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Budget 2017: Income tax increases will reduce cute for this year but deep cuts due to restart in 2019

IPPR Scotland analysis has revealed that despite welcome income tax rises proposed in the Scottish Government’s draft budget, the rises will only provide relief from public spending cuts in Scotland for one year.

The analysis has found that:

Scotland’s day-to-day spending budget is due to fall by £250m the year after next (between 18/19 and 19/20) – (RDEL in 2017/18 prices).
With commitments to increase NHS spending and protect Police budgets, non-protected departments will see falls of £350m the year after next (a 2.7% cut in one year).

The Scottish Government has proposed income tax rises in its draft Budget for 2018/19 that will prevent spending cuts for most departments. IPPR Scotland analysis shows that this will only be sufficient to end the cuts for one year. Either further tax increases or stronger than forecast tax receipts will be needed to protect public services in Scotland beyond this coming year.

Russell Gunson, Director of IPPR Scotland, said:

“The Scottish Government’s draft budget has proposed income tax increases in Scotland from April next year. However, as welcome as the tax rises are, our analysis shows that they will only be sufficient to soften cuts for one year.

“Serious cuts to public spending remain just around the corner. Without further tax increases the year after next, or a stronger economy, deep public spending cuts in Scotland will restart in 2019.

“By outlining a one-year budget, with one year’s worth of tax plans, we are not yet clear as to what the Scottish Government’s tax and spending plans are beyond this year. However, with cuts that could reach £350m for non-protected departments, over just one year, there will be further tough decisions that will need to be taken this time next year.

“Without stronger tax receipts, additional spending at the UK level, or further tax rises these income tax changes will only be enough to soften the cuts for one year.”

ENDS

Contacts

Rosie Corrigan, 07585772633, r.corrigan@ippr.org

Russell Gunson, 07766 904 332, r.gunson@ippr.org

Notes

IPPR Scotland is IPPR’s dedicated think-tank for Scotland. We are cross-party, progressive, and neutral on the question of Scotland’s independence. IPPR Scotland is dedicated to supporting and improving public policy in Scotland, working tirelessly to achieve a progressive Scotland. For more information, visit: https://www.ippr.org/scotland

Non-protected departments in Scotland are those outside of Health spending and Police spending. We also included a cash-terms protected for colleges.

Resource DEL spending is distinct from Capital DEL or AME funding, or financial transactions. Only RDEL can be used to fund the day-to-day costs of public services like schools, hospitals and public sector pay.