Meeting of the Parliament 20 November 2024
Jackie Baillie is forgetting that inflation was falling, interest rates were falling and economic growth was on an upward path, which the OBR now says is under threat as a result of the Labour Party’s budget.
The devil is always in the detail of any chancellor’s statement, and we should be alert to that. That is priced into politics. However, this budget is not priced in because few, if any, chancellors have sought to raise tax by such a staggering amount in a single budget—£40 billion—and no chancellor has sought to do it in such an underhand way.
For the record, Labour’s manifesto did not state explicitly that the commitment applied only to employee national insurance—I accept that. However, we know that it was deliberately opaque. Paul Johnson, the director of the Institute for Fiscal Studies, reinforced that point when he stated publicly that increasing employer national insurance contributions is a
“straightforward breach of a manifesto commitment.”
Even if we give the UK Labour Government the benefit of the doubt—even Scottish Labour members will struggle to do that today—it remains clear that a rise in employer contributions still amounts to a tax on working people and on public service delivery.
The OBR forecasts that about three quarters of employer national insurance contributions will be passed on to employees, including those effectively delivering Scotland’s public services. Scotland’s public sector will be hit unduly hard because it is larger and because the workers in it are paid more than in the rest of the UK.
Today, we will hear that this £25 billion tax on jobs will hit many organisations that directly and indirectly deliver our public services. It could cost councils alone £265 million. It will hit our general practitioner surgeries, universities, care homes, the palliative care sector and independent nurseries, and a huge range of third sector organisations and private contractors now face severe financial pressures.
In short, the decision will cost jobs and result in lower real-terms wages, thereby reducing the overall amount that the measure will raise after its indirect consequences are accounted for.
The OBR also says that passing on employer national insurance contributions increases will contribute to a “sharp” slowdown in real household disposable income growth in 2026-27 and 2027-28—the growth that the UK Government said that its budget would deliver for Scotland. In other words, the increases will undermine growth here in Scotland and across the UK.
Therefore, it is no surprise that alarm bells are ringing across the public sector and in the many organisations delivering services on behalf of the state. Those concerned about the negative impact of all that come from a variety of well-respected groups in Scotland, all of which are now issuing similar stark warnings.
The chairman of the British Medical Association’s Scottish general practitioners committee, Dr Iain Morrison, said:
“We would call on both governments to urgently provide reassurances on additional funding and ensure GPs will not be forced to shoulder the burden of these extra employment costs at the expense of the care they will be able to provide to patients.”
It is increasingly clear that the impact will not just be on GPs but on the third sector and charities. Marie Curie warns that Scotland’s hospice sector began this year with a predicted £15 million budget deficit, and that was before NHS pay awards were announced. The organisation says that, without urgent support, further service cuts and vulnerable patients being turned away will become unavoidable, and it calls on ministers, including Scottish ministers to act now. It added:
“With the additional funding from the UK Government, the Scottish Government now has the opportunity and financial means to demonstrate its commitment to supporting essential palliative care services.”