Carlaw’s tax plans could cost Scotland £270m, says thinktank

Tax plans outlined by Scottish Conservative leadership candidate Jackson Carlaw could cost Scotland £270 million, according to analysis.

The interim leader of the party launched his bid to take over the reins full-time this week, promising to bring taxes for “middle Scotland” in line with the rest of the UK.

Scots on incomes between £27,000 and £43,430 currently pay up to £150 more in tax than people in the rest of the UK, while those earning between that mark and £45,000 stump up an extra £500.

However, the Fraser of Allander Institute thinktank said in a blog post that Mr Carlaw’s proposed changes “might be seen as puzzling” after its analysis showed it would most benefit those earning £43,430 and above.

The post suggests the policy, which Mr Carlaw would only be able to implement in the 2022-23 financial year and after a win in the 2021 Holyrood election, would benefit the top 20% of earners most.

The analysis concluded: “A policy framed as supporting ‘middle earners’ predominantly benefits households at the top of the distribution of household income.”

Scotland’s intermediate rate is currently 1% above that of the rest of the UK at 21%, following the devolution of income tax powers to Holyrood.

The analysis said: “If this policy was implemented in 2020-21, it would reduce the government’s income tax revenues by around £270 million.”

However, the thinktank does state an uptick in jobs caused by the new tax powers could see the number reduce.

According to the institute, the reason the figure “appears surprisingly expensive” is because it will also be felt by those who earn more than £45,000 a year.