𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

The nasty political habit of rinsing the so-called ‘rich’ in this country does not work as a recent attempt by the Scottish government has proved. In their infinite wisdom the Scottish National Party decided to increase the top rate of tax in the country to 48p which was to be paid by anyone earning more than £125,000 a year – outside of Scotland anyone falling into this top tax band pays 45p in the pound.

Presumably, a bright spark somewhere thought that by increasing the rate there would be loads more cash available for the SNP to spend on their latest pet projects. However, the move spectacularly backfired and ended up reducing revenues. All Westminster politicians should take note, especially new Chancellor John Healey as he starts to plan his Budget which will be revealed later this year and that will no doubt include new forms of taxation.

Analysis by the Tax Policy Associates think-tank concluded that Scotland had probably “fallen over the Laffer curve”. This economic theory was created by economist Arthur Laffer, and it argues that revenues start to decline once taxes pass a certain level because people decide to work less, move to another country with a more favourable/fairer tax policy or find clever, yet legal ways, of hiding their income.

Such measures can include taking income as dividends rather than as a salary, paying more into a pension or simply reducing working hours. Dan Neidle, who heads up Tax Policy Associates and is a former adviser to the Scottish Government, said that the new SNP policy would have expected to have brought in an additional £53million in tax but analysis of HMRC data actually showed revenues had dropped by between £15million and £30million – Dan says he believes that actually drop was around the middle point of £22milliion for the tax year 2024/25.

Whatever the precise figure, the evidence speaks for itself: if you continue to bash the so-called rich with eyewatering levels of personal taxation there will always be a tipping point where they will not put up with it anymore.

Under SNP rule, Scotland has six income tax bands which is double the amount in England and SNP economic policy has made the country the highest-taxed part of the UK. The comparisons are stark with anyone earning more than £33,500 a year paying more in tax in Scotland than south of the border while those on salaries of more than £50,000 a year pay almost £1,500 extra in tax compared to their English counterparts.

Socialist politicians always argue that if you want decent public services then you have to pay more tax, but the SNP’s track-record over the last two decades has been shocking. Compared to other parts of Europe, Scotland has the highest rate of drug deaths with the SNP failing to reverse the trend, while NHS waiting lists and A&E waiting times in Scotland reached record levels this year.

From building new ferries to constructing new hospitals in Edinburgh and Glasgow – the SNP has failed to get projects finished on time and within budget. But this is not an exercise in highlighting SNP struggles as similar examples of waste and mismanagement can easily be found in the public sector elsewhere in the UK – this is about highlighting that the leftwing quick-fix of taxing the perceived ‘well-off’ more does not always deliver the cash expected but also has other economic consequences.

Not only do such decisions backfire as we have seen in Scotland with tax receipts actually dropping, but it does nothing to encourage growth in a country. All punitive tax rates do is send out a negative message to entrepreneurs and investors who may well decide they would be better off creating businesses in a place where they are not going to be punished for their success.

The same applies to skilled workers on above-average salaries who may well take the view that they are better off living somewhere with lower tax rates. Our latest Prime Minister has pledged not to increase income tax as per the 2024 Labour Party manifesto, but politicians from all parties must learn the lesson from the SNP’s experience in Scotland next time they are tempted to whack up taxes.

It is not always the solution that they would like it to be.