Conclusive, final proof of damage being inflicted by their financially illiterate policy
LIFE’S two certainties used to be death and taxes. But in Scotland there is a difference. Death doesn’t get worse every time the Scottish Government delivers a Budget.
And yesterday’s tax and migration report from HMRC finally, and conclusively, revealed just how much damage the SNP’s decision to make Scotland the highest taxed part of the UK is doing.
The government’s predictably selective reading of the report trumpeted its finding that ‘thousands more workers moved to Scotland than left since the nation became the highest taxed part of the UK’.
Deputy First Minister Shona Robison insisted this represented ‘yet more proof that Scotland is an attractive place for people to live and work’.
Unfortunately for the financially illiterate Robison, there isn’t any actual evidence to show higher taxes have suddenly become a magnet for workers eager to come to Scotland (and endure some of the worst public services in the UK).
More significantly, the report does not examine the impact of the latest tax hikes in December’s Scottish Budget, when the tax gap between Scotland and the rest of the UK was significantly widened.
However, what the report shows clearly, and what Robison shamefully ignored, is the impact the SNP’s high tax regime is having on higher earners, who in Scotland pay the lion’s share of income tax.
The HMRC report, which tracked inward migration in the UK through different income levels between 2009 and 2022, revealed a fall among higher rate and top rate taxpayers in Scotland following the tax changes.
The higher rate threshold in Scotland begins at £43,663. The report states: ‘There is some evidence of a fall in net migration to Scotland for individuals earning over the higher rate threshold, with the size of the fall increasing with income levels.’
It estimates there has also been a net loss of 1,030 people on the higher rate of tax, with lost tax of £60.6million.
This direction of travel is deeply worrying for Scotland’s economy.
Commenting on the HMRC report, entrepreneur and philanthropist Sir Tom Hunter said: ‘The tax system here is a barrier to enterprise. We really can’t afford to lose more than 1,000 top rate and higher rate earners in Scotland. It’s right that those with the broadest shoulders should carry the heaviest burden and we do, but the reality is a high proportion of income tax revenues in Scotland are now increasingly being paid by a small part of the population.
‘We need to move away from all the spin. Around 11 per cent of Scotland’s population contributes around 65 per cent of the tax revenue. We really cannot afford to lose any of those people if we want a flourishing economy in Scotland.’
Professor John Kay, a fellow of the British Academy and the Royal Society of Edinburgh, as well as a former economic adviser to the Scottish Government, said the report’s findings on high earners ‘was probably the only demonstrable practical example of the Laffer Curve’.
The Laffer curve, originated by renowned economist Arthur Laffer, is the theory that lower taxes boost economic growth and therefore increase tax revenues, while higher taxes reduce growth.
Laffer’s general theory about taxation was a central plank of the SNP’s tax policies under Alex Salmond but was abandoned during Nicola Sturgeon’s antibusiness leadership.
Back in 2016, Ms Sturgeon’s former finance minister Derek Mackay famously admitted he had never heard of the Laffer Curve during questioning by Holyrood’s finance committee on his plans to raise taxes.
Earlier this year Laffer said the Scottish Government’s high income tax policies were ‘stabbing Scotland in the heart’.
The real issue here is not just the SNP’s dishonest attempt to spin, or more accurately manipulate, the HMRC report. It is the fact that employers, trade unions and even business advisers to the SNP – most notably former Royal Bank of Scotland chief Sir George Mathewson, one of the few high-profile businessmen to support independence, who warned as far back as 2017 that the party’s policies on taxation would drive high earners and their tax revenues out of Scotland – were consistently ignored.
For the past seven years, successive SNP Budgets have left hard-working Scots – everyone earning more than £29,000 a year – paying higher income tax than their counterparts south of the Tweed.
Most of those people have to suck that up, unless they can avoid the increase by paying more into their pension pot, thus reducing their gross earnings.
Many are doing exactly that, while higher up the scale there can be no doubt now that many top earners are either changing domicile, taking their salary in shares or consulting an expensive accountant to avoid paying the full amount of tax. QED.