THE Scottish Government has taken a gamble on tax in recent years. And it now looks like it is going to increase the stakes. Back in 2016 when the Conservative Government announced it was raising the threshold for the 40p rate of income tax, the Scottish Government did not follow suit. It then raised the higher rate to 41p.
Now, two years later, the Chancellor has announced he is raising the higher rate threshold for England and Wales further. However, again, it looks like the SNP will resist the pressure to do the same, thereby increasing the tax gap between Scotland and the rest of the UK even more.
The numbers are no longer marginal. In fact, if, as expected, the Scottish higher rate tax threshold is unchanged, someone earning £50,000 in Scotland would pay £1,560 more than their English equivalent.
Derek Mackay, the Scottish finance minister, says this is the fair path to take. Splits have also emerged in Labour, with Richard Leonard saying raising the higher rate threshold should not be a priority.
But we should be extremely cautious about further increasing tax in Scotland. The middle classes who will be paying more include many of those who generate Scotland’s wealth and start businesses. Hitting them too hard would be counter-productive. We should also remember that many middle-earners have struggled financially in the last decade.
Everyone in Scotland also has to believe paying more tax is worth it – in other words, they have to see results for the extra money, but there are serious questions about whether that is happening. Many schools are facing a staffing and resource crisis; the country’s health and social care services are also under intense pressure.
Yes, some Scots may be willing to pay more tax, but will they be convinced it is worth it if there are no significant improvements to public services? The Scottish Government will have to deliver those improvements – and deliver them quickly – if its gamble on tax is to pay off.
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