First Minister Nicola Sturgeon hailed yesterday’s Scottish budget as an example of “strong and stable” government. However, for those paying attention to this political event, far overshadowed by events elsewhere, it could more easily be described as ‘slow and steady’.
While funding boosts were announced for the NHS, mental health services, education and public sector pay, it seems inaction on income tax will have the most noticeable effect on taxpayers north of the border.
The Finance Secretary’s decision to freeze the higher rate of income tax threshold has set Scottish earners adrift from those in the rest of the UK, who were given an effective tax cut by UK Chancellor Philip Hammond in October.
It is an unfortunate situation for the SNP administration that a mundane budget, which does not tinker with income tax, has allowed a sizeable gap to open at the top. While someone earning £60,000 in Scotland will pay £9.93 less tax than last year, they will also be £1,644 worse off than if they lived elsewhere in the UK.
Time will tell whether a devolved and diverged tax system has any negative effect on the Scottish economy. With the Scottish Fiscal Commission already warning that higher taxpayers may review working hours and “tax residency decisions” as a result of the widening gap, Derek Mackay will be hoping that the ‘social contract’ of paying more to live in Scotland and use its public services will prevail.
With the budget requiring the support of at least one other party to pass, the SNP Government will now look to the Greens as the most suitable partner and will likely make further concessions, specifically on local tax reform, to bring them on side.
However, in contrast to the high drama at Westminster, perhaps ‘slow and steady’ is exactly what the voters want during these uncertain times.