The £2.1bn black hole
New forecast shows shortfall in revenue Tory warning of a ‘Sturgeon slowdown’ Higher level of tax ‘will drive away jobs’
NATIONALIST ministers are facing a £2.1billion financial black hole because their tax policies will raise far less than first predicted.
A new report warns income tax revenue will be billions lower over the next four years than the Scottish Government first forecast ten months ago.
Critics say the figures indicate the decision to collect more tax from most workers earning more than £33,000 will spark a ‘Sturgeon slowdown’, which could come at a high cost to the public purse.
The Scottish Government’s economic forecasters downgraded tax forecasts substantially in response to its own gloomy warning about the economy, which is facing the worst prolonged period of growth since the 1960s. In February, a Government report estimated income tax would raise £12.3billion in Scotland next year.
But this has now been downgraded to £12.1billion in the new forecast by the Scottish Fiscal Commission (SFC), which takes into account the economic outlook and the impact of the SNP’s tax policies.
Over the next four years, the SFC predicts income tax will bring in £51.4billion, rather than the £53.5billion the Scottish Government forecast earlier this year.
Scottish Conservative finance spokesman Murdo Fraser yesterday expressed concern at the downgraded forecast, saying: ‘Thanks to the coming Sturgeon slowdown, the Scottish Government is projected to raise £2billion less than expected over the remainder of this parliament.
‘That’s £2billion less going to schools and hospitals because of the failure to match levels of growth we are seeing elsewhere in the UK.
‘The SNP’s answer is to introduce a new Nat tax – but these figures show that if we had higher growth, there would be no need to do so. The SNP’s Nat tax isn’t just a broken promise, it’s bad economics. Hanging a sign at the Border saying “Higher Taxes” will drive away jobs and leave Scotland further behind other parts of the UK.
‘Nicola Sturgeon broke her promise on tax this week. She said she wouldn’t increase taxes on basic rate taxpayers, but that’s exactly what she’s done. It is time she apologised and instead focused
‘Should focus on delivering growth’
her government on delivering the growth we need to support our vital public services.’
The SNP’s tax proposals, announced in Thursday’s Budget, will leave 1.1million Scots who earn more than £26,000 having to pay more than if they were based in other parts of the UK.
Miss Sturgeon was accused of breaking a manifesto promise by introducing a new 21p tax band for everyone earning between £24,000 and £44,273, although the first £2,000 will be taxed at a lower rate of 19p, meaning the break-even point is £26,000. Thanks to increased personal allowances, Scots on £33,000 will pay the same as at present – but £70 a year more than the rest of the UK.
Beyond £44,273, the higher rate of tax will also rise by 1p in the pound to 41p, while the top rate, on earnings above £150,000, will increase to 46p.
The SFC also forecast that the amount of money households have to spend will not rise for three years because of a combination of slow wage growth and inflation.
The SNP minority government could face a battle securing enough support to get its Budget through parliament. Labour, the Liberal Democrats and the Tories have all indicated that they have strong concerns about several aspects.
And the Greens say they will not back the Budget without changes, including around £150million more funding for councils.
A Scottish Government spokesman last night insisted: ‘There is no black hole. The SFC forecasts that growth in income tax revenues will outstrip growth in the rest of the UK and provide extra support for public services.’