Tory tax cuts: Here are the real reasons why the SNP are so angry – John McLellan

You will have missed the measured view from a senior nationalist politician last week, amidst the furious SNP reaction to Chancellor Kwasi Kwarteng’s tax-cutting mini-budget.

“Devolution was designed to ensure the nations could tailor their decisions to suit their own needs and, while we are charting a different course in Scotland, it is entirely a matter for the UK Chancellor to set tax rates he thinks appropriate for England.”

You missed it because I made it up, and the reaction has been one of consistent fury, but it remains the case that the whole point of devolution was to allow Scotland to follow different paths.

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Instead, the splenetic response from interim Finance Secretary John Swinney set the tone. “We are doing everything within our power to support people, public services and the economy, but these efforts are under threat by a reckless UK Government beginning a new, and dangerous race to the bottom,” he said. “With a fixed Budget, and no scope to borrow for short-term challenges, Scotland is at the mercy of UK decisions. This reinforces the urgent need for independence.”

Chancellor of the Exchequer Kwasi Kwarteng delivered his mini-budget in the House of Commons on Friday
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Of course, for nationalists everything the UK Government does justifies independence, good or bad, whether policies are directly applicable here or not, even when there are specific financial benefits.

The SNP did not welcome £630 million extra coming its way through Barnett formula calculations, because it doesn’t fit the victim narrative.

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When Nicola Sturgeon said the super wealthy are “laughing all the way to the actual bank... while increasing numbers of the rest relying on food banks", she did not mention her tax system will leave everyone earning over £15,000 worse off compared to the new UK rates, or that as well as the £400 energy bill support for every UK household announced two months ago, those on Universal Credit also received £326 in July and are due a further £324 in the next few weeks.

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Pound falls to all-time low as Kwasi Kwarteng hints further tax cuts on way
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It is fanciful to expect Scottish ministers to take a relaxed view about changes to taxation which do not affect people living in Scotland, but it does give a glimpse of what life might be like in the event the independence plunge was ever taken.

For a start, that £630m wouldn’t be available, but fundamentally there would be as much point in complaining about tax levels in England as there is about attacking the Republic of Ireland’s rock-bottom corporation tax to entice foreign investment.

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Compared to England, Scotland is now uncompetitive on both income and property taxes, so not only is there a disincentive for companies to establish operations here, but those already here could have a problem persuading staff to relocate without expensive compensation packages. According to estate agents, interest is already reportedly rising from higher Scottish earners looking to buy property in Northumberland, possibly with a view to switching their taxation address.

And compared to the new liberalising, pro-growth intent in Downing Street towards planning, freeports, investment zones and energy licences, the contrast with a Scottish administration which includes Green ministers who openly regard economic growth as evil could not be more stark. If I was Teesside mayor Ben Houchen or Manchester’s Andy Burnham, I’d get a list of every company thinking of investing in Scotland and take their people out for a very nice dinner.

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Westminster is using UK credit muscle to borrow billions to beat the crisis and betting on fast growth to pay for it, but the main gripe of a Scottish Government seems to be that it can’t borrow money to the same extent, with the crucial difference that it has no credible growth plan at all, or any evidence it would act prudently to limit the danger of higher inflation which threatens to wipe out the benefits of lower personal taxes.

The Scottish Government does have limited borrowing power, but even if it went on a debt-driven spending splurge, its priority would not be economic incentives but welfare to camouflage the effect of Scottish stagnation, like the six per cent increase in eight payments delivered by Social Security Scotland in April this year, which will see the Scottish benefits budget balloon 48 per cent from £3.9bn now to £6.4bn in 2026-27.

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The SNP’s irritation seems to be as much about having to respond at all, but in a small island competing in the same markets for labour as well as goods, the actions of a United Kingdom built on the prosperity of an aggressively pro-growth London would inevitably impact on the choices open to an independent Scotland.

With a maximum of two years before the next election, Liz Truss has taken an enormous gamble on fast growth to stave off stagflation – high inflation and low growth – but the long lead-in time for tactics like planning reform and securing energy security means their impact will not be fully felt before the electoral clock stops ticking.

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Her only other option is a dramatic reduction in state spending, but the charge of recklessness would stick if she went into an election on the back of a huge cuts programme. While inflation should come down as the energy cap kicks in, it could rise again if government borrowing does not fall and the only way to guarantee that is to slash expenditure.

As the low pound drives up the cost of imports, this time next year we could be at the start of another crisis with the promise of tougher times to come, so why wait for that to happen?

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Ms Truss has signalled the next General Election will be in 2024, but I have a hunch that’s a bluff. Perhaps more will be revealed at the Conservative conference next week, but her best bet is to go when people still feel the energy-cap benefit and the tax line on their payslip is lower. But if it doesn’t work and Labour is resurgent, where will that leave Nicola Sturgeon’s de facto referendum? No wonder nationalists are angry.

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