Both £33,000 and £26,000 have been quoted as the threshold below which Scottish taxpayers will pay less tax as a result of today’s tax policy announcements. But which figure is correct?
It seems a near certainty that the Scottish Government will seek to increase income tax revenues in tomorrow’s budget – through a combination of changes to rates and thresholds. If this happens, it will kick-off a hotly contested debate about the impact on the Scottish economy.
The Scottish Chambers of Commerce have got their response in early, arguing that “at a time of sluggish growth and faltering business investment, a competitive Scotland cannot afford to be associated with higher taxes than elsewhere in the UK”. The Federation of Small Businesses has also warned about the impact of tax increases on the economy.Continue reading
David Eiser, Fraser of Allander Institute
The slowdown in Scotland’s rate of economic growth relative to the UK has been well documented. Whilst growth in UK GDP per head has been weak, growing at just 2.3% between Q1 2015 and Q2 2017, Scottish growth has been weaker still, with per capita GDP growing just 0.57%, over the same period (Chart 1).
Revenues from non-savings, non-dividend (NSND) income tax now form part of the Scottish budget. Under the Fiscal Framework, the Scottish budget will be better off than it would have been without tax devolution, if revenues per capita grow more quickly in Scotland than they do in the rest of the UK (rUK). Conversely, slower growth will translate into a smaller Scottish budget.
A critical question therefore is what slower growth in GDP per capita – in Scotland relative to rUK – might mean for the growth of income tax revenues per capita in Scotland relative to rUK. Does slower growth in GDP per capita necessarily mean slower growth in income tax revenues? How strong is the relationship and what factors might influence it?Continue reading
The Scottish budget faces a substantial challenge. Between now and the end of the parliament in 2021/22 the resources available to the government are projected to decline by about 3% in real terms.
This might not sound like much. But at the same time as the budget is declining, the health budget (which accounts for almost half of government spending) will increase by 3%. Whilst this might sound generous, a 3% increase is only just sufficient to keep up with a growing and ageing population (notwithstanding the general inflationary pressures facing the health service).
Furthermore, a range of other spending commitments have been made, on services ranging from childcare to policing, tuition fees to care for the elderly.Continue reading
There has been much speculation about what the Scottish Government may choose to do with income tax when they put forward their Budget proposals this December.
This blog looks at some options and the amount of money that could be raised.Continue reading