RECESSION WARNING OVER SNP TAX GRAB

Sturgeon’s tax war on Scots families will send economy into free fall, say experts

SCOTLAND will hurtle towards recession if Nicola Sturgeon follows through on her threat to hike taxes, business chiefs warn.

High-profile business leaders and industry chiefs yesterday delivered a stark caution that rises may send the economy into reverse.

They fear that forcing hardworking Scots to pay more income tax will make the country a riskier place to set up firms, will drive away investment, discourage much-needed skilled staff – such as doctors – from relocating here, and will damage business growth.

The Scottish Chambers of Commerce said that ‘squeezing the last drops’ out of workers could send Scotland’s economy into free fall – raising the prospect of re-entering recession for the first time since 2012.

The warning comes after the First Minister announced that

‘the time is right’ to consider a more ‘progressive’ approach to income tax – and committed to considering raising the amount paid by people on the 40p and 45p rates of tax.

Miss Sturgeon also faced a backlash yesterday from the business community over a range of other proposals in her Programme for Government – including a ban on older cars from city centres.

Liz Cameron, chief executive of Scottish Chambers of Commerce, said: ‘Investors are making daily decisions about where and when to fund developments across the UK – Scotland may be seen as a riskier option.

‘Higher rates bills and higher personal taxes for key decision-makers in organisations will do nothing to attract businesses to Scotland and could, in time, drive away investment.

‘It is not even the best way of achieving what the Scottish Government is seeking to deliver, that is, higher levels of spending on public services.

‘More businesses, employing more people in high-quality jobs, and all paying fair taxes is Scotland’s most sustainable solution. Growing the Scottish economy, not squeezing the last drops out of existing businesses and workers, will generate more tax revenues.’

Sir Iain McMillan, the former CBI Scotland chairman who chaired the Commission on Fair and Competitive Taxation, said: ‘Scotland’s economy has not performed as well as the rest of the UK for some time and we need to have competitive rates of tax north of the Border.

‘If the Scottish Government goes down the higher tax route it will damage the economy in the longer term and may deter doctors, businessmen, public sector workers and other skilled staff we need. My strong advice would be to stop this debate and start getting Scotland to live within its means.’

Earlier this year, the Scottish Government opted in its Budget to freeze all income tax bands and rates. It also froze the £43,000 threshold for paying the 40p higher rate despite it rising to £45,000 south of the Border.

A series of policy papers setting out the options for raising income tax will be published by the Scottish Government in the coming weeks.

Miss Sturgeon said she would consider proposals from other Left-wing parties ahead of this year’s Budget.

Labour has proposed 1p be added to the basic and higher rate tax band, and would back bringing back the 50p additional rate of tax. According to the Institute of Fiscal Studies, this proposal would strip £1.2billion a year from Scots.

The Greens want even more radical reforms, including a 60p top rate of tax and a 43p rate starting at only £43,000, which would bring in up to £950million a year, while Lib Dem proposals would sting Scots for £750million a year.

The Scottish Retail Consortium has written to the Scottish Government to encourage it to avoid tax rises.

Director David Lonsdale said: ‘Last December, Scottish ministers said “household budgets are already under strain”, and if anything the squeeze has got worse.

‘Any notions about increasing income tax rates for the vast majority of Scots should be firmly knocked on the head as it could cast a pall over consumer spending – a mainstay of Scotland’s economy.’

Stuart Mackinnon, of the Federation of Small Businesses in Scotland, said: ‘We would urge the Scottish Government to carefully model what impact changes in Scottish tax rates could have on business start-ups and business growth rates.

‘We do not want to make a change which may or may not raise a small amount more tax revenue but may impact on Scotland’s economy.’

Scottish Conservative finance spokesman Murdo Fraser said: ‘The SNP has to listen to these organisations. Increasing taxation on workers and businesses will only drive talent away and cause huge harm to the economy.

‘It was only a few months ago that Scotland had a quarter of negative growth. If taxes are whacked up, we could be straight back to the brink of recession again.’

The Scottish Government said: ‘As set out in the Programme for Government, we will publish a discussion paper that not only sets out tax options but also considers the impacts of taxation, including on household incomes and economic activity, to seek a consensus ahead of the Scottish Budget.’

‘Drive away investment’

MOTORISTS are to be banned from entering Scottish cities or face automatic fines if their cars do not meet strict clean air standards.

Nicola Sturgeon yesterday unveiled proposals to bar drivers in city centres – with a network of cameras to enforce a new penalty scheme.

Under Scottish Government plans, four low-emission zones will be set up by 2020, with one in place before the end of next year. It could mean cars, taxis and buses are restricted from accessing certain areas.

Ministers have ruled out forcing drivers to pay to enter cities and have instead backed a ‘national penalty regime’ – and those flouting the ban face extra fines if they do not pay within a ‘defined period’.

The crackdown is likely to affect petrol cars registered before January 2006 and diesels registered before September 2014, and is part of a bid to improve public health.

Green campaigners praised the move but critics deemed it an attack on motorists.

The Alliance of British Drivers said: ‘This is simply nonsensical. This will make cities a no-go area for many, with businesses relying on cars, vans or other vehicles moving out of them. This is not fair on motorists who rely on their cars for getting around.’

Miss Sturgeon announced the creation of the four new zones yesterday – to be set up in Glasgow, Edinburgh, Aberdeen and Dundee within the next three years.

The first is widely expected to be Glasgow and in place by the end of next year. Estimates to build and design the system there are between £3.4million and £14.9million.

The First Minister said: ‘Some of the changes that will be involved for a low-emission zone do involve behavioural change, they do involve things that can be difficult for people. But the scale of this challenge and the importance of this challenge means we’ve got to do these things.’

Transport Minister Humza Yousaf said it would be for individual councils to decide which vehicles were banned or exempt ‘but could include freight, taxis, buses and private motor vehicles’.

According to the plan, this would be based on minimum European emission standards, an ‘air quality model’ and ‘compelling reasons for certain vehicles to be included’.

It is anticipated restrictions will be in place 24 hours a day, seven days a week. A public body to oversee the plan is yet to be determined. The Government said ‘only a decriminalised penalty regime would allow penalties to return to Scottish bodies directly’. Last night, RAC spokesman Nicholas Lyes said the proposals ‘will have motorists reeling’. He added: ‘The outlined measures could have serious financial and practical impacts on those living and working in and around these cities.

‘Unlike the London Ultra Low Emission Zone, where motorists and businesses will have had up to six years to plan and budget for necessary upgrades to their vehicles, these proposals appear to fast-track stringent restrictions with a limited “sunset” or grace period.’

Neil Greig, policy and research director of the IAM RoadSmart motoring group, said: ‘This could ban relatively new cars. This will hit low-income families worst.’

Although the consultation document fails to point out exactly what vehicles could be banned, it includes a list of what could be exempt, such as ambulances, snow ploughs and night-shift workers who prove they have no other way of getting to work.

Scottish Labour air quality spokesman David Stewart said: ‘It is the same old story with the SNP, launching consultations not policies. [It] must come forward with more detail to allow commuters to prepare.’

ClientEarth lawyer Anna Heslop said: ‘This is a chance for Scotland to help lead the way on clean air and transport in Europe.’