Four economic advisers to the Scottish Government have warned that the country faces an exodus of high earners and wealth creators to England unless the SNP matches Conservative tax cut plans.
First Minister Nicola Sturgeon was scathing in her criticism Chancellor Kwasi Kwarteng's mini-budget cuts to income and property tax — cutting the top rate of income tax to 40% while it remains at 46% in Scotland.
She described commentators calling for Scotland to follow suit as "right wing".
However, over the weekend, four of her most trusted economic advisers said the Scottish Government needs to act.
'No-win'
Sir George Mathewson, the former Royal Bank of Scotland boss, Professor Sir John Kay and the tycoon Jim McColl told The Sunday Times that Scotland had been left in a no-win situation and would lose much-needed tax revenues unless it acted.
The trio, who served on the Scottish government’s council of economic advisers, argue that the Scottish Government should now bring taxation in line with the rest of the UK.
They were joined by Benny Higgins, a Scottish banker and former business adviser to Nicola Sturgeon, who told The Telegraph: “A 1p gap may be seen by me and my peers as tolerable and understandable, but a 6p gap would be different.
“The effect on high earners means jeopardy for the Scottish business community. The Scottish government doesn’t have to close the gap completely but should do something to reduce it.”
Top tax payers could go
Meanwhile, Douglas McWilliams, a leading economist and deputy chairman of the Centre for Economics and Business Research (CEBR), told The Sunday Times that “it would be realistic to assume about 20% of top-rate taxpayers could move south”.
Kay, a fellow of the British Academy and the Royal Society of Edinburgh, said: “While the number of people in Scotland paying tax at 46% is just 0.6% of the population, they account for around 16% of Scottish income tax.
“Very few of those people would have to leave Scotland or shift residence before you would lose more tax than you gain from continuing to charge the higher rate.”
He added: “It’s a no-win situation for the Scottish Government. The politics of cutting top-rate taxes looks awful in Scotland, but if they don’t do it, they will lose taxes. So probably the sensible thing to do is match it, even though perhaps the politically astute thing to do is not match it.”
Mr Mathewson, one of Scotland’s most respected figures in UK finance and one of the few high-profile businessmen to support independence, said: “We cannot afford to give people a tax incentive not to be in Scotland. Whatever they do in Westminster must influence what you have to do in Scotland because it’s an open market. We can’t create a taxation difference between England and Scotland.”
Scotland 'needs to be attractive'
Jim McColl said: “There’s always a risk that if it’s more business friendly down south people will recognise that, so it does create a danger for the Scottish economy. There needs to be an urgent focus on economic growth in Scotland — we haven’t had that. Westminster is making the UK attractive. We need to make Scotland an attractive destination.”
Sir Tom Hunter, a leading entrepreneur who last month launched a fund with the Scottish National Investment Bank to help start-up businesses scale up, called the chancellor’s package “a bold initiative” that the Scottish government should react to.
He said: “I’d like to see the Scottish government do something now, not rebadge this for political reasons. Just get on with it. It will help Scotland.
Ryan Crighton, Policy Director at Aberdeen & Grampian Chamber of Commerce, said: “I think every business in the land shares the Chancellor’s ambition to bring in a new era of growth for the UK economy.
“This is a bold intervention from the UK Government and it is now crucial that we see this package mirrored, in full, here to avoid Scotland losing its best talent and companies to the rest of the UK.
“For many, it is already more expensive to work or buy a home in Scotland – the Scottish Government must now ensure that Scotland doesn’t lag behind the rest of the UK as a high tax, low growth neighbour."