Employer national insurance hike 'could cost Scotland hundreds of millions'

The SNP has warned a potential rise in employer national insurance contributions could cost Scottish public services hundreds of millions of pounds. 

The party demanded Sir Keir Starmer provide a "cast-iron guarantee" that any tax hike will not hit services or slash the Scottish Government's Budget.

Keir Starmer | Sean Gallup/Getty Images

It comes amid reports UK Chancellor Rachel Reeves is planning to increase employer contributions in the Budget on October 30, as part of efforts to plug a £22 billion “hole” in the public finances.

House of Commons Library analysis, commissioned by the SNP, estimated a rise of one or two percentage points would cost NHS Scotland, Police Scotland, the Scottish Fire and Rescue Service, and the Scottish Government between £70 million and £142m a year. 

Across a five-year parliament, it would cost the Scottish Government and Scottish public services in the region of £350m to £710m. These figures do not include local authorities, due to the complexities involved.

The SNP said the vast majority of this sum would hit NHS Scotland, which is Scotland's biggest employer, with around 160,000 staff including doctors, nurses, paramedics, midwives and porters.

Police Scotland, which has 23,000 officers and staff, would face a bill in the region of £8m to £16m a year, while the Scottish Fire and Rescue Service, with 7,600 staff, would be hit with a bill of around £1m to £3m a year.

The Labour manifesto ruled out raising national insurance, income tax or VAT – but it stressed that it did not want to raise taxes on “workers”.

SNP Westminster leader Stephen Flynn said: "Keir Starmer must give a cast-iron guarantee that the Labour government's national insurance tax hike won't hit Scottish public services or slash the Scottish Government's Budget.

"By increasing NI taxes, the Labour Party will be breaking yet another election pledge. There are serious concerns that doing so could cost the Scottish Government, NHS, schools, police and fire service hundreds of millions of pounds, which would mean, for instance, less money available in Scotland to employ nurses and teachers, or to provide healthcare and education.

"If the Labour Party goes ahead with this tax hike it must, at the bare minimum, ensure that any negative impact on the Scottish Government and Scottish public services is fully mitigated - and that any mitigation comes on top of, not in place of, significant real-terms increases to Scotland's block grant."

Kate Nicholls, chief executive of UKHospitality, previously warned any rise in employer contributions would "hammer sectors like hospitality, where staffing costs are the biggest business expense". 

Paul Johnson, the head of the Institute for Fiscal Studies, said it would be a “straightforward breach” of the Labour manifesto. “I went back and read the manifesto and it says very clearly, we will not raise rates of national insurance,” he told Times Radio last week. A spokesman for the UK Treasury said: “Following the spending audit, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22bn hole the government has inherited. Decisions on how to do that will be taken at the Budget in the round.”