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Wednesday, 13 December 2017

Derek McKay advised against 50p top rate of tax by senior government advisor.

A report released by senior advisor to Nicola Sturgeon; Gary Gillespie has recommended against raising the top rate of tax to 50p. 

The report claims that additional rate (AR) tax payers are 'more mobile' and have 'more opportunities for reducing their tax bill compared to taxpayers on lower incomes' meaning that a rise of 5p could lead to capital flight. 

It is estimated that around 20,000 adults in Scotland currently pay the top rate of tax, under 1% of the population, it only applies to earnings over £150,000. Many of those paying AR are involved in mining, professional service and financial services that tend to compete globally for staff, meaning that these higher earners are potentially more mobile. 

The report does concede that there are many factor as to why you might wish to stay in Scotland, including quality of public services, education and culture. Factors that might mitigate against mass migration of top earners. 

It warns that in a worst case scenario raising the top rate of tax to 50p could cost the Scottish Government £24m a year in lost revenues. 

Gillespie said: “However our analysis also notes that a lower increase in the additional rate could mitigate the behavioural response and provide a greater opportunity to raise revenues."

One of the members of the council of economic advisers, top economist Anton Muscatelli, has called for a "slight increase" in taxes for what he describes as “the cost of living in a civilised society”. 

The advice comes the day before the Scottish budget is announced. Nicola Sturgeon has said that 'the time is right' to consider a taxation rise.
Last month the SNP published a “discussion paper” on income tax which set out four scenarios, the first of which proposed raising the higher and additional rates by 1p each.

Reform Scotland, meanwhile, have argued Scotland should not alter its income tax rates from UK levels until other taxes such as VAT and business tax are also devolved.Chairman Alan McFarlane said: 
“Altering the Income Tax rate to make it different from Westminster, far from being beneficial, could be detrimental to Scotland’s economic performance and lead to a drop in revenue available to spend on public services. The Scottish Government has itself acknowledged the potential for adverse behavioural change in response to income tax policies. “We need more tax levers to equip us to introduce coherent reform. There are viable options with precedent, including VAT and Corporation Tax."

The budget will be announced tomorrow at 2pm Thursday the 14th of December.

Monday, 11 December 2017

The Federation of Small Business urge ministers to 'Steady Economic Ship'

In a report published today, the Federation of Small Business (FSB) found that three fifths of businesses don't want the government to change income taxation, with two thirds believing it would be detrimental to the economy. 

The survey conducted this November on 315 Businesses in Scotland, found that 20.7% wanted a decrease in taxation and 21.0% would welcome an increase. 

The poll comes just before the draft budget is announced on Thursday. FBS have written to Cabinet Secretary Derek Mackay with the results, asking for a 'steady economic ship' in times of uncertainty. 

The First Minister has spoken about taxation increases to fund public spending in the last few months, the extent of which will be revealed in Thursday's budget.

Andy Willox, FSB’s Scottish policy convenor, said: “A clear majority of those that run their own business in Scotland don’t want the Finance Secretary to increase income tax rates. Those asked warned of the impact on the wider economy, and little wonder with pressure on household incomes and uncertainties about the impact of Brexit.”

The research from FSB also showed that 68% of businesses are on the basic tax rate, meaning they earn between £11,501 and £43,000.

The government's four alternative approaches include having anything up to six tax bands, while three out of the four feature a 50p additional rate and incremental changes to the basic and higher rates.

The FSB survey found that just under half of business owners preferred the proposal with the largest number of bands and rates.

Andy Wilcox added: “This data scotches the myth that business owners are all high earners. Further, when forced to choose between Ministers’ palette of tax options, the largest share of business owners chose what could be regarded as the more progressive option.

“They seem to be less worried about their own wallets and more concerned about the wider economy.

“That’s why, overall, smaller businesses don’t want to see tax change. As FSB warned ahead of the UK Budget, trading conditions are already turbulent, and additional tax hikes – for them or their customers – are not what we need right now. The Scottish Government must resist the siren song of a big change budget, and do what they can to steady Scotland’s economic ship.”

Source: FBS Scotland

Friday, 8 December 2017

£15 million grants available through 'Tampon Tax' fund

Following legislation from the Westminster government's 2015 Autumn statement, VAT on sanitary wear is now used to provide grants for women's health support and economic development charities. 

There are currently grants of £1 million pounds each available to charities that support women's mental health and wellbeing, as well as organisations that tackle violence against women and girls. 

Tracey Crouch, the minister for civil society said: "The tampon tax fund is already making a real difference to the lives of women and girls across the country. We are ensuring that the money generated from sanitary products continues to support good causes and address the serious issues that women of all ages face."

She also specifically welcomed applications for projects that support women and girls "across multiple regions" of the UK.

The tax has been criticised as it is based on tampons and sanitary towels being classed as 'luxury items', rather than necessary to menstruating women. 

The recipients of funding from the Tampon Tax were also called into question in October when an anti-abortion charity received £250,000 from the government. 

Period poverty has also been highlighted world world as lack of sanitary products can prevent school attendance and negatively impact girls education. 

Applications are open until midnight on Sunday 28 January for projects delivered over either one or two years.

Source: third source news.

Monday, 4 December 2017

Joseph Rowntree Foundation finds an increase in children and pensioners living in poverty

Figures from the think tank show that 300,000 more children and 400,000 more pensioners are now living in poverty than in 2012-13: the first sustained increase in child poverty for 20 years. 

14 million people in the UK currently live in poverty – more than one in five of the population. While poverty levels fell in the years to 2011-12, changes to welfare policy – especially since the 2015 Budget – have seen the numbers creep up again.

The report's release follows the entire social mobility commission quitting over the weekend citing a lack of progress towards a 'fairer Britain'.

Alan Milburn, the government tsar for social mobility said on his resignation that the venture had been rife with “indecision, dysfunctionality and lack of leadership” seeing 'little hope' that Theresa May's government would be able to contribute to a more equal society. 

Frances O'Grady the general secretary of the Trade Unions Congress said: “Working people are not getting a fair deal from the economy, with real wages still worth less than a decade ago.” She called for a minimum wage of £10 an hour.

JRF chief executive Campbell Robb said: “These worrying figures suggest that we are at a turning point in our fight against poverty. Political choices, wage stagnation and economic uncertainty mean that hundreds of thousands more people are now struggling to make ends meet.”

Oxfam’s Rachael Orr said: “It’s not just working adults who are affected, but their children too, and it’s a real worry to see progress on child poverty going into reverse.”

Chief executive of the Child Poverty Action Group Alison Garnham added: “As today’s report shows, we know how to reduce child poverty in the UK – we’ve done it before. Yet at the start of a sustained rise in the rate of child poverty – bewilderingly – there is inaction. The question the report begs is why are we not investing in our children?

“Families with children have had a decade of cuts to their incomes and the damage is showing. Unless there is action now to protect the living standards of low-income families, we will pile up problems for future generations and for the UK economy.”

Source: Joesph Rowntree Foundation. 

Thursday, 30 November 2017

Report reveals lack of social mobility between Scottish boroughs

A study released by the UK Social Mobility Commission has revealed discrepancies between the services of local authorities. There is a gulf between what different councils are able to provide to tackle the attainment gap that impacts upon what sort of life young people could lead.

The level of literacy and numeracy differs by as much as a third between the wealthiest and most deprived countries. 

Using controversial new Scottish Government data, the SMC report ranks local authorities by the average gap in reading and writing attainment in P1, P7 and S3. At P1, the deprivation gap in the proportion of pupils reaching the expected level was almost 34% in Highland, the worst-performing area. At P7, Aberdeenshire came bottom of the table, with an attainment gap of over 40%. And Aberdeenshire saw the biggest difference between the best and worst-off pupils at S3, of 40%.

UK wide it was found that the worst performing areas for social mobility are no longer inner city areas, but remote rural and coastal areas, and former industrial areas, especially in the Midlands. Young people from disadvantaged backgrounds living in these areas face far higher barriers than young people growing up in cities and their surrounding areas - and in their working lives, face lower rates of pay; fewer top jobs; and travelling to work times of nearly four times more than that of urban residents.

The Rt Hon Alan Milburn, chair of the Social Mobility Commission, said:

'The country seems to be in the grip of a self-reinforcing spiral of ever-growing division. That takes a spatial form, not just a social one. There is a stark social mobility lottery in Britain today.

London and its hinterland are increasingly looking like a different country from the rest of Britain. It is moving ahead as are many of our country’s great cities. But too many rural and coastal areas and the towns of Britain’s old industrial heartlands are being left behind economically and hollowed out socially.

Tinkering around the edges will not do the trick. The analysis in this report substantiates the sense of political alienation and social resentment that so many parts of Britain feel. A new level of effort is needed to tackle the phenomenon of left behind Britain. Overcoming the divisions that exist in Britain requires far more ambition and far bigger scale. A less divided Britain will require a more redistributive approach to spreading education, employment and housing prospects across our country.'


Tuesday, 28 November 2017

OECD downgrades UK's Growth Forecast making it the weakest of the G7 countries

The Parisian based think thank the Organisation for Economic Co-operation and Development, today released it's predictions for the UK's growth. It forecast Britain's economic growth to drop from 1.5% in 2017 to 1.2% in 2018 and 1.1% in 2019.

The OECD’s forecast for 2018 and 2019 is well below the downgraded estimate issued by the Office for Budget Responsibility alongside chancellor Philip Hammond’s Budget last week, and highlights how the organisation believes Brexit will weigh heavily on Britain’s economic performance.

The OECD's report published in September put Britain at just 1% in 2019, the rise is attributed to the interim deal that is currently being negotiated. In today's report, Britain leaving the EU is described as a significant risk for economic prospects in Germany, Ireland, Latvia, the Netherlands, South Africa and Spain. 

Figures for the global growth in the OECD report are 3.6% this year and 3.7% in 2018, putting the UK well behind the global level led by China and India. 

José Angel Gurría, the OECD general secretary, said: “Growth has picked up momentum and the short-term outlook is positive, but there are still clear weaknesses and vulnerabilities.

“There is a need to focus structural and fiscal action on boosting long-term potential as monetary policy support is reduced. Countries should implement reform packages that catalyse the private sector to promote productivity, higher wages and more inclusive growth.”

Thursday, 23 November 2017

Fraser of Allander Institute and Scottish Centre for Employment Report on Scottish Labour Market Trends

The Fraser of Allander Institute and Scottish Centre for Employment has released their report on Scottish labour market trends. 

The Fraser of Allander Institute is a leading economic research institute with over 40 years of experience researching, analysing and commentating on the Scottish economy. The FAI undertakes a unique blend of cutting-edge academic research alongside applied commissioned economic consultancy in partnership with business, local and national government and the third sector. 

The report shows that Scotland’s labour market remains strong, in absolute terms and relative to the rest of the U.K., with a slightly lower unemployment and a higher employment rate. Scotland continues to have the best employment rate outside of the East and South of England with a record high of 75.2% employment and unemployment remaining low at 4.0%.

Much of the increase in employment comes from self employment. The nature of this work is predominantly unknown, whether a move to increase work flexibility and potential earnings or a result of not being able to find employment and so becoming precariously self employed. The kind of work being undertaken will have an impact on the amount of tax revenue generated by this upturn in self employment. 

Self employment has risen particularly in women since 2008, perhaps indicating that child care is a motivation in the increase. In terms of age, the largest increase in employment since 2008 has been in the 65+ demographic, 25-34 and 35-49 are also back at pre-2008 levels of employment. 

Trends in youth labour market of 16-24 show employment at a record low, however this could in part be due to employment inactivity indicating an uptake in full time education between these years.Productivity remains sluggish, as a result of which real earnings once adjusted for inflation are also subdued. 

You can read the full report here as well as John Sutherland looking in more detail at firm’s workplace adjustment strategies during the Great Recession with insights from the Workplace Employment Relations. John is an Honorary Research Fellow at the Scottish Centre for Employment Research (SCER) in the Department of Human Resource Management at the University of Strathclyde.