Mail Online

WILL STURGEON WALLOW IN VIRTUE SIGNALLING?

After tax-cut Budget, top f inancial expert asks the acid question:

By MERRYN SOMERSET WEBB EDITOR-IN-CHIEF OF MONEYWEEK

AFTER the Chancellor’s breathtaking income tax cut announcement – and Nicola Sturgeon’s refusal so far to follow suit – I tweeted (only half-jokingly) about my immediate search for a house down south.

The replies were almost instantaneous, and entirely predictable. Mostly along the lines of: ‘Ye’ll no be missed.’ I can take the brickbats, but the truth is undeniable. Talking about moving to England was an obvious and active conversation in many Scottish households on Friday night.

It can’t feel good to any family to know that 50 miles away from Edinburgh another family with the same gross income as them will soon have a net income many thousands higher than them.

The raw figures are startling. If you live and work in Scotland you will most likely pay more tax than anyone working in England next year. If you are an even reasonably high earner, you already do. Income tax here is already higher in most bands than in the south – anyone earning £50,000 pays around £1,500 more in Scotland than in England, for example.

But Friday’s radical announcements on tax from Kwasi Kwarteng make things look much worse.

In England the basic rate is to fall to 19 per cent. That number rises to 40 per cent at £50,270 and that’s that. Simple, low, internationally competitive. In Scotland, where income tax is devolved to the current SNP government, 19 per cent only applies up to £14,732. After that you pay 20 per cent, then 21 per cent and then at only £43,662 it’s 41 per cent.

Next comes 46 per cent at everything over £150,000. Complicated, high and not remotely competitive.

The key point, however, is this: by next April no worker in Scotland will pay less than a worker in England. And higher earners will pay a lot more. On £50,000 the difference is £1,863 a year. On £150,000 it is £3,046 and at £250,000 £9,046. Real money. Either way, this isn’t about individuals. It’s about the people driving Scotland’s future.

There may be talk about quitting Scotland, but most people probably won’t actually do anything: moving house is an expensive bore.

What they might do, however, is shift their affairs around such that they don’t pay as much income tax as before. They might also be more open to transfers elsewhere: if you are, say, a couple of fund managers, lawyers or doctors and a move to Newcastle might save you £20,000 in tax between you, perhaps you might think about it more than you would have last year.

That said, the real problem is not people leaving in the immediate future. It is those who will not come to Scotland – the middle managers, doctors and public sector workers who’d rather work down south and keep more of their own money, the tech entrepreneurs who know the kind of people they want to employ would prefer to live in a low tax region, the senior growth drivers in all sectors who might like Scotland but not quite enough to pay a £20,000 year levy to live in it.

Scotland has fewer than 30,000 people with an income over

Income tax here is already higher in most bands than in the south

No worker in Scotland will pay less tax than a worker in England

£150,000 as it is. More might be better than fewer.

There is a view in parts of Scotland that right-thinking people are not motivated by money. But those who believe that should look to the problems in the NHS. Why are so many senior doctors (and not so senior doctors) retiring early or cutting hours? Because they don’t like the pension tax hit they take after a certain level. Are they all outrageously selfish or do they just, like most people, react to financial incentives? You might not like this, but it is the way it is.

So here is the question. Will the SNP allow the tax differential between Scotland and England to stay this wide simply for the sake of difference (and a little eat-therich virtue signalling)? Or will they do the best thing for Scotland and go for competitive tax rates and growth?

When Kwarteng made his tax announcement yesterday he spoke of his hope that it would reward enterprise and incentivise growth. If only it could be given the chance to do the same in Scotland.

News

en-gb

2022-09-25T07:00:00.0000000Z

2022-09-25T07:00:00.0000000Z

https://mailonline.pressreader.com/article/281767043092773

dmg media (UK)