STEPHEN DAISLEY: Cutting tax payments is not egocentric… it is the one actually radical financial concept that’s assured to learn ALL of us

Time is running out for this session of Holyrood. Campaigning is already under way for May’s election, in which the voters will choose a government either to undo – or, more likely, to outdo – the many failings of the current one.

But before then there is the small matter of the Scottish Budget, the first draft of which is due next week.

Policy changes at Westminster, in particular Chancellor Rachel Reeves’s scrapping of the two-child benefit cap, mean SNP finance minister Shona Robison will have more cash to work with. (The Scottish Government had intended to mitigate the financial impact of the cap from April.)

In these straitened times, the prospect of a Budget with a little more fiscal breathing room ought to gladden the hearts of taxpayers. Not this one. 

We have already been told the current rates and bands for income tax will stay put, though there could be tweaks to the thresholds at which tax kicks in.

A pre-election Budget in which tax cuts have been taken off the table.

You might think this speaks to the arrogance of the SNP, convinced they already have the election in the bag and needn’t bother buttering up the voters, but while you wouldn’t be wrong as such, the more pertinent observation is that the Nationalists are under no pressure to offer income tax relief.

There is no tax-cutting contest at Holyrood, not even in election season, because it is a parliament in which the very thought of tax cuts is considered unclean, almost sinful.

When the Tories surrendered Westminster’s income tax powers to Holyrood, with the eager assistance of Labour and the Lib Dems, they assured us it would make the Scottish parliament more fiscally responsible.

What it has done, instead, is enshroud Scotland in the fiscal tomb of tax and spend. 

A future Chancellor would be hard-pressed to smuggle income tax cuts north of the Border, leaving Scotland’s economy forever at the mercy of a governing class indifferent to growth when it is not openly resentful of it.

The nation’s decision-makers, on the whole, regard tax cuts as the encouragement of self-interest, a reward for ambition, a favour to the privileged – and they consider all these bad things.

Reducing the fiscal burden on hardworking Scottish families is low-status, non-U, and just a little tacky.

This is the socialism of snobs. When these attitudes pervade, it is easy to become discouraged and resign ourselves to the permanent rule of status- seeking midwits whose politics never outgrew the student debating society.

This is all the more reason to make the case for growth-stimulating tax cuts. The truth is seldom popular but all that matters is that it’s true.

So let’s tell the truth: tax cuts, properly designed and mindful of the economic circumstances of the day, can increase rather than decrease revenue.

And cuts to income tax at this time could raise much-needed revenue for the Scottish exchequer. We can be reasonably confident of this as we know how taxation works. 

Tax any economic behaviour, such as working longer hours to earn more pay, and it will eventually produce less of that behaviour.

And for a simple reason: an incentive has been replaced by a disincentive.

We needn’t be students of Art Laffer to know that. It’s common sense, something we can attest to from our own lives.

If it costs more to earn more, there is a point at which it is no longer in our interests to earn more.

The opposite is also true: reduce taxes on earning and you increase the incentive to earn and therefore to work.

The same goes for taxes on goods and services, like VAT. The less tax incurred, the more goods and services customers will consume. No matter how many times we run this experiment, our policymakers refuse to learn from the results. 

The reason Shona Robison won’t unveil income tax cuts when she stands up in Holyrood next week has nothing to do with economics and everything to do with politics.

Effective politics in the short-run, perhaps. Voters are concerned about public services and want them funded properly. However, in the long-run, this kind of politics is counterproductive. In fact, it’s thoroughly self-defeating.

When I say Robison should use the Budget to cut income tax, I don’t mean she should do so for the sake of it.

There is certainly a moral argument that people should be allowed to keep more of their own money because they have earned it and it belongs to them.

My case, however, is different: people should be allowed to keep more of their money because doing so benefits all of us. Tax cuts don’t just lie idle in bank accounts. They tend to re-enter the market as households feel able to spend more. 

The more households there are spending above their normal budget, the more economic growth is created, typically for retailers, the hospitality sector, and luxury purchases like entertainment subscriptions and digital hardware (phones and other devices).

This creates higher profits for these industries but it also brings the VAT receipts rolling in and necessitates more hiring, thus creating new or higher-band taxpayers.

 It is this additional revenue which can then be spent on public services or channelled into even more substantial tax cuts, which should in turn bring in sizeable sums to the government’s coffers.

This is how you create a dynamic economy while investing in the services that are so precious to all of us.

Don’t expect Shona Robison to do any of this, though. Growth-stimulating tax cuts are an inconvenient truth for many politicians.

 Or at least the kind who never saw a tax hike they didn’t approve of and are instinctively suspicious of taxpayers having more say in how their earnings are spent.

When your country’s political culture is steeped like ours in the snooty conviction that the voters cannot be trusted and need wise philosopher kings to spend as much of their earnings as possible on their behalf, cutting income tax becomes a radical idea.

Time is also running out for this brand of politics. The digital age gives us more opportunities and the necessary infrastructure to make choices for ourselves, and in time this will include areas where the state currently enjoys a near-monopoly, like healthcare or education or even bin collection.

The more people take up these opportunities, the harder it will be for governments to maintain the current tax-spend-deliver model. 

The era of stumping up ever larger segments of your pay packet in exchange for mediocre services, subject to long waits, and with scant input in service design or delivery will not survive the pace of technological and social change.

Until such time, politicians who claim to value public services should abandon their ideological prejudices and recognise tax cuts as a tool to raise revenue for schools and hospitals.

For many, the intellectual stumbling block will remain: tax cuts benefit individuals, not the common good.

The leap of faith they must make – and given all the evidence it is really more of a step – is that self-interest and the common good are linked.

Cut people’s taxes if you want more money to spend on their services. A Scottish Budget with this maxim at its heart would be the most revolutionary, and the most beneficial, ever placed before Holyrood.