Scottish Labour leader Anas Sarwar has announced that a “conversation” will take place between the UK and Scottish governments regarding the increased National Insurance contributions.
Scottish ministers have warned that the recent tax hike, revealed in the UK budget, could lead to an additional £500 million burden on public sector employers in Scotland. Public Finance Minister Ivan McKee highlighted the uncertainty surrounding potential compensation, noting it as a “big unknown” ahead of the Scottish government’s budget due in December.
Sarwar informed BBC Scotland’s The Sunday Show that Labour is already committed to discussing this issue, with talks involving the chief secretary to the Treasury. The UK government’s recent budget raised the National Insurance rate for employers from 13.8% to 15%, while lowering the salary threshold from £9,100 to £5,000.
This change may heavily impact Scotland, which has a notably larger public sector workforce compared to the rest of the UK. Sarwar mentioned that this budget would provide an extra £1.5 billion for Scotland this financial year and £3.4 billion more next year.
“Something we committed to on the day of the budget… because we recognize there will be an impact on our national health service,” Sarwar stated regarding National Insurance compensation discussions.
Sarwar also expressed concerns over policies such as the two-child benefit cap, which limits benefits for larger families. While he acknowledged disappointment over no changes in this area, he emphasized that it would take more than one budget to rectify long-standing issues left by previous governments.
McKee pointed out that while new funds are available, they do not completely alleviate financial pressures. He noted that most of the additional £1.5 billion would be allocated for previously agreed public sector pay rises, leaving limited resources for infrastructure projects.
Regarding mixed messages from the UK government about National Insurance compensation, McKee remarked:
“That’s a big, big unknown.”
When asked about potential tax increases in Scotland, he said it is a “very strong consideration”.
The Scottish Conservatives criticized the chancellor’s budget as a “socialist tax hiking budget,” claiming it aligns with SNP policies and will adversely affect hardworking Scots. Finance spokesman Craig Hoy stated:
“Labour repeatedly said they would protect working people… but their decision to hike employers’ National Insurance contributions will threaten workers' jobs and their pay packets.”
As discussions continue, pressure mounts on leaders like Sir Keir Starmer to transfer powers necessary for addressing labour shortages in Scotland.
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