John Ferry John Ferry

Sturgeon’s war on business is strangling Scotland’s economy

There was one minor and one big surprise in the Scottish government’s latest budget, which was set out by Kate Forbes, the finance secretary, last week.

The minor surprise was the Sturgeon administration’s decision to provide less business rates relief, in comparison with England, to the retail, hospitality and leisure sectors during the next financial year. Businesses in Scotland will be eligible for 50 per cent relief, capped at £27,500 per rate payer, but only for the first three months of the 2022-23 financial year. In England, the same businesses will be eligible for 50 per cent relief for the whole financial year.

A winding down of rates relief was anticipated, but the full withdrawal of support just three months into the next financial year was unexpected. It reinforced the sense, especially pertinent in Scotland since Nicola Sturgeon replaced Alex Salmond as first minister, that business and enterprise is a long way down the list of Scottish government priorities.

The big surprise came from the Scottish Fiscal Commission (SFC), Scotland’s official economic and fiscal forecaster charged with supplying the government with independently produced numbers for its budgets. One of its tasks is to forecast income tax receipts (income tax was mostly devolved in 2017-18). Having dramatically revised its forecasts from earlier this year, the SFC now expects upcoming Scottish budgets to be lower as a result of income tax devolution, despite the Scottish government pushing those taxes up.

Scots are paying hundreds of millions of pounds more in tax just to stand still

It is worth digging into the numbers. Diverging Edinburgh-London income tax policies mean people in Scotland earning over £27,850 pay higher tax than those in the rest of the UK. On a macro basis that equates to Scots forking out over £500 million more in income tax this year than they would under UK policy.

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