Scots pay £900m more in tax but only see ‘£170m in benefit’

EDINBURGH: Scots have paid £900 million more in tax in the past three years, but only £170 million in net benefit has made its way to the government’s budget, new analysis shows.

The Scottish government has been in control of “non-savings non-dividend” (NSND) income tax since 2017-18, which has seen a divergence from policy in the rest of the UK.

According to research from the Scottish Parliament Information Centre (Spice), Scots have paid an estimated £900 million more than they would have if policy remained the same as in the rest of the UK in the last three years.

Under the fiscal framework — an agreement between Westminster and the Scottish government put in place after the devolution of the tax powers — the block grant sent to Scotland every year would be adjusted based on tax receipts.

The framework would mean that, if the Scottish government kept its tax policy the same as the rest of the UK and tax receipts grew at the same rate, then deductions from the block grant would mirror the amount raised from taxpayers.

But, because the Scottish government decided to shift its tax policy to a more “progressive” one, a net of just £170 million has been added to the budget. A Spice research paper said: “Over the three-year period of income tax devolution for which actual tax receipts are known (2017-18 to 2019-20), the different income tax policy adopted by the Scottish government has generated an estimated £900 million in additional revenues than would have been available if the Scottish government had mirrored rUK income tax policy.

“That is, Scottish taxpayers have paid an estimated £900 million more in income tax than they would have if rUK income tax policy had been implemented in Scotland.

“However, the net effect on the Scottish budget over the same period is much smaller than £900 million.

“For the same period, the net benefit to the Scottish budget totals a much smaller £170 million.

“This represents the difference between the NSND income tax revenues generated and the adjustments to the Scottish block grant over the same period.”

The paper added: “The Scottish government budget has not seen the full impact of the differential tax policies due to differences in economic factors affecting the amount of tax that Scottish taxpayers have generated, such as differential wage growth, differences in the composition of the tax base and differences in the balance between taxpayers and non-taxpayers across the population.”