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Time to raise Scotland’s sights by lowering tax

March 31, 2021 by Michelle Ballantyne Leave a Comment

MICHELLE BALLANTYNE says Reform offers a challenge to the cosy tax and spend consensus  


Scotland is failing. Since the SNP came to power Scotland has failed in so many ways, from educational standards to centralising  policing. But perhaps most starkly it is economic failure – with GDP growth of barely half the UK average – that presents the greatest challenge to our long term prosperity. This failure to match the UK average really matters as it has cost us some £11bn per annum with around £3.9bn lower tax receipts; enough to fund a housing budget twice the current level. 

Why has growth been so poor in Scotland? There are many factors, but the critical one has been that Scotland has tested the tax and spend thesis to its limit. Britain may have the longest tax code in the world, at some 20,000 pages, but the Scottish version is even more complex, notably with generally higher income tax and an absurdly onerous and expensive Land and Buildings Transaction Tax.  

These anti-growth policies, coupled with a Scottish state sector that currently spends well over 50% of GDP, has stifled the very productive private sector that ultimately pays for the NHS, a good education and other vital services. Simply put, the growth of the state has chocked the productive private sector. It is not sustainable. 

The SNP has been the architect of this policy, but Scottish Labour’s response is to tax even more. More disappointingly the supposedly free market Scottish Conservative Party has lost its self-confidence and lamely goes along with the zeitgeist. I see no proposals from them to stimulate the hard-pressed private sector, just an acceptance of the failing status quo. 

As Scottish leader of Reform UK I want Scotland to break with this depressing consensus before it is too late. Using tried and tested principles Scottish-based City economist Ewen Stewart has devised a plan to lower and simplify taxes for the whole UK in general and Scotland in particular. In the medium term the impact should raise the pedestrian growth rates that have stifled the Scottish economy. In turn this will rejuvenate the tax base and, Ewen Stewart estimates, be fully self-funding on a five year view. 

Our proposals result in a £48bn stimulus UK-wide through tax cuts where all will benefit, but with the modestly off benefiting proportionately the most. In a Scottish context the tax cuts are worth some £4.2bn of 2.2% GDP. 

It may seem counterintuitive to cut taxes when the economy is in such a lockdown-induced hole but actually £48bn is 12 weeks Coronavirus spending. This stimulus will raise growth from highly pedestrian levels, building future tax revenues. The SNP’s approach to increase tax simply plugs a short term hole while undermining the potential in the longer term.  

The truth is the current UK-wide fiscal deficit is being funded largely by quantitative easing (Bank of England purchasing UK sovereign debt). Our proposal is to be clear and transparent as to how the deficit is being funded. We will park the emergency Coronavirus-induced excess debt into a 75-year Corona Bond, funded by the UK central bank.  

Through this mechanism we will guarantee that the short term hit to Government revenues from our proposals would be plugged through marginally higher Corona Bond borrowing. Thus our proposals will not result in any reduced revenue to the Scottish Government as the shortfall from tax cuts will be funded by the Bank of England.

Quickly, however, tax revenues will rejuvenate via higher underlying growth. Just like accessing the Covid vaccines earlier and in greater number, this scheme is only possible because Scotland benefits from being a fully participating member of the United Kingdom with a respected and powerful central bank. 

‘An employee earning £20,000 per annum would be £1,500 better off – an effective 7.5% pay rise. This money would flow back to the economy, multiplying the impact’

Our guiding principle is that Scottish taxpayers should not be discriminated against and punished by the Scottish Government. Taxes in Scotland will be no higher than the UK as a whole. That is Reform UK Scotland’s promise. 

Across the UK, where the Treasury sets income tax thresholds, Reform UK would raise the threshold before any income tax is paid to £20,000 from a current £12,500. We then propose that income tax is levied at 20% up to £70,000 and then 40% thereafter. An employee earning £20,000 per annum would thus be £1,500 better off – an effective 7.5% pay rise. This money would flow back to the economy, multiplying the impact. 

While a UK-wide measure we would abolish Corporation Tax on all profits below £100,000 per annum taking around 80% of companies out of paying any Corporation tax at all. Small business has been decimated by the lockdown – this will, help to stimulate it and help create jobs.  

And on the ineffective and depressing Scottish Land and Buildings Transaction Tax we would simply abolish it replacing it with a UK-wide Stamp Duty levied at zero under £750k, 2% up to £1.5m and 4% thereafter.   

This is just a flavour of our fully-costed proposals, and while it can be argued it will take a political revolution to deliver them we firmly believe that they are realistic and it is high time our rivals recognised they have been travelling down the high tax and spend road for far too long and must now turn back.

At the very least we want to get people to talk about Scotland reforming itself to make the creating and building of businesses as a huge priority if we want to have world class public services. You simply cannot have the latter without the former. 

Frankly, Scotland has been underperforming for too long under the high tax, centralised control and wasteful spending of the SNP. Our plan does the opposite. It lowers and simplifies tax, increases our competitive position and will raise growth – ultimately funding a strong and vibrant public sector through a rejuvenated private sector. That is a win-win scenario.  

Michelle Ballantyne is the Leader of Reform UK Scotland

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Filed Under: Contributors, Cover Story, Michelle Ballantyne, Opinion, Working Life Tagged With: Reform UK, Scottish tax, tax

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