‘Gap between Scotland’s richest and poorest ever widening’

David Hume InstThe gap between Scotland’s most wealthy and most poor is widening, according to two of the country’s leading economists.

Stirling University’s David Bell and David Eiser, both fellows of the Centre on Constitutional Change, conducted research on behalf of the David Hume Institute.

They found the richest two per cent of Scots saw their income rise by more than 25 per cent between 1997 and 2013 while the poorest four per cent saw a drop in real income of a tenth.

This is despite more than a decade of the minimum wage and tax credits for low earners and a huge net growth in the economy, pre-recession.

They also found that those just above the bottom four per cent had done better and had seen a rise in income of 15 per cent, which was proportionally more than any group apart from the super rich.

David Eiser
David Eiser

However, Eiser said that he believes inequality will have gotten worse still since their last data was recorded in 2013.

He said: “It seems almost certain that inequality will have increased since then. The recession and its aftermath saw a large increase in the proportion of insecure work - part time work, temporary work, and out-sourced agency self-employment”.

The pair of academics also looked at what Scottish authorities, with both the powers they already have and those they are likely to get under further devolution, can do to arrest the trend.

The main target, in the opinion of Mr Bell and Mr Eiser, should be the current council tax system which they see as “regressive” and not an effective way of taxing becasue high-value properties are charged at a lower percentage than low-value ones.

Their research uncovered huge regional differences in the tax that shows a typical Band D council tax payment in Aberdeenshire is little more than half of one per cent of the median house price. Whereas in East Ayrshire, a Band D council tax bill jumps to more than 1.3 per cent of the median house price.

The duo’s report claim such a system creates a bias in favour of home ownership and embeds intergenerational housing and wealth inequalities.

They also advocate putting up the top rate of tax for those earning more than £150,000 a year.

They suggest an increasing from the current 45 per cent to 50 per cent.

However, they suggest that such a move is unlikely to have a significant impact on headline inequality measures as only one Scot in 300 pays the top rate.

They did note, though, that while Conservatives and others warn an increasing of the rate could disincentivise entrepreneurs and innovators, “existing evidence is inconclusive on how significant this effect might be”.

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