Liz Smith: the tax gap is a worrying problem

SNP claims that the majority of working Scots pay less income tax than those south of the border have been challenged by the Scottish Conservatives.

The Tories say new analysis of the most recent earnings data shows that this arguyment no longer stacks up because the nationalist government has not increased tax thresholds in line with rising salaries.

At the end of last year, the Scottish Government admitted that everyone in Scotland who earned over £27,850 paid more in income tax.

But, using recently published wage growth data, the Scottish Conservatives have calculated that the average worker in Scotland will earn £29,095.50 in 2023, well above this threshold.

The shadow finance and economy secretary, Liz Smith, said SNP ministers’ stealth tax rises have finally caught up with them.

She insisted they must stop making the claim that the majority of workers in Scotland pay less tax than people elsewhere in the UK.

She added that the tax gap between Scotland and the rest of the UK is already a serious problem – something that is acknowledged by business – and asserts that any further increase would damage to competitiveness.

“SNP ministers must stop using this claim immediately, as it no longer stands up to scrutiny,” she said.

“Failing to increase tax thresholds in line with rising wages, amounts to a tax hike – and these stealth tax rises have finally caught up with them.

“This boast was always based on careful, cynical spin anyway, because the ‘majority’ were paying a miniscule amount less tax than those south of the border, while the rest were paying substantially more.

“It was a clever bit of smoke and mirrors designed to disguise the fact that Scotland is by far the highest taxed part of the UK.

“But, even on its own terms, the claim is simply untrue now – and ministers must admit as much.

“Scotland is already at a competitive disadvantage with the rest of the UK because of the higher taxes imposed by the SNP.

“Worryingly, Humza Yousaf – doubtless inspired by the extremist Greens – is talking of widening that gap further. That would deliver another hammer blow to the Scottish economy and hard-working Scots.”

In December’s Scottish Budget, Scotland’s acting Finance Secretary John Swinney hiked the higher rate of income tax from 41p to 42p in the pound (40p in rest of UK) and increased the top rate from 46p to 47p (45p south of border).

The tax threshold for the top rate was lowered from £150,000 to £125,140, bringing more earners into the highest band in line with the move by the Chancellor for the rest of the UK. Other income tax bands remain unchanged.

Despite the growing disparity, Francis Breedon, a commissioner for the Scottish Fiscal Commission did not see evidence of workers fleeing Scotland for lower-taxed areas of the UK. 

The Scottish government said it is “proud” to have “the fairest and most progressive tax system in the UK.” It has claimed that individuals are also better off once benefits such as free prescriptions and tuition fees are taken into account.

A spokesperson insisted that changes to income tax in Scotland came into force last month and are estimated to raise more than half a billion pounds of additional revenue this financial year to support vital public services.