Finance (No. 3) Bill

Part of the debate – in the House of Commons at 7:30 pm on 12th November 2018.

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Photo of Colin Clark Colin Clark Conservative, Gordon 7:30 pm, 12th November 2018

I thank the hon. Lady for the intervention. I think she will be well aware that many people in the public sector, including those in hospital management, and those who may go on from being nurses to being in hospital management, are paid substantially more than £50,000.

The OBR is concerned about this next issue. My hon. Friend Mr Jack asked the Financial Secretary about tax divergence, which is very much the crunch, as it has the potential to affect my constituency. The Financial Secretary mentioned that 1% of the population are paying 28% of tax—in Scotland, that constitutes 19,500 taxpayers. The OBR recently reported to the Treasury Committee that the number of higher taxpayers is lower in Scotland than it estimated, and this has actually cost Scotland between £550 million and £700 million in respect of the original estimate. The OBR said:

“It implies that a much lower share of UK-wide income tax is coming from Scottish taxpayers.”

That means the Scottish economy is more vulnerable to losing higher rate taxpayers, which is a serious consideration, because it affects the growth of the Scottish economy. As Scotland is part of the United Kingdom, it should concern us all. The Scottish economy is clearly vulnerable to the loss of these higher rate taxpayers, and it would look as though they are already beginning to move; they are already beginning to react to the divergence.

The OBR gave evidence on how people, for tax purposes, could change their behaviour. It talked about

“a relatively high income individual with a property in Scotland and one elsewhere in the UK, writing to HMRC to say, ‘I live more than half the year” somewhere else. That would mean that their tax would be paid elsewhere in the UK. Here is the absolute proof that cutting tax rates increases the tax take. As was said by my right hon. Friend John Redwood, who is no longer in his place, if there is tax divergence, people will vote with their feet. They are already doing that, as we are seeing the tax take falling in Scotland. [Interruption.] Would Drew Hendry like to intervene? No, he does not. Labour should look closely at Scotland and it should be a lesson on why not to raise taxes.