BUDGET ANALYSIS: TERRY MURDEN says the Truss government is creating One Nation policies that will test the Holyrood regime
Scottish government ministers won’t be short of things to think about in the run-up to the SNP conference this autumn. Liz Truss’s new front bench has spent its first few days in office lobbing policy grenades at the Holyrood administration, making it pretty obvious that the unionists are finally getting their war machine ready.
Aside from a series of cuts in businesses taxes which remain reserved, the Chancellor’s stamp duty and income tax cuts were the headline grabbers in a mini-budget that sets the scene for a series of cross border battles.
The PM has surrounded herself with ministers who are keen to build a United Kingdom which is truly the sum of its parts. Policies to build more nuclear power, relax planning rules, invest in transport and broadband, develop shale gas and investment zones, cut the price of buying a home, and lower income taxes all trespass on the devolved government’s territory.
Make no mistake, the new Westminster warriors have their sights on ensuring the UK is able to compete as one nation and the package of tax cuts and help with energy bills that Scottish businesses will enjoy is coming from Westminster, rather than Holyrood.
Power over taxes was always one of the big prizes of devolution, but along with the power to act independently comes the risks associated with divergence. Just a little is tolerable, but too much can create major concerns. The Chancellor’s bold cuts, the biggest since 1972, have clearly opened a gap between one regime that favours a more equitable system and the other that is being used to drive competitiveness.
Truss and Kwarteng have properly thrown down the gauntlet to Nicola Sturgeon’s government to prove to the voters that her “fairer tax” system is preferable to a “lower tax system” and that it is capable of building the required infrastructure and public services. On the evidence so far, “fairer taxes” have done nothing to improve Scotland’s productivity, reduce levels of poverty or improve the performance of public services.
What happens next will depend partly on how the Scottish Government allocates the £600 million flowing into Holyrood from Barnett consequentials and whether this is used to cut taxes or prop up those ailing public services.
Short of matching the Chancellor’s changes, Scottish ministers can no longer claim that anyone in Scotland is paying lower income tax than someone south of the border. Together with the divergent land and buildings tax, it will build resentment among Scottish taxpayers, and potentially deter higher earners from locating in Scotland. As one analyst said, in an era of remote working, who would move to Scotland if they can pay lower taxes by having their tax base south of the border?
The tag of being the “highest taxed part of the UK” will not be a big vote-winner for the SNP unless the First Minister and her Cabinet can turn back years of under-performance in public services to prove the higher levies are worth it.
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business