Pinstripe

In Helsingborg in Sweden there is an interesting museum dedicated to products which were complete failures.Think Sinclair C5 and you've got the general picture.

The museum is interesting in itself but what struck me was the range of companies behind the product failures.

There are both names which are only dim recollections and others which are still with us today and highly successful. The lesson is that in corporate life, if you have developed what the consumer regards as a lemon you had better get the message pretty quickly. Fix it , move on or go out of business.

If only our dear Scottish Government had the same pressure on it to stop making a fool of itself, not Prestwick Airport this time but the Land and Buildings Transaction Tax, LBTT for short. The reason the Government doesn't have to be such a quick learner is that being a Government it gets to play with your money and mine. Eventually though economic reality will make its rude appearance.

Some parts of LBTT aren’t stupid, the concept of rising rates levied only on incremental slices rather than the whole consideration, as was the case with the old Stamp Duty, is sound.

Where the Scottish Government has got it so wrong is that they have broken the cardinal rule of a successful tax system which is never narrow your tax base.

Tax systems which actually work charge low percentage rates but apply them to a lot of people or things rather than try to extract large amounts from a few. Think dripping tap rather than punch in the face. LBTT exempts most transactions completely but dramatically increases the tax rates on higher value transactions , you therefore get a distorted market, fewer transactions and – this is the bit Sturgeon and co have got to learn - you raise less tax to pay for nurses and teachers. This is stupid, but the Scottish Government, despite being warned, has managed to do it. LBTT is raising less tax than was expected because it is trying to raise too much from too few.

What can be done? Actually it is quite simple, reduce the tax rates and make the tax apply to more transactions. Instead of exempting transactions with a value under £145,000, charge 1%, that will hurt nobody. Cap the top rate at 5% rather than the absurd 12% in place now and make both buyers and sellers pay the tax on each transaction. The tax base is broadened, the high distorting rates are removed and the luckiest group of people in the land – people who already own homes, rather than just those who are struggling to get on the housing ladder, pay the tax. More money, less distortion, more fairness, more nurses and teachers.

I wonder if our political ruling class have the humility to make the necessary changes to a failed tax in the same way a business would with a failed product. On past record they probably won’t. The thing they should really learn though is not just the specific point on LBTT but the principle which applies to all taxes.High tax rates – such as the 50% income tax rate so longed for by all good socialists are daft. They reduce productive activity, create distortions and raise less rather than more money. A simple tax system with lower rates which you can't avoid paying is the agenda a truly progressive party should be pursuing - it would be a winner for Scotland.

Pinstripe is a senior member of Scotland's financial services community.