April 13, 2024
Economy

How the SNP’s war on wealth is blowing up Scotland’s economy


Some high net worth individuals are already quitting Scotland. Estate agents across the border in Northumberland say they have started getting calls from wealthy people wanting to move to England for tax purposes. Berwick-upon-Tweed, a 40-minute train from Edinburgh, is particularly popular.

“Most say that they enjoy living in Scotland but want to move just south of the border for purely financial reasons,” says Jonathan Hopper, chief executive of Garrington Property Finders.

Has anyone actually put their money where their mouth is? A buyer moving from Berwickshire, on the Scottish side, has just purchased a £500,000 home in Berwick-upon-Tweed, says Amy Brown, associate director at Rettie estate agents.

“They became aware that a colleague on a similar pay grade was paying significantly less in tax. So they decided to move,” she says. This particular buyer made the decision even before the December Budget made the tax divergence worse.

Visit Berwick’s prestigious Castle Terrace and wealth is on show. In front of one of the grand stone houses overlooking the Tweed estuary, two peacocks strut across the driveway.

Ally Scott, managing partner for EY Scotland, which employs 1,300 people north of the border and hires around 150 to 200 people per year, is concerned.

“What is the impact of lower take-home pay on [Scotland’s] sustained attractiveness? I’m talking about on the foreign stage as well as the UK stage. That has to be a concern for us.”

If businesses increase salaries to make up for the higher tax burdens, profits will be hit. This risks making Scotland a less attractive place to invest. Currently, cheaper wages in Scotland relative to the rest of the UK are a key pull factor for foreign investors.

Companies are seeking legal advice on relocations, says Duncan Reoch, who leads EY Scotland’s private client team.

Not all businesses can move easily, however. In the North Sea, there is fury. The income tax changes come on top of the windfall tax, which Labour plans to increase and extend.

Aberdein at True North says: “It’s palpable in Aberdeen, the anger and frustration with the lack of understanding of how a complex industry works.”

Income tax divergence between Scotland and the rest of the UK is likely to get even bigger. Chancellor Jeremy Hunt wants to cut UK taxes in the Spring Budget. If he does, Scotland’s First Minister Humza Yousaf has said he will not adopt the changes in Scotland.

A Scottish government spokesman pointed out that Scotland’s economy grew by 0.4pc in the third quarter of 2023 while the UK economy fell into a technical recession at the end of last year.

The SNP also argues that while people in Scotland pay more, they get more from the government, such as free university tuition.

Cameron, however, remains unconvinced. He says: “It’s not like it’s freeing up a huge investment to clear an NHS backlog. What the hell are we getting for it?”



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