Snp Green Government Stuck Between Higher Scottish Taxes And Possible Tax Reductions In England

21st January 2024

With a billion pound budget gap the Scottish government is trying to close the gap with higher taxes in Scotland. A lot depends on it.

Figures from the Scottish Government's Scottish Fiscal commission show that the number of workers being taken into higher income tax bands has doubled since the SNP had the power to make changes

One in four workers - 866,000 - will be in the higher, advanced or top bands within four years, according to the Scottish Fiscal Commission.

Looking back 317,000 in 2017 were in the higher bands, when tax divergence from England began.

Shona Robison, the Deputy First Minister and Finance Secretary, is also introducing a 45% advanced rate between £75,001 and £125,140 and is increasing the top rate from 47% to 48%.

If the UK Chancellor Jeremy Hunt moves to make tax reductions as he has pointed to at Davos recently what will the Scottish Government do. The recently announced increases are due to be ratified shortly before the chancellor does his budget.

The implications for divergence being bigger may in time make a big difference about decision make regarding living in Scotland or not, investment in Scotland or not. Money and people move and while it may not be immediate the diverging difference may have long term consequences that are speeded up by the taxation choices the Scottish Government makes.

Scottish taxpayers have the double whammy of a Scottish Government raising taxes and the UK government freezing personal allowances both of which hit hard in Scotland. the problem for the Scottish Government trying to balance the budget is that changes at the UK level will have consequences for the Scottish Budget.

In an election year the Conservatives have incentives to try and encourage voters with a tax cut. However that then gives the Scottish Government the problem of whether to continue with higher taxes or slash spending to stop the gap growing.