Scotland may need to raise taxes or issue cuts, according to think-tank

Finance Secretary Derek Mackay delivered this year's Scottish budget. Picture: PA
Finance Secretary Derek Mackay delivered this year's Scottish budget. Picture: PA
Share this article
Have your say

An urgent discussion on whether to cut spending or raise taxes is required ahead of the Scottish budget, according to a leading economic think-tank.

The proposal was made by the Fraser of Allander Institute in its Scotland’s Budget 2018 document, which warned austerity is “far from over” and said uplift as a result of Philip Hammond’s promise of £950 million for Scotland by 2020-21 would be offset by weak income tax forecasts north of the Border.

The report said the Scottish budget for 2019-20 will be similar to the previous year, but will still be lower than that for 2010.

It also said that further tweaks to income tax are possible, but the government will “need to consider a wider range of options” to raise revenue. Otherwise ministers would have to take a more strategic look at areas of the public sector where cutbacks will have to be made, “no matter how politically challenging”.

Last night the Green Party, which has previously provided the SNP with enough support to get its budget through Holyrood, interpreted the wider range of options suggested by the report as an opportunity to look at council tax.

Green co-convener Patrick Harvie said: “Fraser of Allander are right that the growing demand for public services needs a serious debate about both local and national taxation. We can raise more funds in a fair way to provide the health, social care and education that Scotland deserves.”

Despite a 3 per cent rise between the current financial year and 2021, the budget will be around 7 per cent per capita lower at the end of the current parliamentary term than in 2010, researchers believe.

The report also forecast that Scotland would spend half of its day-to-day budget on health by 2021 or earlier.

Institute director Professor Graeme Roy said: “Whilst the outlook for public spending in Scotland next year has improved compared to what Finance Secretary Derek Mackay will have been planning for this time last year, for many parts of the public sector austerity will be far from over.”

A Scottish Government spokesman said the report “confirms that the Scottish budget from the UK government has been cut significantly in real terms between 2010-11 and 2019-20. They put it at 
7 per cent for every man woman and child in Scotland.

“This is consistent with the position that the we set out in our Medium Term Financial Strategy in May 2018.

“This supports our frequent calls for the UK government to end austerity, utilise the fiscal headroom that the Chancellor has available and increase public spending on public services – an opportunity that the UK government failed to take at last week’s UK Budget.”