Russell Findlay has a tough job. His party is not on track for a good 2026 election and the new Scottish Tory leader needs to figure out quick how to present Scots with a vision worth voting for come the Holyrood poll. He must prove the Scottish Conservatives are not only different from the soft-left SNP, Labour and Lib Dems – but also different from the surging Reform UK, which according to today’s Survation poll is neck-and-neck with the Scottish Tories despite having no leader, no policies and no campaign.
Enter Findlay’s ‘common sense’ agenda, which this week turned to tax. The centrepiece of the proposal was an income tax cut, in which he proposes extending the range of the 19p ‘starter rate’ from its current limit of just under £15,000 per year to over £43,000 per year – effectively abolishing the 20p ‘basic rate’ and 21p ‘intermediate rate’ bands. An interesting proposal. Fine.
The party also estimates that the tax cut would cost nearly £600m to fund, and this is where I start to lose the argument. I get that Findlay wants to break the left wing consensus – Scottish Tory leaders have been saying that since the days of David McLetchie. I also get that Liz Truss trashed the ‘brand’ of tax cuts. But when you place a ‘cost’ on a tax cut, you immediately cede the free-market argument that tax cuts create economic growth.
The Scottish Tory rhetoric should not be that this tax cut needs funded – it should be that these proposed cuts will promote growth and increase the tax take.
Truss was not wrong about sclerotic economic growth being the country’s central problem. We are in the aftermath of a Budget where the key deficiency is that growth is not projected to meaningfully rise. And Truss was not wrong that tax cuts were needed to lift the growth level. Her tax cuts were not what spooked the markets and led to her downfall – that was instead helped along by her £150bn borrowing splurge to fund a freeze in the country’s energy bills, and her inability to fully explain her position. Findlay should ignore this. He is not Truss and voters know that. Therefore the Scottish Tory rhetoric should not be that this tax cut needs funded – it should be that this tax cut will promote growth and increase the tax take.
Tax changes lead to behaviour changes. This is not an especially new phenomenon. We know from projections by the Fraser of Allander Institute and the Scottish Fiscal Commission that the Scottish government’s recent tax changes will change taxpayer behaviour to the point where they may raise little or no money. And we know from employers ranging from the financial sector to the NHS that higher earners are rejecting Scotland on the basis of our punitive tax regime. So the Scottish Tory leader should keep his pledge to extend the 19p rate, but he should go much further. His proposals still leave anyone earning more than £43,000 per annum paying more tax in Scotland than they would in England.
Findlay has established an important precedent: he is prepared to drop a Scottish income tax rate beneath the equivalent in England. A truly bold, truly common-sense agenda would be to extend this through the tax bands. He should propose the reduction of the current 42p higher rate to under 40p, and merge into that the 45p advanced rate. And he should propose the abolition of the 48p top rate, so that those earning over £125,000 would pay 45 per cent in England but would pay less than 40 per cent in Scotland, giving the Scottish economy the boost it needs to attract these higher earners, expand the tax base and grow the economy. And, of course, he should clearly state that economic growth will pay for all this and more. Just as punitive tax changes behaviour, so will a friendlier regime.
The new Scottish Conservative leader is right to assume that SNP First Minister John Swinney is not interested in working with him to pass the budget – and so he is also right to plough his own furrow on tax. But if he’s going to do it, he must go further.
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