THE “biggest direct beneficiaries” of Reform UK’s plans for huge tax cuts in Scotland would be the wealthiest people in the country, according to expert analysis.
In comments released on Tuesday, the Institute for Fiscal Studies (IFS) also warned that the amount of cash needed to fund Reform’s proposed Scottish income tax cuts – “around £4 billion in total” – would be all-but impossible to find without cutting back public services.
It comes after Malcolm Offord, who was appointed Reform UK’s Scottish leader by Nigel Farage earlier in January, laid out plans for sweeping tax cuts if his party win the Holyrood elections in May.
Offord said Reform would initially bring Scotland’s six income tax bands into line with Westminster’s three, a move which would cost the majority of taxpayers more money and the public purse £1.2 billion.
Next, Reform would cut all Scottish income tax rates by a total of three percentage points, which is projected to cost £850 million per point.
Analysing the proposals, David Phillips, the head of devolved finance at the IFS, said that the “biggest direct beneficiaries of such a change would be the high-income taxpayers that currently pay substantially more in income tax than in the rest of the UK”.
He went on: “For example, someone on £50,000 a year currently pays around £1500 a year more than in the rest of the UK, while someone on £125,000 pays around £5200 a year more.
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“If Reform UK’s ambitions for Scottish income tax were fully realised, they would instead pay around £1100 and £3700 a year less, respectively, than they would in the rest of the UK. Reform UK hope that there could be wider indirect benefits from making Scotland more attractive to high-income individuals.”
Phillips said that while such sweeping tax cuts may be “legitimate and indeed feasible”, they would require cuts to public services and social security benefits.
He explained: “Reform UK say they would fund the initial £2bn cost by reducing the £9bn that they estimate is currently spent on environmental protection, economic development and what they term ‘unaccountable Quangos’. But this does not properly confront the challenges they would face in finding £2bn or more of spending cuts in the coming parliament.
“The ‘Quangos’ (arms-length public bodies funding or delivering services on behalf of the government) include such bodies as the Scottish Funding Council which funds colleges and universities, and Healthcare Improvement Scotland which carries out inspections of health and social care facilities. Many of these have already been set targets to improve efficiency and productivity that outpace what has been achieved in the past as part of the Scottish Spending Review. Further cuts in spending would make it even more likely that services would need to be cut back.
“In addition, much of the spending on environmental protection and economic development takes the form of capital investment.
“The Scottish fiscal framework prevents funding provided by the UK Government for capital investment from being used to fund day-to-day spending or cuts to devolved taxes (which help fund day-to-day spending). If Reform UK envisage using cuts to investment [sic] in energy efficiency, insulation and offshore wind to help fund their tax cuts, they might find themselves unable to do so unless they can persuade the UK Government to change the fiscal framework.
“Scotland can have lower taxes if it chooses to – but that would require a reduction in the range and scope of public services and social security benefits provided to residents.”
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Any immediate cuts to taxes after the Holyrood elections would require an emergency budget to be called, with MSPs being asked to vote on an income tax resolution – a difficult prospect for a minority government.
Offord said on Monday that Reform UK had not had a “line by line” look at the Government books to see what would be cut.
“All we can be very clear about is that there’s been a huge amount of overlap, duplication and waste,” he said.
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