‘Tax Gap’ will make recruitment harder in the Borders

NHS Borders, Scottish Borders Council and local businesses will it harder to recruit senior members of staff unless the SNP tax action to close the tax gap, John Lamont MP have warned.

Speaking after raising the issue in the House of Commons today, the local MP pointed out Scotland is already the highest taxed part of the UK with anyone earning more than £26,250 paying more in tax than they would if they lived in England.

The UK Government’s budget gave an average tax cut of £130 to 2.4 million Scots, by raising the personal allowance to £12,500 and also increased the higher rate threshold to £50,000, to bring more people out of the 40 per cent tax rate.

Unless the Scottish Government also brings more middle income earners out of the 40p tax bracket, the tax gap between England and Scotland will only increase.

New analysis from the Scottish Parliament’s independent research department (SPICe) has now calculated the ‘tax gap’ which will exist if the Scottish Government only increases tax thresholds in line with inflation.

While those on lower pay in Scotland will pay a modest amount of £17 per year less in tax than they would in England, those on higher incomes will pay significantly more.

In England the 40p tax rate will now apply to earnings over £50,000. However, currently in Scotland, a 41p rate applies to earnings £43,430.

A senior nurse on £45,000 a year will pay £293 more tax, while a deputy head teacher on £50,000 will pay a significant £1,343 a year more in tax than they would if they lived in England.

If the Scottish Government doesn’t increase tax thresholds in line with inflation, the tax gap will be even larger.

In response to questioning, Leader of the House, Andrea Leadsom MP agreed that this was a “very serious issue” which could mean “Scotland’s economy was less competitive than that the other side of the Border.”

Commenting John Lamont MP said: “Businesses in the Borders have already told me they are concerned about the impact this difference in income tax will have on recruitment and retention of staff.

“Scotland is already the highest taxed part of the United Kingdom but the tax cuts in the Chancellor’s budget will only make this gap even worse.

“The SNP have already found out the hard way that higher taxes don’t necessarily collect more money – their income tax changes last year raised £550m less than predicted.

“The point about higher taxes in Scotland is that it puts off the best and the brightest. An ambitious teacher looking to apply for a deputy of head teacher role will look at Scotland and see they are going to be taxed much more.

“This has the greatest implication for the Scottish Borders because of our proximity to England and will only make recruitment for NHS Scotland and Scottish Borders Council more difficult.”

 

The SPICe briefing on the tax gap can be found here:

https://spice-spotlight.scot/2018/11/06/what-does-the-uk-budget-mean-for-scottish-taxpayers/