Scottish Budget Analysis Event

This morning we held an event giving an overview of the Scottish Budget unveiled earlier this week.

The slides from this event are available for download here, and are provided below.

December 14, 2018

Scottish income tax policy 2019/20

This afternoon, Mr Mackay set out the proposed income tax parameters for 2019/20 in the draft Budget.

These are shown in the table at the bottom of this blog, together with last year’s policy and the 2019/20 UK policy.

Mr MacKay said that 99% of Scottish income taxpayers will pay less tax in 2019/20 than they did in 2018/19.

This statement is correct in the sense that, in 2019/20, 99% of taxpayers will benefit from a higher tax-free personal allowance**, (and to a lesser extent the Scottish Government’s increase in the thresholds for the basic and intermediate rates).

What about comparisons with the rest of the UK? Mr Mackay pointed out that 55% of Scottish taxpayers will pay less income tax than rUK taxpayers with equivalent income.

This is true in that the 19% Starter Rate in Scotland means that those with income less than £27,000 (slightly above the Scottish median income) will pay less tax than rUK counterparts.

It is worth bearing in mind however that the difference between Scottish and rUK tax liabilities at this end of the income distribution is small – the maximum benefit to Scottish income taxpayers is just over £20 per year.

Some examples of the difference in liabilities for different salaries are given in the diagram below.

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December 12, 2018

What’s next for taxpayers in Scotland?

We’ll soon find out what the Scottish Government has in store for income tax in Scotland in 2019/20 when the Scottish Budget is published next week.

Taxpayers in the rest of the UK already know what to expect after Chancellor Philip Hammond announced changes to income tax in the UK Budget at the end of October.

These were to:

  1. increase the personal allowance from £11,850 in 2018/19 to £12,500 in 2019/20
  2. to increase the Higher Rate Threshold in the rest of the UK from £46,350 to £50,000.

As it is entirely possible that readers might not have made it through our 160 page Budget report on the 8th November, this blog will set out some tax options available to Mr Mackay for the forthcoming year.

Before we do so, here is a summary of the differences between Scottish and rUK taxpayers in the current financial year.

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December 5, 2018

Scotland’s “Middling” Productivity – An International Perspective

Mark Mitchell and Robert Zymek

University of Edinburgh


It is now well understood that differences in labour productivity – the value of goods and services that can be produced in an average hour of work – explain many observable economic differences between countries. Evidence shows that that highly productive economies outperform their less productive counterparts in in terms of per-capita income, population health, subjective wellbeing, and state-capacity (Caselli, 2005; Jones, 2015; Sacks, et al., 2012). For this reason, it is a cause for concern that labour productivity in Scotland – just as in the UK as a whole – is fairly low compared with other advanced economies. It suggests that Scotland could do better, and improve the lives of its citizens by moving up the productivity tables.

In work published earlier this year by the David Hume Institute (Kelly, et al., 2018), we examined Scotland’s productivity performance in an international context. We found that relative to member countries of the OECD – a club of advanced economies – Scotland’s labour productivity is only middling: Scotland is more productivity than most poorer OECD countries; but it is less productivity than many of its EU neighbours, including countries such as Finland, Denmark, Belgium and Ireland.

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December 3, 2018

Scotland and the latest Brexit modelling scenarios – a negative outcome all round

Over the course of this week, the UK Government, the Scottish Government and the Bank of England all published new Brexit analysis.

We have been asked by a number of people to give our take on these numbers.

So in this blog, we attempt to summarise what each model is telling us and the implications for Scotland.

In short, the numbers don’t look great. Far from it.

Even under the UK Government’s favoured deal, the UK economy is expected to be smaller in the long run by around 4%.

But it is the Bank of England’s scenario of a disorderly ‘no deal’ Brexit that is the most eye-watering. Here the UK economy could shrink by 8% in a year – double the size of Scotland’s recession during the financial crisis. Unemployment could rise to 7.5%. If that was replicated in Scotland this would be equivalent to around an additional 100,000 people out of work.Continue reading

November 30, 2018