The Scottish Government has announced its budget for 2023-24, which includes some significant changes to the tax system. The budget proposes to increase the income tax rates for the higher and top earners, while freezing the basic and intermediate rates. It also plans to raise the land and buildings transaction tax (LBTT) threshold for residential property purchases, and introduce a new levy on vacant and derelict land. These measures are aimed at raising revenue for public services and tackling inequality and climate change. However, some critics have argued that the tax changes could have unintended consequences, such as driving people and businesses away from Scotland and towards London. In this article, we will explore the possible impacts of the Scottish Budget on the population and economy of London.
Higher income tax rates in Scotland
One of the most controversial aspects of the Scottish Budget is the increase in the income tax rates for the higher and top earners. The higher rate, which applies to income between £43,662 and £150,000, will rise from 41% to 42%. The top rate, which applies to income above £150,000, will rise from 46% to 47%. These rates are significantly higher than the corresponding rates in the rest of the UK, which are 40% and 45% respectively. The Scottish Government estimates that these changes will affect around 8% of Scottish taxpayers, and generate an additional £230 million in revenue.
However, some experts have warned that the higher income tax rates could have a negative effect on the Scottish economy, and potentially benefit London. Professor Graeme Roy, director of the Fraser of Allander Institute, a leading economic research institute based in Glasgow, said that the tax changes could reduce the attractiveness of Scotland as a place to live and work for high earners, and encourage them to relocate to other parts of the UK, especially London, where the tax rates are lower. He also said that the tax changes could deter inward investment and entrepreneurship in Scotland, and reduce the incentives for innovation and productivity growth.
Higher LBTT threshold in Scotland
Another key feature of the Scottish Budget is the increase in the LBTT threshold for residential property purchases. The LBTT is a tax that is paid by buyers of property in Scotland, similar to the stamp duty land tax (SDLT) in the rest of the UK. The budget proposes to raise the LBTT threshold from £145,000 to £175,000, meaning that buyers of property below this value will not have to pay any LBTT. The Scottish Government claims that this measure will help first-time buyers and low-income households to access the housing market, and support the recovery of the construction sector.
However, some analysts have pointed out that the higher LBTT threshold could have a positive effect on the London property market, as it could make Scottish property more expensive relative to London property. Dr John Boyle, director of research and strategy at Rettie & Co, a leading property consultancy firm, said that the higher LBTT threshold could widen the gap between the average house prices in Scotland and London, which are currently £166,000 and £496,000 respectively. He also said that the higher LBTT threshold could increase the demand for London property from Scottish buyers, who could benefit from the lower SDLT rates in the rest of the UK.
New levy on vacant and derelict land in Scotland
A third notable aspect of the Scottish Budget is the introduction of a new levy on vacant and derelict land in Scotland. The levy is intended to encourage the owners of unused land to bring it back into productive use, and to generate revenue for local authorities. The Scottish Government has not yet specified the rate or the scope of the levy, but has said that it will consult with stakeholders and publish a detailed proposal in due course.
However, some observers have suggested that the new levy on vacant and derelict land could have a negative impact on the Scottish economy, and potentially benefit London. Professor David Bell, professor of economics at the University of Stirling, said that the levy could reduce the value of land in Scotland, and discourage investment and development. He also said that the levy could increase the attractiveness of London as a location for business and industry, as it has a lower proportion of vacant and derelict land than Scotland.
The Scottish Budget for 2023-24 has introduced some significant changes to the tax system, which are aimed at raising revenue for public services and tackling inequality and climate change. However, the budget has also sparked a debate about the possible impacts of the tax changes on the population and economy of London. Some experts have argued that the higher income tax rates, the higher LBTT threshold, and the new levy on vacant and derelict land could drive people and businesses away from Scotland and towards London, where the tax rates and the property prices are lower. However, these arguments are based on assumptions and projections, and the actual effects of the tax changes will depend on various factors, such as the behaviour and preferences of taxpayers, the performance and competitiveness of the Scottish and London economies, and the policy responses of the UK Government and the local authorities.
