Brian Monteith: SNP finds running a nation a bit too taxing

This government believes that it can simply raise taxes to cover public spending mismanagement, writes Brian Monteith

Andrew Wilson, who has been appointed as head of Nicola Sturgeons Growth Commission. Picture: Jane Barlow

The occasion of Derek Mackay’s first budget in the Scottish Parliament last week has revealed a fundamental weakness in the cause of Scottish nationalism that few if any had expected to become apparent quite so quickly, namely that the SNP Government does not have the intellect or the guile to run the country.

In the week preceding the budget, the Scottish Conservatives, revelling in their role of official opposition, issued details of how in 25 out of 30 economic indicators Scotland is in a poorer situation than the rest of the United Kingdom.

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It was the first of what were set to be more uncomfortable comparisons that give testimony that the SNP leadership, so fixated with the desire to foment the conditions for a second independence referendum, has not given due care and attention to its first duty, running the country to the benefit of all in Scotland.

Among the 25 poorer outcomes were all of the most important, including higher unemployment, lower employment (two quite different measures), poorer productivity and higher fuel poverty.

By unfortunate happenstance for the SNP Government, the Organisation for Economic Co-operation and Development (OECD) Pisa study came almost immediately after the economic comparisons, this time demonstrating the dereliction of duty by SNP education ministers over the last nine years.

Those ministers had in the past not just sought to reassure the public that they were on top of their job, but said they had reversed a decline in education standards that had started after devolution began, but now the irrefutable evidence had exposed this as either self delusion or deception, or possibly both.

With thanks to the unhelpfully timed publication of “Scotland Performs” the Scottish Government’s own record of its achievements (or failures), the Conservatives have been quick off the mark to point out that 46 out of 67 key indicators have either stagnated or become worse. When two-thirds of the SNP Government’s own performance measures are saying its ministers are failing at the day job, then it is getting into deep water.

It is against this background of mounting failure that Derek Mackay’s budget has to be seen – and what it tells us is that the SNP is willing to put avarice and envy before the public good – and when that leads us to despair it has no answer except more of the same.

The evidence is irrefutable and clear; the largest share of tax revenues from personal taxes is paid by the wealthiest section of earners. This has become even more the case under first the Conservative-Liberal Democrat coalition and then secondly the Conservative government, when nearly two million people have been taken out of paying income tax altogether by raising the starting threshold for contributions.

There is also the evidence in modern democracies from the times when US presidents Woodrow Wilson, John F Kennedy, Lyndon B Johnson and Ronald Reagan all cut personal taxes that revenues to the US treasury rose. The same experience was found in the United Kingdom when Nigel Lawson cut taxes and HM Treasury saw the revenue increase.

Then we have the copious examples where a range of taxes have been raised and revenues have almost immediately fallen – a disposition that is even more likely in today’s digital age due to the ease in which investments and earnings can be moved into different, more beneficial tax jurisdictions.

Now that the SNP Government has control of so many taxes in Scotland, not just in number but in depth and technicality, it has to confront itself with the reality – what happens if revenues fall because it has raised taxes?

What happens when businesses move their investments to the rest of the UK because the returns are better there? What if bright, entrepreneurial people that create jobs (and thus more tax revenues from the new salaries) decide not to locate to Scotland? What if people decide not to buy or sell properties but instead sit on their hands and instead convert their garage into another bedroom rather than move?

All of these unintended but entirely rational and legitimate consequences can and will follow from an SNP Government that believes it can simply raise taxes to cover the shortfall in its own mismanagement of public spending.

Indeed the evidence of revenues suggests that people are already making decisions about business investment and property purchases that is hitting tax revenues and in time the same will no doubt be found about those high earners that decide to relocate to more attractive tax jurisdictions in the UK than Scotland.

It is not enough to say that everything would be different if only Scotland was independent because what we are seeing is that the SNP (and indeed Labour, the Liberal Democrats and the Greens) would all seek to raise taxes if Scotland were independent.

The only party advocating cutting taxes (modestly, I admit, but cutting them nonetheless) is the Scottish Conservative and Unionist Party, a party that might not initially fare too well in an independent Scotland’s first elections.

It naturally follows that the approach taken by the SNP now, which is the only genuine range of measures we can rely upon to judge that party’s behaviour, shows that it does not understand what its own former leading light, Andrew Wilson, has been saying about how to grow the tax revenues.

Wilson, who has been appointed by Nicola Sturgeon as head of her party’s Growth Commission, believes that the best way to grow the tax revenues generated by the wealthiest earners is not to tax them more, but to attract more of them to pay their taxes in Scotland.

What this means is that the decision has to be taken to make Scotland more, not less attractive to these high rollers.

To do this means cutting the taxes or raising the starting thresholds for high tax bands – or a blend of both. For the SNP to take such a policy initiative would be as refreshing as it would be a complete repudiation of everything that Nicola Sturgeon and her ministers now stand for.

I have to agree with Andrew Wilson’s argument. The SNP badly needs Wilson back on its benches and taking the role of the innocent ingénue that is Derek Mackay, so that we can grow the Scottish economy and thus the tax revenues.

That this will not happen tells us everything about the black hole in Mackay’s budget and the economic case for independence.

• Brian Monteith is editor of ThinkScotland.org