Businesses have warned that Scottish workers are “moving to England” to escape higher rates of income tax imposed by John Swinney’s Government. Bosses said there was “big frustration with the tax system in Scotland” due to employees earning more than £33,500 per year being expected to pay more taxes than those working the same role in England.
One manager of a company operating across the UK warned several of their staff had chosen to move south of the Border, while no employees had chosen to relocate north. The views were shared in an official Scottish Government report published yesterday, which examines attitudes among businesses to the Scottish income tax system and its “potential influence on business growth, investment, workforce issues”.
Tax system differences
Holyrood was handed the power to set personal income tax rates in 2017. The SNP Government has since introduced a six-band system which sees higher earners paying substantially more than they do elsewhere in the UK. It means someone living in Gretna earning £50,000 a year will pay £1,496 more in income tax annually than a colleague living in Carlisle earning the same amount.
In the report, the boss of one large company operating across the UK said changes to income tax had made it harder to recruit for higher paid roles in Scotland. They added: “We do have some anecdotal examples of people moving to the north of England from Scotland.
“I think as the tax burden has increased in the UK as a whole, people in Scotland are noticing it is even higher again north of the border.
“When people make that kind of observation I think they'll then continue saying ‘am I getting more in terms of public services etc, a better environment than I would by living somewhere else?”
One-way traffic
Another manager, working for a surveying firm, said: “I think there's a big frustration with the tax system in Scotland, the differentials between Scotland and England.
“We've been spending the last few years expanding south of the border in England. Traditionally in surveying, a lot of people went from Scotland down to London, or Manchester, and then returned back because that's a traditional pathway. What we've found in recent years is actually it's a one-way traffic.
“We've had a number of people wanting to go to England, but not one – not one person - based in England wants to come to Scotland.”
Brain drain concerns
In a section of the report on employee retention, respondents raised fears of a “brain drain” in which young, ambitious and highly skilled sections of the Scottish workforce “are seen to be increasingly unwilling to stay in Scotland due to the higher tax rates”. The report added: “Such concerns were especially common from businesses in higher-paying sectors such as technology and finance where workforces are particularly mobile.”
Michael Marra, Scottish Labour finance spokesman, said “Scots are sick and tired of paying more and getting less under this SNP government.” He added: “The SNP cannot bury its head in the sand while people are sounding the alarm about the toll high taxes are taking on businesses and workers. We need an end to SNP financial mismanagement and a fair and functional tax system in Scotland that supports our public services while giving working people a fair deal.”
Craig Hoy, Scottish Conservatives finances spokesman, said: “We warned that the SNP’s high-tax agenda would stifle business growth and drive wealth creators south of the border. Not only is that coming true, but the Scottish Government’s own report admits this is driven by John Swinney’s decision to diverge from the rest of the UK.”
A spokesperson for the Scottish Government said: “The report highlights that personal taxation is not the main driver of economic competitiveness. The UK Government’s increase in employers’ National Insurance Contributions continues to have damaging implications for Scottish businesses. Our economy is one of the best performing parts of the UK, with Scotland the top UK destination for foreign direct investment outside of London for the past eleven years.”
