DAVID WATT
If you’re going to pay more for something, of course, you look for the value in the uplift. What are the extra benefits that I get for my money? 45% of the workforce will pay more to be in Scotland under the Government’s new tax scheme. Anyone earning over around £40k will pay more with those on around £150k paying just under £2,000 more in tax. So far, so fair, it seems. Those that have more, pay more.
However, the on-paper calculations may not take into account what these higher tax payers bring to Scotland. Apart from their tax contribution, thank you very much, these individuals are generally the wealth creators and the drivers of our economy. They employ people, create and grow businesses (which also pay tax) – therefore we need to keep them here.
We have the very real challenge of a stalled economy and the predicted rock face of Brexit to climb, so right now, the last thing we need is politicians advocating even higher rates of income tax and other personal and business costs, particularly if this becomes a habit. UK economic growth is forecast to be at best anaemic, with Scotland lagging further behind.
But what if that extra £2000 ‘bought’ a significantly improved way of life? Scotland is a great place to live and work and some of the costs, such as housing, health and education, are relatively low and the provision is good. However, no-one can deny that it is cold and damp for many months – we must find other ways to remain attractive. Better services, including transport and broadband? Better ways to spend leisure time and attract families? Lower crime? Of course, all these things cost, but there are ways to make more of the money available to Government, by applying solid business principles.
Spending is the key issue that is not being addressed. It’s not all about how much money is in the pot – it’s about how it’s being spent. Do we really need Over 60s bus passes for people still working or for those who can afford to pay? Do we need free prescriptions for all? Could better off people in Scotland not pay for University fees? With extra funds freed up by a business approach to policy making, the difference might mean that Scotland’s offering balances up with London or New York – even if you get to keep considerably more of your income in these places.
The fact is, Scotland has precious few of these individuals in the highest tax bracket - around 19,000. But what they contribute is so much more than a simple calculation can show. We desperately need more of them – not fewer, and our policies need to welcome them.
So, while the agreed tax increase may have been the best of a bad bunch of choices this time, it cannot become a habit.
The only way to reverse our economic stagnation is to make some hard choices, brought about through grown-up debate – as opposed to simply keeping on increasing the cost of wealth creation.
David Watt is executive director of the Institute of Directors in Scotland.
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