The new Scottish tax regime: gesture politics at its most pathetic

Derek Mackay and Nicola Sturgeon © Getty Images
Derek Mackay and Nicola Sturgeon: put the economy at long term risk

If you are reasonably high-earning and ambitious, and thinking about taking a job in Scotland, you may be thinking again this week. Last week’s Budget (which proved yet again that the SNP has got to get in some new talent if it wants to hang on to power much longer) raised income taxes on an awful lot of the population with a few new bands and a few new rates – you can now pay 0%, 19%, 20%, 21%, 41% and 46% in Scotland.* Everyone earning over £33,000 will now pay more tax in Scotland than in England. That’s 45% of the working population…

So if you earn, say, £150,000, your net income if you live in England will now be £1,174 more than if you live in Scotland. If you earn £60,000 that number is £755. Still thinking of moving? I didn’t think so. So what of people who live in Scotland already? One of the reasons that the Scottish government didn’t raise rates at the top end further – as they would love to – is because they worried people would leave. And they reckon no one will leave for just because they have to pay a mere penny in the pound more. I wonder.  It doesn’t sound like much, 1%. But just like fund management charges, translate it into real money and it adds up.

Say you are dual-earning family both on about £150,000 with a few kids. Nicola Sturgeon just stole your skiing holiday – and you can claim it back by moving to Newcastle. You probably won’t go. It’s expensive and unsettling – and there is the threat of Corbyn in the south anyway. However, you know the trend now (add up the extra stamp duty equivalent you have to pay in Scotland, the lower band for the 40% rate and the fact that the Budget removed the charitable relief on rates for independent schools, and it is all too clear) and you will talk about it. In the meantime, you’ll avoid tax where you can (there has been a sharp rise in people incorporating in Scotland), and you’ll be just a bit more poised to leave than you were.

You might think that all this is a risk worth taking for Scotland to help the low-paid out and raise a pile more revenue. Not so. The projected revenue from all this fiddling is a mere £164m (Scotland has a effective deficit of £12bn…) and the introduction of the starter rates will save those on it a total of £20 a year. Yes, £20 a year.  It’s almost as if this policy was designed simply to allow the Scottish government to claim that low paid Scots pay less tax than other low paid Brits without it actually meaning or costing anything. Anyone who doesn’t see that as pretty cynical politics isn;t concentrating. However it gets worse.

It may be that a good few low-paid people end up not gaining £20 but losing many hundreds of pounds from Mr Mackay’s bitter little Budget. Why? Because you need to be paying the UK’s basic rate of income tax to get your marriage allowance (£230 of it) and 21% (the other new band) is not the basic rate and because it creates a whole new pickle over pension tax relief. The system is designed for 20%, 40% and 45% – so will those on 19% now have to pay back 1%? And will everyone on 21% suddenly have to fill in a self assessment  tax return to get their extra 1% back? Talk about expensive admin. These two things should get sorted out (HMRC won’t be thrilled at having to help the Scottish government unravel the mess but it will do it).

But the point here is the same as it always is with this Scottish government. They have alienated the productive and put the economy and their revenues at more long term risk than they needed too – for no particularly obvious gain to anyone. This is gesture politics at its most pathetic.

 

* The six new bands of tax on earned income for individuals in Scotland

0% on the first £11,850 (personal allowance)
19% on the next £2,000
20% on £13,850 up to £24,000
21% from £24,000 to £44,273
41% from £44,273 to £150,000
46% on earnings in excess of £150,000

  • Neil Roden

    i think first of all you should acknowledge your bias….you are associated with Scotland In Union….secondly you dislike the SNP both essential facts to read this piece.

    1. How many couples in scotland earn over £150k each ? very few
    2. The vast majority of people in scotland don’t take skiing holidays
    3. if your are going to throw in other tax issues then why not council tax on average £300 a year less
    4. plus we could add in free prescriptions, free personal care, no tuition fees etc tec
    5. Then of course we could add in for examples nurses already get paid more in scotland than england and the scottish govt is lifting the public sector pay cap

    i know you know that ending charitable tax relief for private schools is extremely popular here

    some correct information would also have been helpful if you earn £60k a year you pay an extra 29p in tax per week….starbucks anyone ?

  • Observer

    “journalism” at its most pathetic.

  • Fuarach Blas

    You should maybe stick to critiquing London dinner parties. Economics & politics is beyond your ken.

  • Wolf Dancing

    This Scotland in Union website is not supported by a number of browsers. Please sort it or your attempt at ‘Union’ has failed at the first hurdle.

  • OldPete

    This article is an embarrassment. Ms. Webb you obviously don’t care about the less well off in our society, typical right wing `journalist` nonsense.

  • Ciotach

    Typical unionist and anti-SNP claptrap. Do people actually buy this publication expecting informed, fair-minded and balanced comment? Or is all the content as good as this article?

  • Bill McLean

    Appalled by this selfish person’s arrogance and lack of insight of any kind! On a human level she is nowhere! I pray that she is not representative of the people where she comes from!

  • couldasaid

    Darling, where on earth can you get such a cheap ski holiday? And where is Newcastle?

  • Tamas Marcuis

    Since Merryn Somerset-Webb makes it clear here that she does not wish to reveal her membership of the Far Right British Nationalist group Scotland in Union or her suspected membership of the even more extreme UK Unity, we can dismiss this entire vomit of hers as just more propaganda.

    How exactly is any one meant to treat Money Week with respect when they are willing to sell space and their name to aggressively vocal members of such extremist gangs?

  • EdMSmith

    Merryn is such a British nationalist tory that she can see nothing good in this progressive tax. The Low paid will pay less tax. The higher paid will pay a little more. Well done Merryn, you’ve outed yourself as a truly perverse human?

  • Mike Lothian

    Dear lord that’s self indulgent

  • Andrew McIntyre

    Merryn,
    Please stick to financial issues and leave politics well alone. I normally enjoy reading your columns but I for one am not interested in your views on Devolution, Brexit or anything else remotely political.
    Your use of the word pathetic is in itself “pathetic” and betrays your political leanings.
    If this continues I will cancel my subscription.

    • I’ll second that. Merryn is among the best financial journalist/analysts out there. I found this article just a teensy weensy bit spiteful.

      • Bobby Farmer

        If that’s a teeny bit spiteful I’d hate to see her in full flow.

        It’s dripping with venom – not to mention cherry picking facts to push a view she already held long before the latest Scottish budget.

        • Well, I can’t say for sure she’s driven by spite or by ideology. You know how sometimes we find ideology that isn’t our own abhorrent? But there are ways of communicating that without the spite.

          • Bobby Farmer

            Yip, whenever she’s on Question Time she doesn’t speak, she sneers.

            Looks down on everything and everyone she doesn’t agree with. But as this article shows, she’s more concerned about those earning £300k a year, and them possibly having to miss out a skiing holiday (their 4th of the year no doubt).

            • Apollocreed

              I notice the “sneer” that you mention, but it’s hard not to feel conceited when you are debating from a position of a thorough understanding of economics and your sharing a panel with clueless politicians and journalists.

              • Bobby Farmer

                Really? So you think the correct way to respond when discussing something with people when you believe you know more about the topic than they do is to sneer at them?

                Hmmm. Says a lot about you and her.

                (FWIW, her understanding of economics is clearly not what has motivated this attack piece).

                • Apollocreed

                  When it comes to politicians it’s harder to show respect than for other people, but I didn’t say it was correct to sneer. And yes this piece does seem more politically focused than economically so.

                • Apollocreed

                  Looking at the history of your comments on Disqus, I realise that you are quite a dedicated SNP supporter and possibly an App developer, so that says a lot about your comments and I understand where you’re coming from. Although I’m surprised you would be reading a website like Moneyweek with that background!

    • Alex Henderson

      Agreed. I have already cancelled my subscription for this very reason.

  • Yes, MSW, it’s pretty much what I wrote on my blog
    http://moneyquestioner.co.uk/scotland/income-tax-rises-scotland/

    You’ve gone further with your pension analysis.

    It is indeed a pointlessly complicated budget. Probably to appease the growing number who want to raise more taxes – Labour, LibDems, Greens all want to go further – while keeping those high earners who realise it’s just a piece of spin onside.

    Oh, and I don’t think your example of a couple each earning £150k is going to win over much sympathy apart from from a small number of couples actually in that situation. It won’t mean a loss of a ski holiday but it might mean the budget for their next additional home will be £497k rather than £500k!

  • Ralph

    Devolution is a stupid idea – it just makes things even more complicated than they already were. Let Scotland vote for Independence again but if they decide to stay then Holyrood goes – it would be much more democratic for everyone and rUK in particular. If they chose independence we would then have as much interest in Scottish tax laws as French or Japanese wouldn’t we? SNP MPs are no different from any other politicians whether they are in Brussels, Westminster or Holyrood – they are pretty much all just in it for the power and the money. It’s Party first and constituents second – it really does need to stop for things to get any better but it won’t. I feel sorry for the Scots at the moment because they have to fund three sets of MPs! One is more than enough for me thank you – wonder if we will ever get there?

  • Bobby Farmer

    I tried to reply to the outrageous post from ‘lik’ but was told I couldn’t reply to an inactive post. Strange given the post is still visible? Anyway, here’s what I wanted to say to you ‘ilk’:

    *****

    Wow! Just Wow! You start this with talking about how SNP supporters are trolls – the middle bit is a diatribe of nastiness and fiction – and then you manage to end it up with “I can say without exception every SNP supporter I’ve met has been of below average intelligence.”

    You should listen to yourself.

    Oh, and those giving Merryn a hard time are doing so for good reason – and are mainly not posting anonymously.

    *****

  • AnneC

    Excellent article.

  • Apollocreed

    So many tax brackets cost time and money to navigate. There should be a low one – say 20% and a high one, say 45%. Why fill accountants pockets with fees for work created by government?

  • The_UK_is_a_corporatocracy

    On this Moneyweek page https://moneyweek.com/about-us/ it states:

    “Our aim is simple: to give you intelligent and enjoyable commentary on the most important financial stories, and tell you how to profit from them.”

    I think this article misses the target. It’s not advice about how to profit from financial news. How do people living in Scotland profit from it? Move to England with all the associated costs of that? It’s a political piece written in a petty manner. An investment magazine should be politically neutral.

    Subscription cancelled.

    • Ronnie Maxwell

      Yes I would agree… but if she is going to play the political game as she appears to be doing (although as a resident of Scotland i agree with a lot of what she is saying)…as far as being able to “profit from financial news”, she could at least balance her article off it off by stating that even with these higher rates, if you have children approaching university age, as a high earner, you would still financially be a lot better off than you would in Southern or Middle England. Equally if approaching old age, free personal home care help for the elderly (whether rich or poor), represents a huge possible annual saving too.
      a) The housing tends in Scotland (Edinburgh apart) to be a lot cheaper. With generally the opportunity for far better scenery (but admittedly colder weather & larger heating bills), you get far more sq ft, for your bucks!
      b) Those £9,000 per annum University Fees payable at Universities in England, Wales & NI sure add up! If you have three children of close age (as I do), that saving of being able to send your children to Scottish Universities (admittedly with severely restricted spaces at the best Scottish University & Courses) could be worth at least £27,000 per annum! Those annual savings for at least 3 years puts into shade the pathetic mention of the cost of
      skiing holidays etc. That is financial news that you can profit by!
      I may be a Unionist but at least I recognise that her reporting on some of these issues are unbalanced.

      • The_UK_is_a_corporatocracy

        Good point about the tuition fees, which highlights how unbalanced the article is. An England, Wales, Scotland & Ireland comparison overall would bet better. Though not just for people with an household income of £300,000.

  • James Kitchener

    An article displaying such greed, mendacity and downright ignorance that it indicates an intellect which is flawed at the molecular level. 1 out of 10 (you spelled your name right).

  • Pa Broon

    Ha Ha Ha Nice to see the SNP trolls are out in force. Not Even Moneyweek could escape..

  • David Hunter

    Great article!