“BRAIN experiment” appears to be the stark warning in the underbelly of the Scottish budget delivered by Deputy First Minister John Swinney last week.

A warning note has been sounded by the Archangels, and the warning has been amplified by a level of media hype that you would not imagine from the perspective of the investment syndicate.

Of course, in today’s volatile political environment, it is not surprising to see this warning given the skeleton of the Scottish budget.

The warning relates to the Scottish Government’s decision to increase the tax burden on higher paid workers. The top income tax rate of 41% is due to rise to 42% from next April, with the threshold for this freezing at £43,662. And the maximum tax rate should be increased from 46% to 47%, with the threshold for this lowered (in line with the UK) from £150,000 to up to £125,140.

A rise in both rates could be seen as a major move to further increase the additional tax paid by many people in Scotland, compared to residents elsewhere in the UK. And of course, it is interesting from a political point of view to see how the power to change taxes is used in this time of crisis. However, even if they are insignificant, it is important to maintain the tax level of last week in the field.

The views of David Ovens, joint managing director of Archangels, were expressed by the business angel syndicate as a comment on the impact of Swinney’s Budget on “the technology business community in Scotland”.


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Mr Ovens said: “We understand the reasons for increasing the tax burden on Scotland’s highest earners. However, the practical implications need further study. By creating a big difference between Scotland and the rest of the UK, it can cause brain damage.

“Scotland’s booming technology sector employs skilled and creative people who are largely mobile, and such a system could trigger migration elsewhere in the UK. In recent years, Scotland has made great strides to build a reputation for supporting and nurturing entrepreneurs. We just have to be careful that we don’t create a financial environment that stifles business activity and damages our reputation as a place to start and grow successful businesses. ”

Mr. Ovens’s voice was studied, and it was not surprising, although it clearly expressed his views.

Of course comments like Mr Ovens’s which stimulate debate are welcome.

However, many may feel, with good reason, that the coverage of Mr. Ovens’ comments in some quarters of the media, though of course not all, has been somewhat exaggerated. .

In fact, the difference between the income tax burden on middle and high income earners in Scotland and those elsewhere in the UK before Mr Swinney took over last week, considering the impact it has on the most people, it is much greater than the progress in this direction announced in the budget of the first deputy minister.

Much of the difference has been created over the past few years as differences between the thresholds at which taxpayers move to higher rates in Scotland and elsewhere in the UK have increased.

Scotland’s higher tax threshold of £43,662 compares with one of £50,270 for other parts of the UK. And that’s where the big difference lies in tax policy.

This disagreement has arisen over time, and the Scottish Government has not followed through on a move by the Conservatives last year to raise the threshold. At some point, long before the current thresholds in Scotland and elsewhere in England, the money on which people north of the border began to pay higher taxes was not increased in line with inflation. The Scottish Greens have at times argued strongly against raising this threshold even if it is in line with inflation, citing the fall in real time, as it seems that middle-income earners are mistaken for wage-earners. top

However, in a way that some may have seen as misjudgment on the part of the Greens or their cunning in resisting even raising the inflation threshold. However, the difference between Scotland and the rest of the UK in terms of taxation is not necessarily bad. something and it can be good.


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It’s easy to argue that it’s a social positive. Simply put, it seems to create a more just society.

The Scottish Government noted in the spring that it had “taken steps to mitigate the impact of the bedroom tax and UK government benefits as fully as we can within our limited powers”. It is commendable.

He also highlighted his focus on tackling child poverty, noting the introduction of Scottish Child Payment for parents and carers on low incomes with children under 16. .

It is simply a matter of arithmetic that putting money in the pockets of the lowest income earners, who have to spend all their money to survive, will feed directly into boosting aggregate demand and economic activity in the general and standard of living.

And other policies implemented by the Scottish Government can be seen as economic growth, as well as society.

Young people aged between five and 21 who live in Scotland for at least six months a year are entitled to travel on public transport for free. At the end of this period, it can have a significant impact on giving people, including those who are furthest away from the labor force, a chance to get a job. For people in part-time, relatively low-wage jobs, taking the bus can make a big difference in whether or not that job grows economically and in any case spending within the price will provide more money to poor households. – life crisis.

Free university tuition for Scottish students is another policy that looks set to have a significant impact on the economy north of the Border in the long term. Ensuring as much as possible that access to higher education is based on merit – and the lack of talent for those who can afford to pay for it dominates location – seems to be very important for future economic success.


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And, as for the brain drain we are warned about, there seems to be little, if any, sign of such an event.

This should come as no surprise. Denmark is a good example of a country with high taxes, and no signs of “brain-blocking”, and many others. In fact, the way of life in Denmark is regarded as something that people certainly desire.

Scotland’s inward investment figures would also suggest that there has been nothing but a brain drain in recent years.

A study published by accountancy firm EY earlier this year showed that the number of inward investment projects secured in Scotland by 2021 has increased by 14%, to 122.

The increase in the number of inward investment projects that Scotland received last year was the fourth consecutive annual increase.

Scotland’s share of UK foreign direct investment projects rose last year to its highest level in a decade. The country received 12.3% of UK FDI projects in 2021, up from 11% in 2020.

And an EY survey revealed that 15.8% of prospective investors rated Scotland as the UK’s most attractive destination for FDI. This is an attractive reading for the country, and only London scores better in this respect.

In 2021, the year these figures are compared, Scotland has already implemented significant differences from the rest of the UK in terms of income tax, in terms of income and overheads. more.

So it seems best to take the “brain freeze” warning resulting from last week’s Scottish Budget measures with a grain of salt rather than a grain of salt.



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