The cost of supporting the Scottish government’s soaring welfare bill will force more than a million Scots into higher rate tax brackets by the end of the decade, according to new analysis.
Economic forecaster, the Scottish Fiscal Commission (SFC), said an ageing population and rising public sector pay deals were putting pressure on available resources.
It joined other bodies such as the Institute for Fiscal Studies, Future Economy Scotland and the Fraser of Allander Institute in warning that taxes will have to rise or spending severely curtailed by the next government.
Political parties are currently making promises to tackle everything from child poverty to the housing crisis, while keeping taxes low.
But a growing numbers of welfare claimants means the devolved social security bill is on course to hit £9.2 billion by 2030-31, from £7.4 billion in 2026-27 and the gap in the block grant from Westminster will rise.
More Scots are being drawn into paying the higher 42% rate of tax, with no indication that the SNP – the most likely party to win powert – will raise thresholds before the end of the decade.
Professor Graeme Roy, the chairman of the SFC, said: “People in Scotland are moving into the higher tax band more quickly,” adding that the number in the higher rate represents “a significant change”
He also noted that income tax returns were positive, but because of Scotland’s weaker economic growth, Scotland had lost out on even higher returns.
The Scottish budget for the new financial year was passed today, with the Institute of Chartered Accountants of Scotland saying the measures planned “fell short” in tackling the country’s economic challenges.
Chris Barber, CFO at ICAS, said: “The Scottish Budget passed at Holyrood today falls short of delivering the meaningful, long-term changes that Scotland’s households and businesses need.
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