The problem with that question is that it comes straight from the Labour party central office briefing note. The Scottish Government quite rightly re-profiled revenue spending into capital to make up for the capital cuts from the UK Government. We did that because we recognised that—I think there is unanimity on this—direct capital investment had a 1:1 impact multiplier in terms of GDP growth. That is extremely important, because the problem is that we do not have enough economic growth, so the Scottish Government were right to re-profile revenue into capital spending.
As I said earlier, the 4:1 ratio of cuts to tax rises under the Government, plus their smoke-and-mirrors approach to direct capital investment, shows just where their priorities lie, and it is not with people, jobs or growth. We can all probably agree that plan A has failed, and with the UK still teetering on the brink of a triple-dip recession the Chancellor seems to want to continue to do the impossible, which is to cut his way to growth. It has not worked and it will not work; and this Finance Bill will not help.
The Bill does, however, make provision for personal tax changes, and the increase in the basic rate threshold to £9,440 is welcome. The Government are right to try to take as many people as possible on low and modest incomes out of tax, and the savings from that increase, added to the £326 of savings from basic rate taxpayers, whose personal allowance has risen from £6,475 in 2010 to £8,105 last year, makes sense, but that is only part of the personal tax story. As I have said, the Government are also foolishly ploughing on with a tax cut for millionaires, which at their own conservative estimate will cost £500 million.
It is those in the middle who are really being squeezed. The tax relief in terms of the 40% band used to be £37,400, but that was decreased to £34,300 last year, so for every £326 changed up in the Budget, at 20p in the pound, people have had to shell out an extra £560 at the 40p rate, before this year’s changes. So although the change in this year’s basic threshold is welcome, we must recognise that the Chancellor pulled the same trick in the middle again by pre-announcing another cut to the 40% threshold down to £32,010 last year. That means that in three years the Government have taken the proportion of taxpayers paying the 40% rate from 10% to 13% of the total taxpaying public—up 670,000 in three years. Over 25 years, the proportion has doubled to 2.1 million extra people now paying a tax rate that was previously only for the rich. With hundreds of thousands of people now paying a 40p tax rate that was never designed for low and middle incomes, it is safe to say that the middle is not so much being squeezed by the Government, as garrotted.