Mini-budget tax cuts: Nicola Sturgeon needs to follow Kwasi Kwarteng's lead on tax cuts and economic growth in Scotland's national interest. But she won't – Murdo Fraser MSP

Our Scottish Government is rarely stuck for a savage one-liner about the UK Government to fit the news-cycle. But after the abuse they poured on the Chancellor Kwasi Kwarteng for his fiscal event last Friday, now they need to come up with a proper answer to fit the economic cycle.

As a devolved administration, they have every lever they could wish for to respond to the Chancellor’s decision to abolish the additional rate of income tax in the rest of the UK and shave a penny off the basic rate. And they face exactly the same issue they would have of how to compete with a neighbour even if Scotland was outwith the UK.

Those on the highest incomes in Scotland have a significant tax incentive to move south, and take their revenue with them, if the SNP retain the additional rate of 46 per cent. And now middle-income earners are being squeezed even more by Nicola Sturgeon’s high taxes.

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The First Minister’s addiction to virtue signalling has already cost Scotland twice over. We are the highest taxed part of the UK, but her rises have actually raised less money for Scotland than the situation before income tax was devolved to the tune of around £150 million.

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SNP economic advisers from the days before they employed PR men to write their currency policies are united that Nicola Sturgeon should follow suit and abolish the additional rate.

The former chairman of RBS, Sir George Mathewson, was unequivocal: “We can’t create a taxation difference between England and Scotland.” Alex Salmond’s old economist of choice, Professor John Kay, said it wouldn’t take many top earners to move to see keeping the tax lose more revenue than it gains.

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Even Jim McColl, who the SNP used to rely on to buy shipyards and build ferries, said: “Westminster is making the UK attractive. We need to make Scotland an attractive destination.”

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Nicola Sturgeon has come under pressure to reduce taxes in Scotland following cuts south of the Border (Picture: Jeff J Mitchell/Getty Images)

So once Citizen Sturgeon has got the clenched-fist rage of her Popular Front (Waitrose branch) politics out of her system, she has a decision to make. There may be only 22,000 people on Scotland who pay the additional rate – in itself a disgracefully low figure – but they generate around 16 per cent of Scottish income tax. Economists believe that a tenth of them could relocate with ease if the additional rate is retained. Scotland cannot afford for that to happen.

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Before Ms Sturgeon started treating him as Voldemort – the dark lord whose name should never be uttered – Mr Salmond used to go on about something called the Laffer Curve: the economic theory that cutting taxes can actually increase overall revenues by stimulating economic activity.

Presumably Ms Sturgeon was dreaming of selfies as he made those speeches and has blanked out the memory. Because the current First Minister appears to have nothing but contempt for wealth creators, unless they make shoes. She likes spending money but has no time for making it.

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Ms Sturgeon’s vision of Scotland seems to be no further developed than the fact that she runs it, and it is not England. But we live in an open market where personal taxes are lower in England than here, so she has to come up with something a little more nuanced.

It is not just the highest earners who are looking at tax rates. If the SNP administration does not respond, then Scots on £50,000 a year will notice that they are paying £2,000 a year more in tax than their counterparts in the south.

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As we face the greatest cost-of-living crisis in memory, that is a very significant number. Paying that kind of premium for the privilege of a referendum campaign you don’t want, a foreign embassy you don’t need, or a ferry that never gets built appeals to very few.

Whatever you think of Chancellor Kwarteng’s reforms, it is in Scotland’s competitive interests to match them. But for Ms Sturgeon to do the right thing for Scotland would cost her the façade she has tried to build that Scotland can do what it likes regardless of consequences.

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Famously at the US election, Donald Trump was told to “put on his big boy pants” and accept the result. Well, having hurtled her rattle of disgust on Friday, it is time that Ms Sturgeon did something similar for Scotland.

Normally when the First Minister is forced to face up to a grown-up political decision, she says it would all be different if Scotland was independent. She cannot say that this time. This is economic reality. It wouldn’t be.

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The UK Government has set out its Growth Plan, recognising that only by growing the economy will we generate the tax revenues we need to fund public services and reduce debt.

Whatever critics might make of the detail, here is a Conservative government which recognises the need for growth. In contrast, here in Scotland we have two parties in government – one, the SNP, which has never understood the economy, and a second, the Greens, which is actively hostile to growth as a matter of principle.

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It is perhaps little wonder that, since 2014, the Scottish economy has grown at only around half the rate of the UK average. Now, with the rest of the United Kingdom choosing to follow a radical new policy to stimulate growth, the Scottish administration has to respond. The response that is in the national interest is clear: to follow Westminster’s lead.

But the response that is in the national interest runs against the party political interests of the First Minister’s coalition. She has faced this dilemma before but perhaps never so starkly. And maybe just this once, for the first time, she will put Scotland’s interests before her own.

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Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife



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