Rishi Sunak Warns Humza Yousaf Over Scottish Income Tax Hike

Strategic Insights -

UK Prime Minister Rishi Sunak has visited Scotland, warning against hiking income tax again in the Scottish Budget. He argued that "we should be cutting taxes, not raising them," as Scotland is "already the highest taxed part of the UK." Sunak contrasted the SNP's approach with the UK Government's decision to cut National Insurance in the Autumn Statement, which he said would benefit Scottish families and companies.

Key Takeaways:

  • UK Prime Minister Rishi Sunak has warned against hiking income tax in Scotland, citing the country's already high tax burden.
  • Sunak argues that cutting taxes, not raising them, is the right approach to help families and businesses through the cost of living crisis.
  • Scotland is already the highest taxed part of the UK, with anyone earning more than £27,850 paying more income tax than if they lived south of the Border.
  • The proposed income tax hike would see a Scot earning £100,000 per year pay £3,607 more income tax per year than someone on the same salary in England, increasing the cross-Border tax gap by £400.
  • Economists have forecast the band would only generate around £40 million, which they said was "nowhere near sufficient" to plug a projected £1.5 billion black hole in Scottish Government finances.
  • Sunak has called on the SNP to explain why they are choosing a different path which is one of higher tax for both people and businesses.
  • The UK Government has provided Scotland with more funding than ever before through the Barnett formula, including an extra £500 million from the Chancellor's Autumn Statement.

Statistics:

  • 2.4 million Scots are expected to benefit by an average of £340 when the main rate of National Insurance is reduced from 12% to 10% across the UK on January 6.
  • Low-income earners in Scotland earn more income tax than higher earners in England would, due to the different tax bands.
  • The proposed income tax hike would see a Scot earning £50,000 per year pay almost £1,500 per year extra.
  • Scotland is projected to face a £1.5 billion black hole in government finances, which the proposed income tax hike would only partially address.

Sources:

  • "Rishi Sunak warns Humza Yousaf against hiking income tax in Scottish Budget" The Scottish Daily Mail, December 2023