SNP Demand Cast Iron Guarantee for Scottish Services
The SNP has demanded Sir Keir Starmer give a “cast-iron guarantee” that the Labour Government’s national insurance tax hike won’t hit Scottish public services or slash the Scottish Government’s budget.
It comes as new research shows the move could cost NHS Scotland and the Scottish Government hundreds of millions of pounds.
The House of Commons Library analysis, commissioned by the SNP and published today, reveals that if the Labour government, as reported, breaks its manifesto commitment and increases employers’ National Insurance contributions (NICs) by one or two percentage points, this would cost NHS Scotland, Police Scotland, the Scottish Fire and Rescue Service, and the Scottish Government between Ā£70 million and Ā£142 million a year. Across a five-year parliament, it would mean the Labour tax hike would cost the Scottish Government and Scottish public services in the region of Ā£350-710 million.
The vast majority of this sum would hit NHS Scotland, which is Scotland’s biggest employer with around 160,000 staff including doctors, nurses, paramedics, midwives and porters. Outwith the NHS, Police Scotland with 23,000 officers and staff would face a bill in the region of Ā£8-16 million a year, while the Scottish Fire and Rescue Service, with 7,600 staff, would be hit with a bill of around Ā£1-3 million a year.
While an exact estimate for Scottish local government is not currently available due to the complexities involved in determining the cost, the SNP estimates Scotland’s 32 local authorities would face a similar bill of hundreds of millions of pounds across the course of the parliament, given they employ a combined 240,000 people including thousands of teachers, social workers and waste collection staff.
An exact estimate is not available of the cost to Scottish public services of levying national insurance on employers’ pension contributions at 13.8 percentage points, again due to the complexities involved. However, the SNP estimates it would run into many millions of pounds over the course of the parliament.
Last week, Universities UK warned that a one percentage point rise in employers’ NICs would add around Ā£130 million a year in costs for the higher education sector alone, while businesses have warned the increase could cost them billions of pounds every year.
Paul Johnson, the head of the Institute for Fiscal Studies (IFS), has warned an increase in employer NICs would count as a āstraightforward breachā of the Labour Party manifesto, telling Times Radio that he āwent back and read the manifesto and it says very clearly, we will not raise rates of national insurance“.
The IFS and Office for Budget Responsibility (OBR) have both warned that any increase in employers’ NICs will almost entirely be passed onto workers in the form of lower wages. Helen Miller of the IFS said āthey are a tax on the earnings of working people… In the long run, expect the majority of a rise in employer NICs to be passed on to workers in the form of lower wages“. Similarly, the OBR wrote in 2021 that the āeconomic incidence of the tax is passed through entirely to lower real wages in the medium termā.
The SNP has written to the Chancellor challenging the Labour Government to publish a full impact assessment of any National Insurance hike on small and medium-sized businesses, and the jobs and pay of millions of workers.
As Labour look to break yet another election promise by raising the regressive National Insurance tax, this analysis highlights the likely impact on Scottish public services, their workforce and the devolved Scottish budget.
GRAEME
We need a cast-iron guarantee from the Prime Minister that this will not be the outcome of any harmful U-turn.
The potential damage here is wide-ranging, encompassing all the services people across Scotland rely on the most – not to mention the risk to small and medium sized businesses.
This would need to be mitigated on top a significant real-terms increase to the block grant – Labour promised change, but we are faced with more short-changing of Scotland, lower pay, fewer jobs, less investment and a hit to the economy.
Background
House of Commons analysis, commissioned by the SNP:
House of Commons Library sources and approach:
Scottish Fire and Rescue Service figures are based on costs from Scottish Fire and Rescue Service, Annual Report and Accounts 2022-2023 ā page 71
“Figures are simple multiples of the amounts that these bodies report for āsocial security costsā in the staff costs sections of their annual reports for 2022/23 ā for example the cost of a 1 percentage point rise is calculated as the social security costs multiplied by 1 divided by the rate that year. Note that staff costs are likely to have increased since 2022/23.”
Figures for Scottish Government are based on costs from page 109, The Scottish Government Consolidated Accounts for the year ended 31 March 2023 ā these are consolidated accounts covering various bodies, including various executive agencies, as set out on page 11 of the accounts. Figures cover permanent staff only.
The NHS Bodies are included in the Scottish Government total above, and make up the vast majority of this figure.
Police Scotland figures are based on costs from Scottish Police Authority, Annual Report and Accounts 2022-23 ā page 111. Figures include officers as well as staff.
