Scottish Finance Secretary Robison Deems £300m UK Funding Increase Insufficient for Tax Hike Costs

Scottish Finance Secretary Shona Robison has stated that an additional £300 million in UK government funding is “simply not good enough” and will be inadequate to cover the projected increase in employer National Insurance contributions. Reports indicate that Treasury officials in London informed their Edinburgh counterparts that an extra sum ranging from £295 million to £330 million would be provided to offset increased public sector staff expenses. A source within the UK government informed BBC Scotland News that “hundreds of millions of pounds” are being allocated to Holyrood. Conversely, Robison asserted that over £500 million would be required to address the staff costs for individuals directly employed within the public sector, a figure that escalates to £750 million when accounting for indirect employees in areas like childcare, colleges, or social care. She conveyed to BBC Scotland News: “This cannot stand. “The UK government Treasury will need to think again on this to make sure that Scotland’s public services are fully funded for the employers’ National Insurance contribution and we’ll be pursuing the Treasury very rigorously about this point.” It is understood that the UK government calculated the £300 million sum using the Barnett Formula, a mechanism intended to allocate a proportionate share of English spending to devolved nations. Nevertheless, Robison characterized this total as “unacceptable” and “very low” when measured against the Scottish government’s own calculations using the identical formula. She stated: “We can’t have a situation where the UK Labour government gives resources with the one hand through [Barnett] consequentials but takes away with the other through not fully funding the employers’ National Insurance contributions.” The Scottish National Party (SNP) had previously expressed concerns about potential underfunding due to Scotland’s proportionally larger public sector compared to the UK overall. The finance secretary argued that Scotland’s higher proportional employment of teachers, nurses, and police officers should be seen as an advantage and not a reason for “punishment.” Robison has requested clear information from the UK government regarding the compensation amount Scotland will obtain prior to the Scottish Budget, scheduled for announcement next Wednesday. Last month, Chancellor Rachel Reeves unveiled the National Insurance alteration in the UK Budget, aiming to enhance public service funding. Reeves indicated that Scotland would be allocated an extra £3.4 billion in funding for 2025-26 as part of her tax and spending proposals, although this figure did not encompass National Insurance compensation. According to the UK government source, the additional £300 million would leave the Scottish government with “no more excuses.” The source further commented: “Scots expect delivery from the SNP and to use this money to reduce NHS waiting times and raise attainment in our schools – not fill in a budget black hole created by years of financial mismanagement and waste.” Furthermore, the Scottish government is slated to receive an additional £1.5 billion for the current financial year, 2024-25, a sum it stated was consistent with its budgetary forecasts. National Insurance contributions represent the United Kingdom’s second-largest source of revenue, trailing only income tax. These contributions are paid by employees and self-employed individuals on their earnings and profits, and by employers in addition to the wages they disburse. The chancellor raised the employer National Insurance contribution rate from 13.8% to 15% and reduced the threshold at which employers must begin paying these contributions from £9,100 to £5,000. These changes are applicable to public sector employees working for the Scottish government. Approximately 600,000 individuals are employed within Scotland’s public sector, constituting 22% of the entire workforce, in contrast to roughly 17% across the UK. Additionally, Scotland’s public sector employees receive comparatively better remuneration than the broader UK workforce. This situation has generated apprehension at Holyrood that Scotland could face a deficit if the compensation for the National Insurance increase does not align proportionally with its public sector. A spokesperson for the Scottish government emphasized that the Scottish Parliament had voted last week to affirm that the UK government should cover the cost of the change, amounting to “over £500m.” The spokesperson stated: “This UK government policy risks hampering economic growth and damaging public services and whilst discussions with the Treasury are ongoing, we still do not have certainty ahead of the Scottish budget.” The Fraser of Allander Institute, an economics research unit affiliated with the University of Strathclyde, has similarly projected that the Scottish government will face a deficit of approximately £500 million due to the tax adjustments. Mairi Spowage, the Director, commented: “You could say, well, the larger public sector in Scotland, the fact that it’s better paid, that’s sort of down to the decisions of Scottish government.” However, she cautioned that it would be “tough” for SNP ministers to address a £200 million shortfall. Spowage further remarked: “It will definitely be challenging to absorb that in other parts of the budget.” Anas Sarwar, leader of Scottish Labour, pointed out that the Scottish government is receiving an additional £1.5 billion in the current year’s budget and £3.4 billion in 2025-26. He informed BBC Scotland News: “Only an SNP government could pretend that £5bn more money means £200m less money. “I think people would frankly laugh in the face of a government that tries to make such a ridiculous claim.” Russell Findlay, leader of the Scottish Conservatives, characterized the National Insurance increase as “catastrophic” and “counter-productive.” He asserted that it was “entirely proper” for the UK government to offer compensation. He stated: “It’s now incumbent on the SNP government to ensure that that’s passed on,” adding: “But that will protect the public sector who have been hammered by the NI rise, but what it won’t do is protect the private sector.” Copyright 2024 BBC. 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