Much heat and light being generated from the comments of Scottish Tory Ruth Davidson that nine out of ten Scottish households receive more in public services than they pay in tax:
Miss Davidson supported her claims by publishing figures from the Office for National Statistics, which showed the average Scottish household consumes £14,151 more in public services every year than it pays in tax.A fascinating breakdown, and the ONS is reasonably politically neutral so we can more or less trust the figures as quoted (though the devil, as ever, is in the detail). So, assuming that the figures quoted by Davidson are accurate, what do they mean?
Even the families in the middle income groups consume around £20,000 more in state spending than they contribute.
However, those in the top 10 per cent pay £17,205 more in tax than they receive in public services.
Much has been made of comparing Davidson's comment to Mitt Romney's "47%" quote:
There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them [...] These are people who pay no income tax.although they refer to quite different situations. Romney was only looking at income tax, which kicks in at much higher levels in the USA than in the UK: around $40K for a a family filing jointly which is typical for 1 worker families, whereas in the UK you start paying 20% as soon as you're past your £7K allowance. Davidson includes households that pay income and consumption taxes, but are still net receivers when you take into account Government spending on benefits, education, emergency services etc. Romney did not include payroll taxes (equivalent of NI) or consumption taxes (normally levied at 4-9% on most goods and services at state level).
It would be interesting to consider the implication of 10/10 Scottish households being net receivers of government services. That would imply that other sources of Government income, principally corporation taxes and the Barnett formula payments from Westminster, would be funding the marginal payments and services to households as well as all other non-local Government business (defence, foreign policy etc). Since corporation tax is indirectly a tax on employees and shareholders (commonly pension funds), that would imply that the burden of running Scottish national services is borne by successful businesses and English/Welsh taxpayers. As public spending inevitably rises above tax receipts, that squeeze will become ever tighter; corporation taxes will need to rise to the Laffer peak, assuming they are not already past it, since there's no realistic prospect of a Westminster Parliament increasing the financial transfer to Scotland. Northern North Sea oil tax income will continue to drop, aggravating the squeeze. One can only speculate at what will happen if Shetland declares independence and claims taxation rights on the oil fields in its waters.
Since we're only (only!) at a 9/10 ratio, the top 10% of taxpayers can be squeezed for a while longer. However, since they are more likely to be employees and shareholders in private companies, one wonders how long Scotland can continue squeezing the arse of the golden-egg-laying goose before it flies off to warmer and more welcoming pastures in the south.
Ruth Davidson's pronouncement may or may not have been politically wise, but you can't accuse her of making up facts or addressing an irrelevant issue:
Kenny Gibson, a Nationalist MSP, described it as Miss Davidson’s "Mitt Romney moment". He added:"“At least Mitt Romney only insulted around half of Americans, while Ruth Davidson believes almost 90 per cent of Scots do not 'contribute' to society."Well, Kenny, I think we've dealt with the Mitt Romney comparison above. Perhaps you'd like to come up with a definition of "contribute" that encompasses the above facts yet refutes Ruth Davidson's claim? And don't start down the path of a "Scottish nurses are worth more to the country than just their salary" claim; if the Scottish NHS hired Filipino, Polish, Russian, Nigerian or South African nurses for the same salary, they'd likely get more expertise for their money.