Why John Swinney needs to take business complaints about England-Scotland income tax gap seriously

The SNP cannot keeping on eating private business’s lunch without dire consequences for the economy

As John Swinney eagerly dons his napkin in anticipation of the starter at the Confederation of British Industry’s annual lunch in Edinburgh today, he may find himself having to fend off complaints about the SNP-imposed income tax gap between Scotland and England.

Speaking to The Scotsman, CBI chief executive Rain Newton-Smith said uncompetitive tax policies acted as a “handbrake on growth” and urged ministers to reduce the gap, saying this would “only benefit public services”.

Hopefully, the First Minister will have a better reply than the response to Newton-Smith’s remarks from a Scottish Government spokesperson. "Our income tax policies mean that the majority of taxpayers in Scotland pay less than they would elsewhere in the UK, while raising an anticipated £1.7 billion more in 2025/26 than if we had followed UK policies,” the spokesperson said.

John Swinney should realise that higher income taxes in Scotland make it harder for businesses to recruit skilled staff (Picture: Jeff J Mitchell) | Getty Images

The reason why most people pay less but a sizable amount of extra revenue is raised is no financial miracle. Those who benefit do so by a tiny amount while those who pay more shell out hundreds or thousands of pounds extra.

This means the Scottish Government has more to spend, but the population as a whole has £1.7bn less, with all the obvious knock-on effects on the economy. However the true cost is actually higher as, for one, it also means Scottish businesses are at a competitive disadvantage when trying to compete in the jobs market for skilled staff with rivals south of the Border.

The CBI’s calls for no further increases in the income tax gap and an independent review into the effects on Scotland’s competitiveness seem sensible. Indeed, the latter should be a no-brainer.

The SNP themselves would presumably be interested in an impartial, evidence-based assessment of whether or not the extra taxation is imposing too high a burden on the economy. If it is, then it should be reduced. If the problem is less severe, this could be balanced against the benefits of the extra revenue.

As he literally ‘eats their lunch’, Swinney needs to realise he cannot metaphorically do the same to Scotland’s private businesses without the consequences coming back to bite us all.