Leader comment: SNP takes historic, risky step on tax
In announcing the first major use of the Holyrood Parliament’s “tartan tax” powers, Finance Secretary Derek Mackay signalled the Government’s intent to try to break austerity in Scotland. He may find that nothing less will suffice.
For the people who will pay more – those earning above £33,000, according to be SNP – will want to see value for their money; some might accept paying a bit extra, but only if this produces tangible results.
The danger is that any benefits will hardly be felt, while a small, insidious incentive has now been created for higher earners to move south. Scottish companies may also find it harder to attract talent from England and elsewhere.
Even the fact that the overall tax take in Scotland is now higher than elsewhere in the UK creates a problematic impression.
Tax cuts for those earning below £33,000 may help to lift some of the gloom for people worst affected by years of flat-lining wages and rising living costs.
There is no doubt there is a considerable problem with public sector finances. The NHS is struggling to keep pace with rising demand and medical advances, the pressure on the police is such that former Justice Secretary Kenny MacAskill has suggested they should stop responding to minor crimes, and councils have been forced to make swingeing cuts.
But increasing overall taxation risks hampering economic growth which could actually make the situation worse. And the projections for economic growth – significantly below the anaemic forecasts for the UK as a whole – made grim reading. Mr Mackay’s announcement of extra funds for business research and development, enterprise and skills, and super-fast broadband, in addition to other business-friendly moves, was clearly designed to address this and has been welcomed by the business community.
Ultimately, only strong economic growth – and the increased tax revenue this brings – will power Scotland out of ten long years of austerity. As several commentators noted, time will tell if Mr Mackay and Nicola Sturgeon have come up with the right plan.