Hansard

It is refreshing to follow a Scottish National Party minister who is railing against a tax rise. It is just a pity that SNP members do not rail against their own tax rises.

Let me put on the record what Rachel Reeves said on 28 May last year. She said:

“For the duration of the next parliament there will be no increases in income tax and national insurance”.

However, in her very first budget she did precisely the opposite. She rode a coach and horses through Labour’s manifesto—and, with that, through Scottish Labour’s credibility—with a tax on jobs that will fall on the shoulders of millions of workers.

Now we know that Rachel Reeves does not play fast and loose just with her CV; she plays fast and loose with the electorate, and she plays fast and loose with business. In fact, the only thing that she is economical with is the truth.

It will be firms, workers and growth in the wider UK economy that will pay the price for Labour’s broken-promise budget. Judging by their faces, Scottish Labour members know only too well what impact the decision is having on their electoral prospects. Last summer, Anas Sarwar was all set for Labour’s honeymoon—he was measuring for curtains in Bute house and thought that Labour would coast to victory. He believed that Sir Keir Starmer and Rachel Reeves could walk on water, only to discover that they cannot even swim.

Through its budget, Labour has undermined growth and has put public services at risk by imposing the highest-ever tax increase in a single fiscal event. Far from it being a tax only on employers, the price will be paid by the working people whom Keir Starmer and Rachel Reeves promised to protect. Workers will receive lower wages, fewer people will be employed, more people will be laid off and many more will be offered reduced hours.

That is why business has quite rightly slammed Labour’s decision. People in the hospitality and retail sectors are at risk, and they warn that stores and pubs will close and that prices will rise. In a letter to the Cabinet Secretary for Finance and Local Government, nine retail bodies issued a plea for rates relief to offset the costs of Labour’s tax decisions. They warned that the sheer scale of the tax hike and the short timeframe for implementation would impose a £190 million additional cost burden on Scottish retailers each year. In a survey of chief financial officers in the retail sector, two thirds said that they would raise prices, half said that they would reduce workers’ hours and one third said that they would look at automating more functions.

Sean Cockburn, who is the chair of the Chartered Institute of Taxation’s Scottish technical committee, warned of what he described as a

“sting in the tail for Scottish based businesses”,

some of which have been offering job seekers higher salaries to cover the cost of higher Scottish income tax rates.

As the finance secretary and the business minister have been right to point out, the pain will be felt not only by the private sector. General practitioner services, care homes and educational institutions are all at risk as a result of Labour’s tax on jobs. Scottish councils are being forced to push up council tax further in order to make up for the shortfall. Colleges Scotland has issued a stark warning, noting that funding for colleges has dropped by 17 per cent in real terms since 2021-22 and that “resources are already diminished”. It also said that

“The increase in National Insurance Contributions comes at a time when the skills of college graduates are very much needed to boost economic growth and productivity in vital sectors”,

so the increase in national insurance will also undermine growth and skills.

However, the greatest risk that the increase poses is to the charitable and third sectors. As the minister said, the Scottish Council for Voluntary Organisations estimates that the tax hike could cost the sector about £75 million, amounting to its being

“the straw that breaks the camel’s back”,

as hospices and lifeline services are put at risk.

The Scottish Federation of Housing Associations warns that national insurance increases will result in £15 million in additional costs for registered social landlords in Scotland. The charity Turning Point Scotland, which delivers vital specialist public services, is also sounding alarm bells. Its chief executive, Neil Richardson, notes:

“It is ... confusing and fundamentally unfair that the NHS and general public service is exempt from the Employer National Insurance rise yet we are expected to absorb that cost.”

As our amendment makes clear, the UK Government decision is compounded by a number of bad budget decisions that have been made by the Scottish National Party. As the Institute for Fiscal Studies has warned today, the Scottish public sector is proportionally larger than that of the rest of the UK, and the cost to the taxpayer is heavier. However, the IFS warns that that is not—as the minister has intimated—assisting staff retention in the Scottish public sector, the wages for which now account for 53 per cent of the Government’s entire revenue budget.

The state employs 22 per cent of all Scottish workers, and we should not lose sight of the fact that, on average, they earn more now than people who work in the private sector earn. The Government has made a virtue of that without calculating how it is to be paid for. Perhaps the minister will tell us how he intends to pay for it.