Tax ‘gulf’ could hit public-sector jobs in Scotland, Tories claim

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Holyrood Finance Secretary Derek Mackay has been warned the “gulf” in income tax costs between Scotland and the rest of the UK could have a “major impact” on public-sector recruitment north of the border.

Conservative finance spokesman Murdo Fraser raised concerns after  new figures showed if the tax thresholds in Scotland are only raised in line with inflation, Scots earning £30,000 a year or more would end up paying more in income tax than they would south of the border.

That could leave someone earning £100,000 a year paying £1,843 more a year, according to the independent Scottish Parliament Information Centre (Spice).

It highlighted the possible differences in income tax charges between Scotland the rest of the UK after Conservative Chancellor Philip Hammond announced plans to raise the threshold for the 40p higher rate tax to £50,000 from April.

With control over income tax rates and bands having been devolved that will not automatically extend to Scotland – where currently those earning more than £43,430 pay a higher rate of 41p.

First Minister Nicola Sturgeon has already pledged her government will deliver a “balanced, progressive and fair budget” that will “stand in stark contrast” to the one put forward at Westminister.

She claimed this offered “`tax cuts for the rich and just cuts for everybody else”.

The Spice report said the “indications are that the Scottish Government is unlikely to raise the higher rate threshold to the same level as in the rUK”.

If Mr Mackay opts to increase income tax thresholds in line with inflation, researchers calculated this would mean Scots on a salary of £30,000 a year would pay £37 more in income tax – with their annual bill coming in at  £3,537, compared to £3,500 elsewhere in the UK.

That gap rises to £137 for those earning £40,000 a year, before increasing to £1,343 for those with a year on a salary of £50,000.

Meanwhile, high earners on a wage of £100,000 could pay £29,343 in income tax in Scotland in 2019-20, compared to £27,500 south of the border, according to Spice.

The report stressed: “This is a hypothetical scenario for Scotland and the actual differentials will not be known until the Scottish budget is published on  December 12.”

Spice also estimated that if the Scottish Government uprated all income tax thresholds in line with inflation, the amount of cash raised for public services would be £340 million more than if SNP ministers followed Mr Hammond’s example and raised the higher rate threshold to £50,000.

Mr Fraser said the research “shows there will be a clear and noticeable gulf for thousands of people in Scotland”.

Scottish Conservative finance spokesman Murdo Fraser (Jane Barlow/PA)

“It will reinforce Scotland’s reputation as a high-tax country and one which punishes aspiration and drives away wealth.

“It could also have a major impact on public-sector recruitment, as we have already seen in relation to head teachers’ concerns.

“Derek Mackay should reflect on those things before delivering his budget next month.”

A Scottish Government spokesman said: “Following the changes introduced earlier this year, more than two-thirds of taxpayers will pay less on their current income this year under Scotland’s new tax bands, and low earning taxpayers are protected through the introduction of a new starter rate of tax.

“The changes will also mean an additional £428 million will be available in 2018/19 to invest in vital public services and the economy.

“Taxpayers in Scotland also benefit from a range of services not available in England, such as free prescriptions and free university tuition.

“The Spice paper shows that if we were to match the higher rate threshold in the rest of the UK, this would lead to significantly less revenue available to invest in public services and the Scottish economy.”

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