Scottish budget tax plans 'only sufficient to soften cuts for one year'
18 December 2017, 07:22
Income tax increases proposed in the draft Scottish Budget will only provide relief from public spending cuts for one year, according to a cross-party think tank.
Analysis by the Institute for Public Policy Research (IPPR) Scotland found the day-to-day spending budget is expected to fall by £250 million between 2018/19 and 2019/20.
However with commitments to increase NHS spending and protect police budgets, non-protected departments will see falls of £350m in 2019, which the IPPR Scotland says is a 2.7% cut in one year.
The Scottish Government has proposed income tax rises in its draft Budget for 2018/19 that will prevent spending cuts for most departments.
But the think tank's calculations show this will only be sufficient to end the cuts for one year.
Further tax increases or stronger than forecast tax receipts will be needed to protect public services in Scotland beyond 2018.
Russell Gunson, director of IPPR Scotland, said: "The Scottish Government's draft budget has proposed income tax increases in Scotland from April next year.
"However, as welcome as the tax rises are, our analysis shows that they will only be sufficient to soften cuts for one year.
"Serious cuts to public spending remain just around the corner. Without further tax increases the year after next, or a stronger economy, deep public spending cuts in Scotland will restart in 2019."
IPPR Scotland says the one-year budget could see the Scottish Government facing tough decisions in a year's time.
Mr Gunson added: "By outlining a one-year budget, with one year's worth of tax plans, we are not yet clear as to what the Scottish Government's tax and spending plans are beyond this year.
"However, with cuts that could reach £350m for non-protected departments, over just one year, there will be further tough decisions that will need to be taken this time next year.
"Without stronger tax receipts, additional spending at the UK level, or further tax rises these income tax changes will only be enough to soften the cuts for one year."
Finance Secretary Derek Mackay said: "Scotland is facing continued austerity from the UK Government.
"Over a 10-year period, Scotland's block grant will have been cut by £2.6 billion in real terms, and the independent Fraser of Allander Institute has confirmed that we face a £500 million real terms reduction in spending on day-to-day services over the next two years.
"In order to mitigate those UK cuts, protect our NHS and other public services, and to support our economy, we have reformed income tax in Scotland - our only significant fiscal lever - to provide for a growth in revenues.
"Our reforms will ensure that the vast majority of taxpayers are protected, that income tax becomes fairer and that there will be a positive impact on the economy.
"We will continue to do all we can to protect Scotland from UK austerity and also continue to press for our continued place in the European single market, given the huge threat Brexit poses to jobs, investment and living standards."