Budget: Kate Forbes says Scotland cannot rely 'purely on increasing tax rates'

Finance Secretary Shona Robison introduced a new income tax band and raised the top level of income tax in her 2024/25 budget

Former finance secretary Kate Forbes says Scotland cannot rely “purely on increasing tax rates”, and must instead focus on expanding the working age population.

This comes after bank bosses warned people will choose to live in northern England rather than Scotland to avoid paying more taxes.

Finance Secretary Shona Robison set out Scotland’s budget on Tuesday 19 December, including proposals to introduce a new income tax band and raise the top level of income tax.

Former finance secretary Kate Forbes. Image: Jeff J Mitchell/Getty Images.

Those earning between £75,000 and £125,140 will now need to pay 45 per cent income tax.

Similarly, those earning over £125,140 have seen their income tax rate increase to 48 per cent.

The thresholds for these two tax bands were also frozen, meaning more people will be pushed into those tax bands after receiving a pay rise.

It is expected all of these moves will generate £307 million in taxes for the government.

Following the budget announcement, Judith Cruickshank from the Royal Bank of Scotland said she has heard “anecdotal stories” of higher earners choosing to live elsewhere to avoid paying higher taxes.

She says many working in the financial sector are now choosing to live in places like Manchester, Newcastle and Liverpool because of this.

Now Ms Forbes says getting more people to come and work in Scotland is the “far more successful route” to boosting the government coffers.

Speaking on BBC Good Morning Scotland, the Skye, Lochaber and Badenoch MSP said: “I’m obviously not the finance secretary, but I have done the job before so I know it is important to get tax rates right.

“I think the key mission for Scotland has got to be investing in jobs and expanding the working age population in order to increase public revenue.

“That’s a far more successful route to increasing public revenue than purely increasing tax rates.”

Ms Forbes added: “Just imagine the opportunity with expanding the working age population, whether that’s doctors, finance workers or social care staff.

“That population in Scotland faces a huge demographic challenge and we need to focus on bringing people to Scotland to increase the tax base.”

She conceded that Ms Robison was faced with an “extraordinarily difficult” budget when she introduced the new tax measures.

However she echoed the finance secretary’s comments that Westminster is to blame for the tightened purse strings.

She said: “We are only having this debate about tax in the first place because of sluggish economic growth.

“We know the UK is doing worse than many G7 countries at the hands of a Westminster government.

“That strikes me as the primary issue with the UK and Scotland, because most levers are still reserved to Westminster.

“If we saw economic growth not hampered by ridiculous economic decisions, we might not be having this debate around tax rates.”