Budget blow

Yousaf’s new tax ‘would raise only £56 million’

Humza Yousaf
Humza Yousaf wants to introduce a 44p income tax band (pic: Terry Murden)

A new income tax band favoured by First Minister Humza Yousaf would raise only £56 million and would act as a further deterrent to investors, say critics.

Mr Yousaf supports a proposal from the Scottish Trades Union Congress (STUC) to introduce a 44p rate on earnings between £75,000 and £125,140 to ease pressure on the Scottish budget.

But analysis by the Fraser of Allander Institute shows it would barely dent the £1 billion black hole in the government’s finances by raising little more than a quarter of the £200 million projected by the STUC.

João Sousa, deputy director of the Institute, said: “Our best estimate is that the STUC proposal would raise £56 million in 2024-25 after accounting for behaviour, and would be paid by around 141,000 people.”

That amounts to 5% of those with any Scottish income tax liability.

The SNP-Green government has introduced five income tax bands and Mr Yousaf has also raised the prospect of a 1% wealth tax on assets, which could include pensions and property.

Business groups regularly warn that higher taxes, particularly in relation to the rest of the UK, are a deterrent when trying to attract senior staff to Scotland.

The Scottish government said it was “ proud to have a progressive income tax system” and added: “Revenue raised through it allows the most extensive social contract in the UK, providing services such as free prescriptions and free access to higher education which are unavailable elsewhere.”

Infrastructure budget shortfall

The Fraser of Allander research coincides with a report from Audit Scotland which says the Scottish government will be unable to deliver all of its £26 billion plans for public sector infrastructure.

The public spending watchdog found that higher costs, increased maintenance needs and reduced budgets would force ministers to reassess public spending priorities

Audit Scotland said ministers will be forced to make difficult decisions on what projects to prioritise, with others having to be paused or even stopped.

Scotland’s Auditor General Stephen Boyle said: “Scottish government spending decisions on infrastructure will affect public services, and ministers need to be transparent about how they are made.”

The Scottish government accepted that efficiencies around managing public sector property would be required.

Deputy First Minister Shona Robison said the Scottish government was “firmly committed to infrastructure investment” as a means of “delivering high-quality public services”.

She added: “The challenging economic conditions of the last few years resulting from Brexit and high inflation as well as the real-terms fall in the capital grant allocation from the UK government have led to delays for some infrastructure projects.

“Looking ahead we are having to prioritise projects and programmes so the capital spending available is targeted.

“We have also started work on delivering a more efficient approach to the management of public sector property that will save public funds and enable organisations to step towards a net zero estate.”

Murdo Fraser, business and economic growth spokesman for the Scottish Tories, said the report was a “damning indictment” of SNP finance mishandling.

Labour Economy spokesperson Daniel Johnson said: “Ministers must listen to the warnings in this damning report and come clean with the public about their plans.’

Willie Rennie, economy spokesman for the Scottish Liberal Democrats, said: “By failing to grow the economy, ministers have left less money for investment in critical infrastructure, which in turn only worsens economic performance.”

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