SNP’s free cash for all ‘could see income tax rate soar to 85%’
‘Eye-watering’ bills with Universal Income plan
THE SNP’s radical pledge to deliver a Universal Basic Income would leave many workers with 85 per cent income tax bills, according to a respected think tank.
The policy would replace the benefits system, including the state pension, with free cash payments for every man, woman and child.
It is championed as a way of reducing poverty – but threatens to be eye-wateringly expensive.
The Fraser of Allander Institute (FAI) estimated it could lead to an eight percentage points increase to every tax band, at least – meaning higher bills for small and big earners alike.
In its recent Social Justice and Fairness Commission report, the SNP backed the idea of free cash for every Scot.
However, it did not estimate how much the policy would cost.
The FAI has crunched the numbers and believes it could leave taxpayers with a bill of almost £60 billion. It agrees it would alleviate poverty, but it warns it would be an ‘expensive policy’.
Emma Congreve of the FAI wrote in a recent blog: ‘The cost of the lower basic income was estimated to be £27 billion. The cost of the higher-level basic income was estimated to be £58 billion.
‘If Scotland had full powers over social security (much of which are currently reserved) part of the cost could be offset by abolishing much of the current social security system, including the state pension.’
She added: ‘Residual costs would be around £7 billion for the low level and around £40 billion for the high level. If we look at how much income tax would need to change in Scotland to fund this, this would mean eight points on every band, with the tax-free personal allowance abolished.’
Ms Congreve said at the lower level, this would see tax rates rise from 19p to 27p, or from 46p to 54p. But at the higher level, top rate payers would need to hand over 85 per cent of every pound earned to the taxman, in order to help fund the policy.
‘This is clearly an expensive policy,’ she added.
According to FAI modelling, at the lower level of UBI, Scots under 20 would receive £84.54 a week free, with £57.90 for those aged 20 to 24, £73.10 for those 24 to retirement age, and £163 for pensioners.
At the higher level, there would be £120.48 for children, £213.59 for those aged 16 to retirement age, and £195.90 for pensioners.
Liz Smith, Conservative finance spokesman, said: ‘Such a shortsighted plan could see ordinary people face eye-watering tax bills with no rise in the quality of their lives or the standard of local public services.
‘It’s staggeringly incompetent to put forward a proposal that would most likely make Scots worse off, including people struggling on lower incomes.’
Nationalist MSP Neil Gray said: ‘The SNP has long called on the UK government to introduce a basic income pilot scheme in Scotland, which we believe would ensure a strong, fair and progressive recovery from the pandemic.
‘Across the United Kingdom, too many people are living with the constant pressure of poverty.’
‘Ordinary people would likely be much worse off’