THE Scottish Government is set to lose £204 million from its budget after the amount of income tax taken in was almost a billion pounds less than forecast.

Figures released by the Treasury show there was a £941m gap between what was expected and what was received. The number of income taxpayers in Scotland fell 0.6% to 2,513,000 between 2016/17 and 2017/18 while in the rest of the UK the total rose by 0.5%.

The amount of tax collected in Scotland rose 1.8% to £10,916m during the same period, while in the rest of the UK it was up 3% to £154,199m. While the number of basic-rate taxpayers in Scotland fell 1.3% compared, the there was a 0.9% in the rest of the UK.

However, the number of higher rate taxpayers – those earning more than £43,000 in 2017/18 – was up 4.8% in Scotland but fell 2% in the rest of the UK, while for the additional rate there were 3.9% and 6.5% rises respectively.

Public spending statistics also released indicate spending in Scotland rose to by £275 per person between 2016/17 and 2017/18 to £10,881, compared to a UK average of £9350 per head in 2017/18.

Scottish Finance Secretary Derek Mackay said his reserve and borrowing powers were “sufficient to manage” the £204m gap, but said restrictions imposed by HMRC meant these weren’t fit for purpose.

He said the increase in higher and additional rate taxpayers in Scotland showed fears of these people heading over the Border after higher tax rates were introduced were “unfounded”. Mackay said: “Whilst these figures show our reserves and borrowing capacity are sufficient to manage the 2017/18 reconciliation, I will make a decision as part of the budget and spending review process on how to manage any reconciliation in a fiscally responsible way that supports our vital public services.

“However, the volatility the current system places on Scotland’s spending means the fiscal framework review must consider the current limits on the use of the reserve and borrowing powers which are clearly not fit for purpose.”

The Scottish Government increased higher rates of income tax and brought in two additional bands in 2017. Through the reconciliation process – part of the fiscal framework agreed between ministers in London and Edinburgh – this will be partly offset by a £737m increase to the Scottish block grant.

Scottish Secretary David Mundell said: “I urge the Scottish Government to use the extensive powers at their disposal – over tax, economic development, transport, planning, education, employability and more – to really kick-start the economy.

“Their approach isn’t working, and making Scotland the most highly taxed part of the UK and threatening a second independence referendum will only make things worse.”

Scottish Liberal Democrat leader Willie Rennie said the economy had “bounced along the bottom” under the SNP. He added: “What we need is investment in education and mental health to allow everyone to play their part and achieve their potential.”