I was on Question Time with Kate Forbes in Glasgow last week in which she was oddly loyal to the SNP government. She seems to have been the only member of Nicola Sturgeon’s government not to be deleting her WhatsApp during Covid and I suspect she’s disgusted at the way Sturgeon placed secrecy at the heart of her Covid response. She said on Question Time that the way to grow Scotland’s economy was to attract people to come and work there. I put to her that having the highest tax rates in the UK was unlikely to do so and she didn’t really respond.
But she has been more candid in an as-yet-unpublished column in a Highland newsletter where she states the basics:
‘Continually increasing taxes is ultimately counter-productive over the long term, even if you agree with it ideologically, because it ultimately reduces public revenue. The forecasts for what the Scottish Government will raise through its latest changes to the top tax bands is just over £80 million. That isn’t to be sniffed at. But the forecasts also suggest that they’ll lose £118 million that they could have raised because of behavioural change – people leaving or reducing their hours or treating their income differently. That illustrates that we need to invest in people, in job creation, and in better wages. That way the tax take will increase. I’m constantly going on about the tax base. What I am really talking about is people. Calling for a bigger population, through inward migration and retaining our people, is exactly the same thing as wanting to see the tax base increase.’
What she says is horribly easy to reconcile with the new tax regime in Scotland. Scotland’s Fiscal Commission said the introduction of the ‘advanced rate’ (45 per cent from £75,000) and raising the top rate 1pp to 48 per cent will be more than 50 per cent undone by behavioural changes, and only raise £82 million (£199 million static costing, behavioural changes reduced tax take by £118 million). The newly-introduced top rate of 48 per cent alone is basically pointless: it’s estimated to raise just £8 million next year. The static effect would be £53 million but behavioural changes are forecast to lose £45 million.
And those forecasts are likely to be underestimates. For example, when Halifax merged with Bank of Scotland there was debate over where its head office should be: they went for Edinburgh in the end. What would they do now, given that the tax rate for high salaries is markedly higher?
What Kate Forbes says about migration dovetails with a point we make in the leading article of The Spectator this week. The tax base means population – and every country in Europe is now forecast to lose working-age population due to the low birth rate. The exception is the UK where high migration levels will increase the tax base. This has its challenges but they are easier to fix than falling population, a problem described as 'existential' by the Japanese.
Like Forbes, I’m from the Highlands and its story for generations has been one of depopulation. This is reflected the art, the music and – thanks to Glasgow’s Herald newspaper last week – a series of articles on the problem. More countries will soon start to share the depopulation problem – and the conversation will turn to how best to attract people. Cutting tax and letting people better build their lives through their work will be a tool that, I suspect, Scotland and the UK will have to use before too long.
Why Kate Forbes is right about high tax
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04.02.2024
I was on Question Time with Kate Forbes in Glasgow last week in which she was oddly loyal to the SNP government. She seems to have been the only member of Nicola Sturgeon’s government not to be deleting her WhatsApp during Covid and I suspect she’s disgusted at the way Sturgeon placed secrecy at the heart of her Covid response. She said on Question Time that the way to grow Scotland’s economy was to attract people to come and work there. I put to her that having the highest tax rates in the UK was unlikely to do so and she didn’t really respond.
But she has been more candid in an as-yet-unpublished column in a Highland newsletter where she states the basics:
‘Continually increasing taxes is ultimately counter-productive over the long term, even if you agree with it ideologically, because it ultimately reduces public revenue. The forecasts for what........
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