Scotland’s Finance Secretary says she may have to “potentially revisit” her tax plans amid reports the Chancellor will increase income tax in the Budget this month.
Shona Robison said the Scottish Government had a “very limited” set of levers to respond if Rachel Reeves makes the tax decision on November 26.
The Fraser of Allander Institute has estimated a 2p income tax hike in the UK Budget could cut Scotland’s funding by £1 billion because of the way the fiscal framework operates.
Ms Robison has requested an urgent meeting with the Chancellor, saying Ms Reeves should ditch her fiscal rules and instead deliver investment “to grow the economy and support people with the cost of living”.
Speaking to BBC Scotland’s Sunday Show, Ms Robison said the fiscal framework does not take account of changes to national insurance – another levy the Chancellor is reportedly considering changing.
The fiscal framework governs the public money coming to the Scottish Government, but Ms Robison said the system is now in “uncharted territory” as it did not envisage simultaneous changes to both income tax and national insurance.
Ms Robison was asked if she would raise Scottish income tax rates in response to any income tax increase in the Chancellor’s Budget.
She said: “I’m not going to set out here today what our plans for income tax are when we don’t know what we’re going to face on the 26th…
“If we end up in this scenario, then the levers available to us are very limited.
“Unless there is flexibility given to us through the fiscal framework – which would be my first ask, that we need to have that flexibility.
“Because we don’t want to raise taxes, we had already set out in the tax strategy that we want to see that stability till the end of the Parliament.
“But in the event of unforeseen exceptional circumstances, clearly we would have to potentially revisit that.”
Under the devolution settlement, the Scottish Government has powers to adjust income tax rates north of the border.
An HM Treasury spokesperson said earlier: “Our record funding settlement for Scotland will mean over 20% more funding per head than the rest of the UK.
“We have also confirmed £8.3 billion in funding for GB Energy-Nuclear and GB Energy in Aberdeen, up to £750 million for a new supercomputer at Edinburgh University, and are investing £452 million over four years for City and Growth Deals across Scotland.
“This investment is all possible because our fiscal rules are non-negotiable, they are the basis of the stability which underpins growth.”
