Tax or cut – Scots could face tax hikes or service cuts to tackle a £3.5billion deficit

Scots have been warned to brace themselves for possible announcements of tax hikes or big plans being scrapped by financial experts ahead of the publication of the Scottish Government’s resource spending review.

This review will outline the day-to-day spending of the SNP/Greens coalition over the next four years and is expected to be released on Tuesday.

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Critics said the warning demonstrates the SNP’s inability to manage the economy competently and blamed Nicola Sturgeon’s leadership.

Ministers have previously warned of a projected £3.5billion hole in their budget by 2026-27 caused by low tax revenues, costly political commitments and soaring inflation.

The IFS has warned that such a hole – worth around £640 per person in Scotland – would see the Finance Secretary face ‘tough decisions’ on whether to cut key services or increase Taxes.

Due to income tax being partially transferred to Holyrood, low-income people in Scotland paid less tax than in England, with high-income people paying more than if they lived in England.

The Resource Spending Review will set out the Scottish Government’s plans for the next four years of public service spending, but the figures will carry a significant degree of uncertainty.

Finance Secretary Kate Forbes has been told she will face a multi-billion pound shortfall in the coming years.

This is because the Scottish Government’s budget depends on the UK Government’s spending plans and any cuts in tax or spending plans by Downing Street would have a negative impact on the Scottish Treasury.

It also leaves bigger spending plans such as the doubling of Scottish Child Payment and other costly commitments dependent on increased UK government spending to close the £3.5billion gap in Scottish finances. .

David Phillips, associate director at the IFS, said current forecasts showed these costly spending commitments, coupled with runaway inflation, would result in a “billion-billion budget deficit”.

He said: ‘Because it cannot borrow to fund day-to-day spending except in certain limited circumstances, next week’s Scottish spending review could see the announcement of quite significant tax increases or cuts spending on lower priority services, and even dropping some political commitments, to balance the budget.

The financial expert added that the SNP’s 2021 manifesto “bet” was for increased funding from the UK government which then materialized, but he warned that repeating the bet may not succeed.

He added: ‘While further complementary funding could be on the way, it seems unlikely that the UK Government will complement its plans with anything like enough to allow the Scottish Government to pay for all of its policy priorities without making hard choices. in matters of taxation. and/or other areas of expenditure.

Opposition parties pointed to the report as an example of what they call the SNP’s incompetence with the economy.

Liz Smith, the Scottish Conservatives’ finance spokeswoman, said it was a “damning accusation” of the SNP’s “economic mismanagement” and “deeply concerning”.

She said: ‘There is already a huge black hole in the Scottish Government’s budget and now economists tell us it has just gotten much bigger thanks to the lavishness of Nicola Sturgeon. The financial shortfall is the product of the incompetence of an SNP government that wasted taxpayers’ money on a whole host of failed public sector projects, of which the ferry fiasco tops the list.

“The writing has been on the wall for many months now. The Scottish economy is not performing as well as it should, mainly because the SNP has failed to address long-term productivity issues and Labor market imbalances have adverse effects on both tax revenue and investment, and the blame lies firmly with Nicol Sturgeon.

Daniel Johnson, Labour’s finance spokesman, said the warning “lays bare the price of the SNP’s economic failure”.

He said: “15 years ago Scottish wages were growing faster than the UK average – now they are falling behind.

“Clearly the spending review, due next week, will spell out the high cost that all Scots will have to pay for nationalists who prioritize the constitution over the economy.

“It will be counted in lost jobs, cuts to public services and few will be able to forgive them in the SNP.”

Scottish Liberal Democrat finance spokesman John Ferry said Nicola Sturgeon was ‘only too happy’ to ‘cash the cheques’ for her union membership, and said Scots had to ‘pay more and receive less” under the SNP.

He said: “Unfortunately the SNP’s handling of the Scottish economy has left a gaping hole in the heart of our public finances. The fact is that Scots face paying more and getting less under the SNP.

‘Nearly every economic intervention the SNP has attempted has blown up in their face and Scottish ministers are becoming synonymous with managerial incompetence.’

The Scottish Government has been contacted for comment.

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