Chancellor warns SNP tax policy may put workers off move to Scotland
The Scottish Government's tax policies could put people off moving to Scotland, the Chancellor has said.
The Scottish Government's tax policies could put people off moving to Scotland, the Chancellor has said.
Philip Hammond said higher rates of income tax north of the border could be a factor for those who might wish to move to Scotland to work.
Levying additional taxes is one option open to the SNP administration if it is unhappy with its funding from the UK Government, he said.
Holyrood officially gained control over income tax powers worth £12 billion on Wednesday.
SNP policy is to keep income tax rates the same as the Conservatives at Westminster, but not to pass on the increase in the threshold at which people start paying the 40p rate.
While the Conservative Government has said the 40p threshold will rise to £50,000 by 2020, the SNP says the rate will rise by inflation only in Scotland.
A report from Westminster's Scottish Affairs Committee published this week shows Scotland needs to attract migrant workers to help address slow population growth.
Speaking during a visit to Edinburgh, Mr Hammond said: “The implication of indexing the higher rate threshold in line with inflation is that earnings tend to rise faster than inflation... more and more people in Scotland will be getting dragged into the higher rate of tax.
“I think Scotland is a very open economy. The Scottish Government will need to think very carefully about the message that sends.
“The Scottish Government depends on importing people from the rest of the UK and beyond who find opportunities in Scotland and contribute to Scotland's economic growth.
“If they find they are paying significantly higher taxes in Scotland, I think that will be a factor in their decisions about whether they want to come and make their careers in Scotland.”
Mr Hammond was making his first visit north of the border since becoming Chancellor, and following his Autumn Statement last week which included an additional £800 million of funding for the Scottish Government.
But analysis from think-tank IPPR Scotland found the country faces “unprecedented” cuts to public spending over the next three years unless tax receipts rise.
The Chancellor said there had been “downward pressure” on the UK's resource budget because of moves to reduce the deficit inherited in 2010.
He added: “The Scottish Government has the flexibility, should it choose to do so, to levy additional taxes. If it wants to spend more money, it now has the power to do that.”