Humza Yousaf: Further tax divergence could see people leave Scotland

Humza Yousaf has accepted that if tax levels north and south of the Border diverge too far people and businesses could move to other parts of the UK.

The First Minister told ITV Border he was "proud" of the current differences in income taxes, which are higher in Scotland for higher earners than in the rest of the UK.

And he said he was still sympathetic to calls from the Scottish Trades Union Congress (STUC) for wide-ranging new tax rates.

Included in that plan is introducing a new income tax band of 44% between the current higher rate and top rate thresholds, between £75,000 and £125,140 of taxable income.

The STUC say their plans would increase the higher rate of income tax, and all rates above the higher rate, by 2 pence.

According to the union body, the higher rate would become 43%, the new rate for income between £75,000 and the top rate threshold becomes 46% and the top rate becomes 48%.

However, Mr Yousaf accepted that there could be limits to how far the Scottish government could go in raising taxes, as that would partly depend on what UK ministers decide in their budget.

Speaking yesterday after announcing his Programme for Government, the First Minister said the final decisions on whether income tax for the better off would be further increased would be in the Scottish budget, expected in December.

Asked about the STUC plans he added: "Still sympathetic to them. They are of course still sitting as part of the DFM's tax group that is looking very much into these issues.

"What I would say is there's a number of factors we have to consider including, frankly, what the UK government chooses to do with taxation.

"Because we do know that there is a divergence, and I am proud we have a divergence at the moment, given that it is a progressive taxation path that we follow.

"But if that divergence grows too wide, then we know there could be behavioural impacts as a result."

I asked whether he accepted that behavioural impact meant people might stop doing what they were doing, or even move from Scotland to England if taxes became much higher?

Mr Yousaf replied: "Behavioural analysis looks at the analysis of the impact if the divergence is too great and people end up, as you say, moving themselves or their businesses to other parts of the UK. 

"That's something we've always said. There's a behavioural analysis behind the decisions that we take and we'd have to consider what the UK government does as well as making decisions ourselves."

His remarks come as debate over tax policy in Scotland intensifies, with the Tories calling for income taxes to be the same north and south of the Border.

In an interview for Representing Border today Douglas Ross, the leader of the Scottish Conservatives said that the system was already progressive with those on "modest incomes" already paying more tax in Scotland than in the rest of the UK.

"It's very clear. We can't keep on raising taxes, because that's choking the economy and we're going to end up with less money to spend on public services."

He claimed council tax and income tax would go up under the SNP and while the economy was still recovering from COVID and the cost of living crisis his aim was to "get back to parity with the rest of the United Kingdom". But that "doesn't happen overnight".

Mr Ross claimed higher taxes put off investment and put people off coming to Scotland to work.

"Teachers, police officers, many other professions are paying more to do the exact same job in Scotland then they would elsewhere. They are paying more in taxation."

I put it to Mr Ross that cutting tax would have to mean less money in the Scottish budget.

He replied: "That's not the case because we believe that by lowering taxation you can actually grow the economy."

So there would have to be cuts? He replied: "No. Absolutely not. What I'm saying is we can grow the economy."

He said he had set out his plans in a Tory policy paper, 'Grasping the Thistle' and his party was looking at both personal and business taxation.

"All we have heard from Humza Yousaf and the SNP is putting taxes up, but people are getting less for their increased taxation that they are paying here in Scotland after 16 years of the SNP being in power."

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