Scotland’s decision-makers have become too complacent about its appeal and are in denial about its drawbacks.
This out-of-touch worldview is what renders ministers incapable of responding to the real needs of the economy and has, with no small amount of irony, led the SNP to use the tax powers it demanded to damage Scotland’s reputation.
We live in bizarre political times, but the sight of a Nationalist administration imposing a Scotland surcharge ranks as one of the most extraordinary moments of this parliament.
The problem extends far beyond income tax, though. The workplace parking levy, based on a pilot in Nottingham, will be applied initially to employers – but they will have the option of passing on the cost to their workers.
In this economy, many small and medium-sized firms simply cannot afford another overhead and will have no option but to ask their staff to stump up.
Based on the Nottingham experience, that means a potential bill of up to £500 a year for every driver affected. That may not sound a vast sum to our politicians who are paid almost £64,000 a year each by the taxpayer, but to many it is the downpayment on a holiday or the cost of fixing a long-running problem with the family car.
The parking levy’s Green defenders would counter that, even if it proves punitive to drivers, it is worthwhile to reduce our overreliance on fossil fuels and the build-up of cars on busy city streets. But making motoring more expensive to the tune of £500 a year is just as likely to have the opposite effect – forcing drivers to switch to cheaper, less fuel-efficient vehicles.
The Fraser of Allander Institute has said that, while there is some connection between a parking tax and a reduction in congestion, it is still ‘a fairly blunt tool’ and is not as effective as a London-style congestion charge.
DR STUART McIntyre, Associate Professor in Economics at the University of Strathclyde, says the jury is still out on the overall ramifications of the Budget but warns that it could damage Scotland’s commercial reputation.
He told me: ‘It’s unclear whether these new taxes will actually change behaviour – as some claim – rather than just generating new revenues for councils. While the value of sterling is low, a tourism tax may have little effect on the flow of visitors from abroad.
‘A further tax on businesses through the workplace parking levy, following on from a contentious business rate revaluation, and combined with the widening income tax gap between some skilled workers in Scotland and those in the rest of the UK, may start to erode a perception of Scotland as a competitive place to do business.’
The car park tax has grabbed all the headlines but its partner in crime, the tourist tax, is just as insidious. The Budget proposes that councils be given the power to impose a per-night surcharge on the cost of hotel rooms and other visitor accommodation.
The City of Edinburgh Council has already voted to adopt such a measure, making it the first city in the UK to implement a tax on tourists. In a city where tourism is the lifeblood of much of the local economy, it is an obvious revenueraiser for councillors – but it is also a gamble that visitors and businesses will absorb the additional costs without complaint.
As with the workplace parking levy, the tourist tax fails to take into account the effect of behavioural changes – the actions taken to minimise tax burden.
In the case of visitors to Edinburgh, making the capital more expensive might make it less attractive, keeping away tourists and hitting the businesses that rely on their trade. Combined with the parking tax, it constitutes a direct hit on the profits and competitiveness of Scottish businesses.
MATTHEW Lesh, Head of Research at liberal think tank the Adam Smith Institute, commented: ‘The SNP and Greens have never seen a tax that they didn’t want to increase on hardworking Scottish families. Scots are sick to the back teeth of ever-higher taxes under the SNP while receiving nothing but lower quality services, attacks on businesses, and an obsession with independence.
‘If Scotland wants to be competitive, to attract business and opportunities, the Scottish parliament should decrease and reform taxes. It should make Scotland the lowtax capital of the UK. And it should remember that businesses in the Highlands have different needs than those in the Borders or Scotland’s cities. You’d think the Nationalists would know Scotland’s varied national needs.
‘It doesn’t make any sense to be charging the same parking tax all across Scotland, particularly in places where there are a lack of alternative transport options.’
It may make no sense to economics experts but it makes political sense to the SNP. They must do whatever it takes to survive in a minority government setting, with policy blunders and party scandals never far from their door.
But what of Scotland, though the country they claim to be alone in standing up for, which they accuse their opponents of talking down? For Scotland, politics and tactics are low down the list of concerns. Families are more worried about meeting mortgage payments and making a dent in that pile of bills. Businesses want to grow and recruit but find it is being made more difficult at every opportunity.
The sign at Carter Bar can bid welcome in as many languages as take ministers’ fancy, but in all of them it will be meaningless if they keep Scotland shackled to the deadweight of higher taxes and the absurd millstone of taxes on going to work and staying in a hotel.
It might be time to rewrite that sign on the road coming into Scotland: ‘Abandon aspiration all who enter here.’