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The Herald Scotland
5 days ago
- Business
- The Herald Scotland
So you want progressive taxes, SNP? Fine: start with a land tax
Stories about wealthy people fleeing to avoid taxes are scarcely a novelty. Some of Scotland's most feted thespians and entrepreneurs have been following that route for decades. The others seem to have survived and feel no envy for the departed brethren, boring each other in sun-kissed places. The 'scare story' keeps running, however, as a deterrent to any government initiatives which might inconvenience the greediest. Never mind that it was Brexit which prompted more such departures than anything else. According to the Tax Justice Network, an average of 30 press articles a day appeared about 'the non-existent millionaire exodus in 2024', fed by lobbyists hired to promote the fiction. Read more by Brian Wilson In fact, many wealthy people want to do the right thing, particularly if they have acquired that status by creating businesses and employment to match. A fractional increase in taxation is not going to send them scurrying for their passports. As entrepreneurs, they are likely to be more concerned about the impact of business taxes than personal ones. The old statistic which gave rise to a theatre company, when seven per cent of the people owned 84 per cent of the wealth, is seriously in need of updating. Now, the richest one per cent own more wealth than the bottom 70 per cent while, according to Oxfam, billionaires pay 'effective tax rates close to 0.3 per cent of their wealth'. It's a pretty compelling case for starting to redress that gross imbalance while also contributing a few billion to the public finances, but it won't happen overnight or by grand announcement. Putting in place new structures which would be fair and effective, without unintended consequences, will be extremely complicated and take time, in the teeth of fierce resistance. That doesn't mean it shouldn't be embarked upon. Where better to start than in Scotland, which should be looking creatively at its own revenue options, beyond ritual moans about not being sent enough money or by raising income tax rates for people who are not at all wealthy. The number caught in Scotland-only higher tax rates has almost doubled in three years to over 700,000 and that particular well is running dry. People don't need private jets to escape a 48 per cent rate of income tax. The Scottish Affairs Select Committee at Westminster delivered a report this week which said the Barnett Formula is working well for Scotland and also that the Scottish Government should have more borrowing powers. I endorse both conclusions, but we can surely be more progressive than that? As one would expect, the SNP's contribution to the committee's work was based on their constitutional objective under the guise of Full Fiscal Economy, which nobody – including themselves – takes seriously. They just feel obliged to keep making that noise while, in real life, taking the money Barnett delivers, even more generously since the election of a Labour government. The area in which a radical Scottish Government could do immediate work is by replacing the council tax which is a regressive system introduced by the Tories in 1991 and causes no inconvenience whatsoever to the wealthiest in the land, particularly if their wealth is related to that very commodity – land. Eight years ago, SNP ministers asked for a report from their own Land Commission on the option of a Land Value Tax. In theory, this should be attractive to them because it plays into other stated objectives on which, otherwise, nothing is happening – land reform through greater diversity of ownership, land being freed up for housing, derelict land being brought into use, and so on. The Land Commission spelt out potential benefits of a Land Value Tax. 'Aside from raising revenue, one of the main theoretical benefits of land value taxation is that it should encourage land to be used more productively. This is because it is based on the value of land in its optimum use as opposed to its actual use. 'Taxing land value should also be an efficient approach to taxation because the supply of land is relatively fixed so taxing it should not affect supply. Whereas income taxes reduce incentives to work and corporation taxes reduce incentives to invest, taxing the value of land should not affect the amount of land available'. Funding arrangements for the Scottish Parliament are again under review (Image: Newsquest) For good measure: 'Taxing land is also attractive for administrative reasons because land cannot be moved so land value taxes should be difficult to avoid or evade.' At the end of all that, one wondered: 'What is there not to like?'. To be fair, the Commission added the caveat: 'The research did not find unequivocal evidence that proves they definitely deliver the various benefits often claimed of them. Any further steps toward implementation must therefore be taken with caution.' That was the get-out clause which the Scottish Government gratefully accepted. Whereas there is 'unequivocal evidence' that the existing system is deeply regressive, leaves large areas of Scotland untaxed and local government near bankrupt, there is no 'unequivocal evidence' that trying something else might produce better results. So after 18 years of SNP government, the Tory solution of 1991 – based on not offending the wealthy – remains undisturbed. Under the devolution settlement, the Scottish Government could only apply radical reform to funding councils rather than to national taxation. But it would be a start which would signal a genuine commitment to redistribution. And maybe if they tried it, working closely with the UK Government, it could become not just the most radical and interesting outcome Holyrood has ever delivered, but also a stepping-stone towards delivering a fairer tax system for the whole country. Or is it easier just to shout 'wealth tax' while avoiding even the smallest advance towards that objective? Brian Wilson is a former Labour Party politician. He was MP for Cunninghame North from 1987 until 2005 and served as a Minister of State from 1997 to 2003.
The Herald Scotland
7 days ago
- Business
- The Herald Scotland
Westminster urged to increase ScotGov borrowing limits by MPs
Currently, the Government is limited to borrowing £600 million for day-to-day spending and £450 million for capital projects. A committee of MPs has told the UK Government to look at increasing the Scottish Government 's capital borrowing limits. But in a report from the Scottish Affairs Committee at Westminster on the fiscal arrangements north of the border, MPs pushed for the limits to be increased. The report said: 'At present, the Scottish Government's limited borrowing powers constrain its ability to manage fiscal shocks, as it is only able to borrow for resource purposes to cover forecast errors. 'Capital borrowing limits are currently linked to, and grow in line with, inflation, which may not necessarily be the highest metric of growth.' It added: 'We agree with the Secretary of State that borrowing limits should be linked to the measure which offers the Scottish Government the highest level of flexibility but, crucially, we note that which metric delivers this remains undetermined. 'The UK Government should therefore publish a transparent analysis of what borrowing limits would look like based on the different metrics advised in the evidence for this inquiry. 'At the next fiscal framework review, we encourage the UK Government to consider reforming the Scottish Government's capital borrowing powers, by automatically coupling borrowing to the metric which offers the highest limit.' Read More The report comes at the end of an inquiry by the committee which sought to gauge the effectiveness of the Barnett Formula – the measure which dictates the level of funding the UK Government sends to Scotland every year. The MPs found the measure was 'fit for purpose', although it is 'imperfect'. The committee also rejected calls for the formula to shift and provide funding to Scotland based on need. Scotland, the report said, already receives more funding per head than any other country in the UK and a change in the framework could see funding cut. In written evidence to the committee, Scottish Finance Secretary Shona Robison reiterated the Scottish Government's support for full fiscal autonomy – an arrangement which would see powers over tax and spending devolved. But the committee dismissed such a move as not being a 'realistic prospect'. 'Fundamental questions remain about how full fiscal autonomy would work in practice, and whether it would be operable within the constraints of the UK's current devolution settlement,' the report said. 'Practicality aside, we do not believe that a compelling case has been made that such a change would automatically result in Scotland receiving a higher level of funding.' Ms Robison declined an invitation to appear before the committee, leading the MPs to say 'do not see how we can consider this a serious proposition, and we remain to be convinced that this proposal is desirable in principle, let alone workable in practice'. Responding to the report, Ms Robison said: 'This report rightly recognises that Scotland's finances remain largely dictated by the UK Government's spending decisions, irrespective of the impact on Scottish public services. 'That has meant Scotland has been left with a shortfall of £400 million to pay for the Chancellor's national insurance increase, and saw Scotland short-changed by more than a billion pounds over the next three years at the recent spending review. 'The decisions we have taken to ask higher earners to pay a little bit more – while most income tax payers pay less than in the rest of the UK – mean that we can support vital public services and provide free tuition, prescriptions and the Scottish child payment to help tackle child poverty.' Scottish Secretary Ian Murray said: 'The spending review provided the Scottish Government with an extra £9.1 billion, giving them a record settlement. 'People will expect that to deliver better outcomes for Scots – lower NHS waiting lists and better attainment in our schools. 'Spending per head in Scotland is around 20% higher than the rest of the UK thanks to the Barnett formula. This report confirms that it appears to be the position of the Scottish Government to scrap that formula that delivers higher funding – they should explain why they want less money for public services in Scotland. 'Their plans for full fiscal autonomy would mean a £12 billion cut in public spending for Scotland.'
BBC News
7 days ago
- Business
- BBC News
MPs call for more transparency over Barnett formula calculations for Scotland
A Westminster committee has called for greater transparency over how the Scottish government is financed. The Scottish Affairs Committee made the recommendation in a report having examined the effectiveness of the Barnett formula - the measure used to work out how much money the UK government sends to devolved nations each Scottish and UK governments have long-disputed whether the formula is fair since its introduction in agreed that although the mechanism was "fit for purpose" it was not perfect, and that UK ministers should be more transparent about their calculations. The committee also said consideration should be given to increasing Scottish ministers' ability to borrow cash for infrastructure projects. The Scottish government said the committee's report confirmed its finances are largely dictated by the UK government said Scotland had received a record settlement in the recent spending Ferguson, chair of the Scottish Affairs Committee, said the Barnett formula had been the subject of continued debate since its introduction almost 50 years ago. She added: "Throughout our inquiry we've scrutinised it from every angle and ultimately found that the formula is fit for purpose and support its continued use to determine Scotland's funding levels."The formula is in no way perfect, but the committee heard no convincing evidence that there is any need for the formula to be reformed significantly, or that there is a workable alternative."The Labour MP for Glasgow West said the report set out ways to improve the way it operates in practice by "improving transparency" and making changes to the Scotland's broader financial framework. Scotland's Finance Secretary Shona Robison welcomed the said: "This report rightly recognises that Scotland's finances remain largely dictated by the UK government's spending decisions, irrespective of the impact on Scottish public services. "That has meant Scotland has been left with a shortfall of £400m to pay for the chancellor's national insurance increase, and saw Scotland short-changed by more than a billion pounds over the next three years at the recent Spending Review."Robison said the decision to tax higher earners more in Scotland helped support public services and provide free tuition, prescriptions and the Scottish Child Secretary Ian Murray said the June spending review provided the Scottish government with an extra £ added that, thanks to the formula, spending per head in Scotland was around 20% higher than the rest of the said: "This report confirms that it appears to be the position of the Scottish government to scrap that formula that delivers higher funding."They should explain why they want less money for public services in Scotland."Their plans for full fiscal autonomy would mean a £12bn cut in public spending for Scotland." The committee supported the continued use of the "imperfect" formula and recommended a series of measures to the UK government to improve its a bid to improve transparency it called for greater clarity on how comparability percentages are calculated. This could be addressed by publishing details of its calculations in future funding policy statements. The committee also expressed concern about the impact of UK government spending decisions on the Scottish government's budget "often with little warning".It said ministers in Edinburgh should have more fiscal flexibility and greater capital borrowing the Scottish government is limited to borrowing £600m for day-to-day spending and £450m for capital written evidence to the committee, Robison reiterated support for full fiscal autonomy - an arrangement which would see powers over tax and spending the report described this as an "unrealistic prospect" and added there was not a compelling case that it would automatically result in higher levels of funding for Scotland.
Scotsman
7 days ago
- Business
- Scotsman
Starmer urged to allow SNP ministers borrow more cash ahead of upcoming funding gap
SNP ministers are braced for a capital funding shortfall by the end of the decade. Sign up to our Politics newsletter Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... Sir Keir Starmer has been urged to allow the Scottish Government to borrow more funding for capital investment projects as SNP ministers brace for a funding gap of more than £2 billion. Currently, the Scottish Government is limited to borrowing £600 million for day-to-day spending and £450m for capital projects such as new hospitals, schools, roads and net zero infrastructure. Advertisement Hide Ad Advertisement Hide Ad St Andrew's House is the Scottish Government's headquarters, based in Edinburgh. | TSPL The Scottish Government's medium-term financial strategy predicts a £2.1bn funding gap for capital investment plans by the end of the decade. Capital spending is forecast to increase from £7.2bn in 2025-26 to £9.2bn by 2030, with more money poised to be allocated to affordable housing, public transport and a flagship strategy to decarbonise buildings. But in a report from the Scottish Affairs Committee at Westminster on the fiscal arrangements north of the border, MPs have pushed for the limits to be increased. The report said: 'At present, the Scottish Government's limited borrowing powers constrain its ability to manage fiscal shocks, as it is only able to borrow for resource purposes to cover forecast errors. Advertisement Hide Ad Advertisement Hide Ad 'Capital borrowing limits are currently linked to, and grow in line with, inflation, which may not necessarily be the highest metric of growth.' It added: 'We agree with the Secretary of State that borrowing limits should be linked to the measure which offers the Scottish Government the highest level of flexibility but, crucially, we note that which metric delivers this remains undetermined. 'The UK government should therefore publish a transparent analysis of what borrowing limits would look like based on the different metrics advised in the evidence for this inquiry. Advertisement Hide Ad Advertisement Hide Ad 'At the next fiscal framework review, we encourage the UK government to consider reforming the Scottish Government's capital borrowing powers, by automatically coupling borrowing to the metric which offers the highest limit.' The report comes at the end of an inquiry by the committee which sought to gauge the effectiveness of the Barnett Formula – the measure which dictates the level of funding the UK Government sends to Scotland every year. The MPs found the measure was 'fit for purpose', although it is 'imperfect'. The committee also rejected calls for the formula to shift and provide funding to Scotland based on need. Advertisement Hide Ad Advertisement Hide Ad Scotland, the report said, already receives more funding per head than any other country in the UK and a change in the framework could see funding cut. SNP finance secretary Shona Robison In written evidence to the committee, Scottish Finance Secretary Shona Robison reiterated the Scottish Government's support for full fiscal autonomy – an arrangement which would see powers over tax and spending devolved. But the committee dismissed such a move as not being a 'realistic prospect'. Advertisement Hide Ad Advertisement Hide Ad Responding to the report, Ms Robison said: 'This report rightly recognises that Scotland's finances remain largely dictated by the UK Government's spending decisions, irrespective of the impact on Scottish public services. 'That has meant Scotland has been left with a shortfall of £400 million to pay for the Chancellor's national insurance increase, and saw Scotland short-changed by more than a billion pounds over the next three years at the recent spending review.' Scottish Secretary Ian Murray said: 'Spending per head in Scotland is around 20 per cent higher than the rest of the UK thanks to the Barnett formula. This report confirms that it appears to be the position of the Scottish Government to scrap that formula that delivers higher funding – they should explain why they want less money for public services in Scotland.
The National
7 days ago
- Business
- The National
UK ministers told to increase Scottish Government borrowing limits
Currently, the Government is limited to borrowing £600 million for day-to-day spending and £450m for capital projects. But in a report from the Scottish Affairs Committee at Westminster on the fiscal arrangements north of the Border, MPs pushed for the limits to be increased. READ MORE: I've known Corbyn for decades. I believe he could help us to independence The report said: 'At present, the Scottish Government's limited borrowing powers constrain its ability to manage fiscal shocks, as it is only able to borrow for resource purposes to cover forecast errors. 'Capital borrowing limits are currently linked to, and grow in line with, inflation, which may not necessarily be the highest metric of growth.' It added: 'We agree with the Secretary of State that borrowing limits should be linked to the measure which offers the Scottish Government the highest level of flexibility but, crucially, we note that which metric delivers this remains undetermined. 'The UK Government should therefore publish a transparent analysis of what borrowing limits would look like based on the different metrics advised in the evidence for this inquiry. 'At the next fiscal framework review, we encourage the UK Government to consider reforming the Scottish Government's capital borrowing powers, by automatically coupling borrowing to the metric which offers the highest limit.' The report comes at the end of an inquiry by the committee which sought to gauge the effectiveness of the Barnett Formula – the measure which dictates the level of funding the UK Government sends to Scotland every year. The MPs found the measure was 'fit for purpose', although it is 'imperfect'. The committee also rejected calls for the formula to shift and provide funding to Scotland based on need. Scotland, the report said, already receives more funding per head than any other country in the UK and a change in the framework could see funding cut. In written evidence to the committee, Scottish Finance Secretary Shona Robison reiterated the Scottish Government's support for full fiscal autonomy – an arrangement which would see powers over tax and spending devolved. Shona Robison (Image: PA) But the committee dismissed such a move as not being a 'realistic prospect'. 'Fundamental questions remain about how full fiscal autonomy would work in practice, and whether it would be operable within the constraints of the UK's current devolution settlement,' the report said. 'Practicality aside, we do not believe that a compelling case has been made that such a change would automatically result in Scotland receiving a higher level of funding.' READ MORE: Activists 'to defy Labour with illegal pro-Palestine T-shirts' at Edinburgh protest Robison declined an invitation to appear before the committee, leading the MPs to say they 'do not see how we can consider this a serious proposition, and we remain to be convinced that this proposal is desirable in principle, let alone workable in practice'. Responding to the report, Robison said: 'This report rightly recognises that Scotland's finances remain largely dictated by the UK Government's spending decisions, irrespective of the impact on Scottish public services. 'That has meant Scotland has been left with a shortfall of £400m to pay for the Chancellor's national insurance increase, and saw Scotland short-changed by more than a billion pounds over the next three years at the recent spending review. 'The decisions we have taken to ask higher earners to pay a little bit more – while most income tax payers pay less than in the rest of the UK – mean that we can support vital public services and provide free tuition, prescriptions and the Scottish child payment to help tackle child poverty.' Ian Murray (Image: PA) Scottish Secretary Ian Murray said: 'The spending review provided the Scottish Government with an extra £9.1bn, giving them a record settlement. 'People will expect that to deliver better outcomes for Scots – lower NHS waiting lists and better attainment in our schools. 'Spending per head in Scotland is around 20% higher than the rest of the UK thanks to the Barnett formula. This report confirms that it appears to be the position of the Scottish Government to scrap that formula that delivers higher funding – they should explain why they want less money for public services in Scotland. 'Their plans for full fiscal autonomy would mean a £12bn cut in public spending for Scotland.'
