What the mini-Budget 'Growth Plan' means for Scotland: Nicola Sturgeon's Government 'to receive £600m budget boost' as a result of tax cuts elsewhere
Scottish ministers will receive more than £600 million of extra funding as a result of tax cuts elsewhere in the UK, the Treasury has said.
Chancellor Kwasi Kwarteng abolished the top rate of income tax for the highest earners as he spent tens of billions of pounds in a bid to drive up growth to ease the cost-of-living crisis.
In a so-called mini-budget axing the cap on bankers’ bonuses and adding restrictions to the welfare system, he argued tax cuts are “central to solving the riddle of growth”.
Mr Kwarteng scrapped the 45 per cent higher rate of income tax and brought forward the planned cut to the basic rate to 19p in the pound.
He also announced cuts to stamp duty in England.
The changes announced by Mr Kwarteng will place huge political pressure on Scottish ministers by widening the gap between what people pay in Scotland and what they pay down south.
Sean Cockburn, chair of the Chartered Institute of Taxation’s Scottish technical committee, said: “Bringing the reduction to the UK basic rate forward by a year means that, as things stand, from next year, Scottish ministers will be unable to say that some Scots face lower tax bills compared to the rest of the UK.
“We won’t know how the Scottish Government intends to respond until later this year so absent this detail, it raises the prospect that all Scottish taxpayers earning more than £14,732 will now pay more income tax compared to taxpayers in the rest of the UK.
“As an illustration, someone in Scotland earning £27,850 would have paid the same amount of tax as someone living in the rest of the UK this year. The changes announced by the Chancellor mean that from next year, they would pay £152.80 more.
“The abolition of the additional rate tax raises the prospect of significant income tax divergence for taxpayers with income above £150,000.
“In Scotland, the ‘top’ rate of tax (as it’s called) is charged at 46p. Someone earning £200,000 next year would pay £6,045.80 more in income tax compared with someone in the rest of the UK”.
The Treasury said the Scottish Government is expected to receive more than £600 million of extra funding over the three-year period covered by the 2021 spending review as a result of the changes to income tax and stamp duty.
More than 2.3 million workers in Scotland will also see a cut in their national insurance payments, worth an average of £285 a year.
Elsewhere, the Scotch Whisky Association welcomed a freeze on spirits duty.
Scottish Secretary Alister Jack said: “The Chancellor has set out an ambitious package of measures which will cut taxes and drive growth right across the UK.
“A strong economy is the best way to tackle the cost of living challenges we are all facing due to Russia’s invasion of Ukraine.
“Our ‘Plan for Growth’ will support households and businesses in Scotland, while driving economic growth to deliver jobs, investment and prosperity.
“The UK Government is delivering for the people of Scotland when it really matters.”
Deputy First Minister John Swinney said the Chancellor’s statement would provide “cold comfort to the millions of people across Scotland who have been looking for the UK Government to use their reserved powers to provide support for those that need it most”.
He added: “Instead we get tax cuts for the rich and nothing for those who need it most.”
He said spiralling inflation meant the Scottish Government’s budget is worth £1.7 billion less than it was in December.
Mr Swinney added: “We are doing everything within our power to support people, public services and the economy, but these efforts are under threat by a reckless UK Government beginning a new, and dangerous race to the bottom.
"With a fixed Budget, and no scope to borrow for short term challenges, Scotland is at the mercy of UK decisions. This reinforces the urgent need for independence.”
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