Rachel Statham

The Institute for Public Policy Research Scotland (IPPR Scotland) has set out its analysis of the Autumn Budget, in which the UK Chancellor announced an increase in the higher rate tax threshold to £50,000 in England, Wales and Northern Ireland.

Income tax thresholds on earnings are devolved to the Scottish Parliament, as such it is up to the Scottish Government and MSPs to decide whether to match the tax cut at next month’s budget.

According to IPPR Scotland’s analysis, which takes account of behavioural response, matching the UK tax cut could cost over £1 billion over the next four years (cumulative cost, real-terms based on 2018/19 prices), through to the end of the next spending review in Scotland.

Matching the tax cut in Scotland could cost up to £280 million per year next year (2018/19 prices). If funded by reductions in spending for non-protected departments in Scotland, it could reduce day-to-day funding by around two per cent in 2019/20.

Given the Scottish Government’s stated opposition to public spending cuts, and ambitious plans for reducing child poverty, the attainment gap and delivering inclusive growth in Scotland, IPPR Scotland has warned that a £1 billion tax cut would be unaffordable.

Rachel Statham, IPPR Scotland economic analyst, said: “The cost of matching the UK government’s tax cut for higher earners in Scotland would stack up to over one billion pounds between now and the end of next spending review. This is far too high a cost for Scotland’s public services to pay to fund a tax cut for the better-off.

“Far from being able to afford tax cuts, if the Scottish Government wants to end public spending cuts, and make progress on its ambitious policy priorities – like reducing child poverty, improving attainment and delivering inclusive growth – we might need see further increases in tax revenue this year and over the coming years.

“As we approach next month’s Scottish budget, these figures lay out the clear choice facing the Scottish Government and the Scottish Parliament. Do we invest in public services or offer a tax break for those who need it least? In our view we need to prioritise public spending and anti-poverty measures over tax cuts for the highest earners in Scotland.”