Meeting of the Parliament 20 November 2024
During the recent United Kingdom general election, we highlighted the real and pressing challenges in United Kingdom public finances. At the time, those challenges were largely dismissed by the Labour Party. Rachel Reeves said:
“I am under no illusion about the scale of the challenge we face”
and
“we don’t need higher taxes”.
Although I have a degree of sympathy for the Chancellor of the Exchequer with regard to the challenges that she inherited, Labour has not chosen to meet those challenges by looking to those with the broadest shoulders, as we called for. Instead, Labour has delivered a hike to employer national insurance contributions, without, it would appear, first considering the impact that that would have. Rather than a progressive approach, Labour has chosen a regressive tax on employment. That approach was in line with Labour not realising the consequence that was first seen in July in relation to the winter fuel payments, where, without any consultation with the Scottish Government, Labour decided to cut the funding for that vital benefit to Scottish pensioners.
Crucially, the Chancellor of the Exchequer has not committed to fully reimbursing the costs of the increase to those providing public services. Those costs will be challenging for the Scottish Government to bear. We expect the uplift next year to the Scottish Government’s overall resource funding position to be only around 1 per cent in real terms, before national insurance contribution consequentials. In short, if the UK Government does not fully reimburse those costs, there will be a significant detrimental impact on the delivery of public services.