Carlaw’s ‘£270m’ in tax cuts
Tax plans outlined by Scottish Conservative leadership candidate Jackson Carlaw could cost Scotland £270 million, according to analysis.
The current 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 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 (FAI) think tank 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 per cent 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 1 per cent above that of the rest of the UK at 21 per cent, 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 £270m.”
However, the think tank does state an uptick in jobs caused by the new tax powers could see the number reduce.
It said: “It could be argued that a tax cut might induce some increase in labour supply, which may mean that the policy ultimately costs somewhat less than this.”
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.