In four years’ time, it is estimated that the Scottish Government will be receiving £1.5 billion less in revenues as a result of taking partial control of income tax, rather than sticking with the original Barnett formula.
In practice, that doesn’t mean there will be less funding available, rather it means that taxes – mainly on households – will be much higher in Scotland than elsewhere in the UK, but with next to nothing to show for it.
According to Scottish Government ‘ready reckoner’ estimates, £1.5 billion is roughly equivalent to 9p on the basic rate of income tax, or almost 4p on all rates of income tax – from starter rate to top rate.
So rather than the revenue raised from higher taxes being used to increase spending, which might have come in rather useful, instead it’s had to be used to help to make up the shortfall in funding due to slower economic growth in Scotland.
This has, effectively, been the end result of the partial devolution of tax powers since 2017-18. Why so? For three reasons:
