Yesterday, Shona Robison, Scotland’s finance minister, delivered her tax and spending plans for the coming fiscal year. The headline message from the SNP was the following: the majority of Scots will pay less tax than those living in the rest of the UK.
That’s thanks to a very slight lifting of the threshold freeze on the lower tax bands, resulting in whopping tax cuts of less than £1 per week for the lowest tax-paying earners. The result is that those taxpayers at the bottom of the rung will find themselves £24 a year better off than if they lived anywhere else in the UK. By contrast, those earning £70,000 are faced with a nearly £2,000 premium for living in Scotland.
The SNP are masterful at spin and so the message seems to have landed. Scots on the whole are genuinely grateful to live in a country where wealth creators and higher earners are punitively taxed in return for a cardboard box and some powdered milk for all new parents.
Nevertheless, it’s still worthwhile calling out yesterday’s budget spin, as tax expert Dan Neidle has done. He calculates that what might be the smallest tax cut in history is actually no cut at all. Inflation and the continued freezing of the personal allowance means that in real terms everyone earning more than £12,947 (the amount the personal allowance should be lifted to to keep up with inflation) is actually some £72 a year worse off. Plus, this Budget ‘for lower earners’ actually sees most of the tiny benefit going to the highest 50 per cent, because they see the reduction at the lower end of their pay too.
There is no real desire or means within Scotland’s governing party to do anything meaningful on tax. Instead this was a nothing Budget with headline grabbing announcements such as a private jet tax that will likely bring in the square route of heehaw and a mansion tax that will only cover around 400 homes. The clever spin means that real terms reductions in the education and local government budgets go unaddressed.
The aim, then, was simply to tweak tax brackets just enough to enable the SNP to claim that the majority (55 per cent) of Scots are taxed less than their friends and family in the rest of Britain. The move was so cynically executed that it may not even work in the long run. If median earnings and inflation rise faster than expected, then more tax payers will be dragged up the brackets and the reverse will again become true: Scotland will be the highest taxed part of the UK. Indeed, already one million middle earners will find themselves in a higher bracket.
Regardless, this Budget will sail through Holyrood because Anas Sarwar’s Scottish Labour have said they will not oppose it. The thinking among Sarwar’s team is that it’s better to get the Budget out of the way and off the front pages in the run up to May’s elections than spend weeks wasting energy on it.
It’s bizarre that the SNP seems content with a national strategy that boils down to: ‘free education but we’ll punish you when you use that education to become a high earner.’ That’s a recipe for economic decline and a brain drain, two things you might want to avoid if you truly believed in a Scotland that could afford to go it alone.
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