Scottish Budget: The truth behind the SNP's big claim about income tax
Don’t be fooled into thinking that Scotland is a low-tax country by talk of 55 per cent of people paying less than those south of the border
One of the big claims made by Shona Robison as she presented the Scottish Budget was that more than 55 per cent of Scots would pay less income tax “because they live in Scotland and have a government led by the SNP” rather than south of the Border.
The Finance Secretary trumpeted her decision to increase the thresholds for the basic and intermediate income tax bands, while chiding Chancellor Rachel Reeves for going after “people’s hard-earned cash” by freezing them. “I’m making a different choice,” she proclaimed.
However, looking beyond the rhetoric to the cold, hard figures in the associated budget documents revealed an estimate that Scotland’s different income tax policies are expected to result in an extra £1.8 billion of revenue in 2026-27, taking the total to £21.5bn – so not far off ten per cent higher.
These revenues, as estimated by the Scottish Fiscal Commission, are also set to rise steadily to £26.7bn in 2030-31, an increase of almost 25 per cent.
Tax rises and spending cuts
The explanation for all this extra cash despite 55 per cent of Scots paying less is simple. They get buttons – a maximum of 75p a week for taxpayers below the median income, according to the Fraser of Allander Institute – while the 45 per cent are being taken to the cleaners. Something to remember if an SNP election leaflet lauding supposedly low-tax Scotland drops through your door.
João Sousa, deputy director of the Fraser of Allander Institute, also pointed out that “relative to plans laid out in June, the Finance Secretary has had to cut day-to-day spending by £480 million”, while capital spending will also fall by £850m. Higher taxes combined with public spending cuts is seldom a good look for a government facing an imminent election.
Some good news
However, despite a degree of smoke and mirrors and growing concern over a looming black hole in public finances, this was at least not an overly reckless ‘giveaway’ budget. And there were some welcome measures.
The much-needed extra £70m for cash-strapped colleges was an overdue recognition of both the dire state of their finances and their importance to the economy.
The increase to the Scottish Child Payment for under-ones to £40 a week will help prevent young lives from being blighted by poverty.
And the promised “summer of sport”, linked to the Commonwealth Games and the football World Cup, was a hugely encouraging sign that ministers may finally be taking the vast benefits of exercise seriously. We hope this will be just the start of a concerted drive to turn Scotland into a ‘sporting nation’, an idea we have long supported.
It remains to be seen whether new business rates relief, particularly for the struggling leisure, hospitality and retail sector, will be good enough. But Leon Thompson, of UKHospitality Scotland, warned the majority of firms “will still be paying higher business rates bills in April” and described the Budget’s measures as “merely a sticking plaster”.
What Budgets are all about
There were other steps that will please certain constituencies. The new ‘mansion tax’ and ‘private jet tax’ were in keeping with the running theme of soaking the rich, which may well ease any coalition negotiations with the hard-left Scottish Greens after the Holyrood election.
However, much like high taxes imposed on the better off, such policies don’t just hit the people who are directly affected.
Businesses have already warned that potential employees are being put off moving to Scotland or are requesting higher wages to compensate for higher taxes. These are drags on economic growth at a time when it is desperately needed and growth, it should be remembered, is what Budgets are supposed to be all about.
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