Their thinking was that on those occasions when England, especially the south-east of England, experienced an economic downturn – either by an unexpected turn of events or deliberate government policy to cool inflation – the debilitating effects on Scotland were much more adverse. Scotland, they claimed, had different economic needs and so her problems required Scottish solutions.
Fast-forward to 2022 and a Scottish parliament in Edinburgh does have options, albeit limited ones, to chart a different economic course from that set at Westminster – witness the recent decision at Holyrood to freeze rail fares and residential property rents.
Such options will be further exercised soon as the Scottish Government decides what to do with the additional £630 million unexpectedly provided by the new Chancellor, Kwasi Kwarteng, as part of a tax-cutting agenda which formed the basis of his mini-Budget announced last Friday.
As a result Nicola Sturgeon’s cabinet has the opportunity to bring income tax more into line with England and to reduce the burden of Land and Buildings Transaction Tax as Mr Kwarteng has decided to do with stamp duty south of the Border (and in Northern Ireland as well). Or it could choose to flush Kwasi’s money down the khazi with more debatable public spending that provides little benefit (except, of course, for those so employed).
So far, the portents for the former have not been good. No sooner had the mini-Budget been announced than Ms Sturgeon was tweeting that the tax cuts would “Send the super-wealthy laughing all the way to the actual bank”, a rather shallow comment from which it might be inferred that she has a problem with people becoming super wealthy – either now or in a separate Scottish nirvana of the future.
Just for the record, ‘super-wealthy’ might be said to include Sir Tom Hunter, who came from relatively-humble beginnings in Ms Sturgeon’s native Ayrshire. He began selling trainers from the back of a van before building the business into Europe’s largest independent retailer. He must have paid vast amounts in taxation both personally and in corporate terms and his charity, the Hunter Foundation, has donated millions of pounds to good causes.
However, this being a property column, I will now park income tax and move to the prospects of the Scottish Government matching, or at least partly following, the Chancellor’s decision on stamp duty, Mr Kwarteng hasn’t actually lowered rates but stamp duty will not now kick in until transactions of £250,000 (double the previous limit of £125,000) and the exemption for first-time buyers will rise from £300,000 to £425,000.
There are fears, however, that tax concessions on house purchases, whether north or south of the Border, will be cancelled out by a rise in prices as vendors presume buyers can now afford to pay that bit more. This time last year I might have agreed but the turnaround in national economics over the past six months has convinced me otherwise.
As recently as last December the UK base rate was at 0.1 per cent but since then has risen to 2.25pc with further rises probably on the cards. This is already leading to significant increases in payments for homeowners with standard variable rate (SVR) mortgages and those on fixed rates will eventually feel the pain too when their current deals run out. Also this time last year, people did not expect to be facing a huge increase in their domestic energy costs over the winter months.
This decrease in disposable income will likely see potential house-purchasers being a lot more cautious when bidding for a property and at times be prepared to lose out rather than make the type of offers which might stretch their household finances to the limit. Therefore should the Scottish Government make concessions on LBTT, market pressures are likely to keep prices reasonably stable.
Reform of the top rates of LBTT have been especially needed, almost from day one of its inception. Therefore, let’s hope our First Minister’s reference to the ‘super-wealthy’ was simple politicking and that action of a more sensible nature, on her part, will follow.
David Alexander is chief executive officer of DJ Alexander