Brian Monteith: High earners exit as punitive SNP policies bite

Derek Mackay has refused to pass on the raising of the tax threshold for the higher band of tax that is happening across the rest of the UK, believes Brian. Pic: Greg Macvean

It was former SNP MSP Andrew Wilson and now chairman of Nicola Sturgeon’s Growth Commission who said last year that the way to increase the tax revenues that come from the wealthiest in society is not to tax such people more, but to grow their number. Unfortunately for Scotland, Wilson’s advice was ignored and it is now beyond doubt that the public finances have been put in a perilous position as a result.

The danger for the SNP is that if they follow the opposite of Wilson’s argument, as they have done, and seek to grow revenues by taxing the wealthiest more, then invariably these highly mobile people can simply rearrange their affairs and pay their taxes in another more hospitable jurisdiction. This is not a new phenomenon, for it has been well recorded in many countries over many decades.

And so it should have come as no surprise when at the weekend there was the news that higher earners have already started to turn their backs on Scotland. Lawyers and estate agents reported they are finding a change in the market with top executives turning down opportunities to come to Scotland because of the higher tax on buying homes over £350,000.

It was the SNP’s decision to create a Land and Buildings Transaction Tax (LBTT) that was more punitive than that levied in England under the Stamp Duty Land Tax (SDLT) and now we are all going to pay the price. Fewer high-rollers paying taxes means lower government revenues, which in turn requires everyone else to pay more to make up the difference.

The damage is not limited to the public finances but means that private spending on schools, renovating properties and all the other financial investments associated with relocation are reduced, further slowing down economic growth.

This is all bad enough for the SNP Government, but Finance Secretary Derek Mackay and his First Minister Nicola Sturgeon have upped the ante by also refusing to pass on the raising of the tax threshold for the higher band of tax that is happening across the rest of the UK. This particular punishment is not restricted simply to hurting millionaires, but will hit Scottish middle-class earners who have worked hard to get into jobs that pay over £45,000 a year, stinging them with a bill for an extra £314 per person. It was not even necessary, as Derek Mackay managed to find “new money” that could have avoided the need for a tax rise.

How all this is meant to strengthen the Scottish economy and win political favour is beyond me. Again revenues are in danger of being reduced – adding to the shortfall that LBTT will continue to deliver, only this time the immediate pain will be felt by public servants such as head teachers, doctors and higher-ranking police officers. If these are the sort of policies followed by the SNP under devolution why should people believe they will behave any differently were Scotland to become independent? Turning Scotland into Cuba without the sun is hardly an attractive proposition.

Added to these two measures, we also have the increase in Scottish business rates that will be faced by larger companies. Again the rational response would have been to create a level playing-field for Scottish companies with the rest of the UK, or better still try to give our businesses – in many cases further from their markets than many of their competitors – a competitive advantage with marginally lower business rates. If Devolution Max cannot be used to help our job creators why should any business leader believe independence will give them an advantage?

So, in managing the public finances and encouraging economic growth the SNP Government does not follow rational behaviour, instead it follows what it believes will shore up the left-of-centre vote that it has taken from Labour.

The same is true in education. Not only are attainment levels falling behind other countries for average student scores, last week we found out that our best-performing pupils are substantially behind similarly graded students. Knowing as we do that the best-performing state schools often benefit from a larger degree of autonomy and are able to specialise in particular fields and take a greater share of decisions for themselves, the rational approach would have been to spread more independence among schools.

If that were deemed too radical then it could have been limited to a few schools that could have been a pilot for such reforms, but no, that course has been ignored and instead we have further delay through a consultation process that delays decisions and prolongs the agony for our children.

This all provides a salutary warning about where the current SNP leadership is taking us.

The rational economic course of action was for the SNP Government to, at the very least, ensure that Scottish taxes on earnings and property transactions were not higher than they are in the rest of the UK. The rational action was to help our businesses, and aid our schools and their pupils.

That Nicola Sturgeon leads a government that does not behave rationally tells us how she is likely to think and behave when coming to decide on her aspiration to have a second independence referendum. Forget that the Scottish public does not want it, forget that the economic case for independence is far, far worse than it was in 2015. The rational choice would be to attend to the many failures in government policy across justice, housing, education and health and then, having won the fresh confidence of the Scottish people, seek to have a second referendum with a new economic case that answers all the difficult questions. But the First Minister and her government does not behave rationally, indeed, she shows all the signs of being seduced by her own rhetoric. It should come as no surprise then if she uses the SNP conference in March to demand a second independence referendum timed for the autumn of next year.

The rational response would be for the Scottish people to punish such reckless behaviour by voting to remain in the UK a second time. It may not be too long before we know if Nicola Sturgeon’s irrational political choices are a symptom of a personal approach or a reflection of how the Scottish people think too.

* Brian Monteith is editor of ThinkScotland.org