SNP under pressure to follow tax cuts as UK economy 'back on track'

His deputy Laura Trott has already indicated that individuals will also benefit from tax cuts in a hint that either income tax or national insurance could be reduced.

National Insurance contributions are set at a UK-wide level, but the Scottish Government sets income tax bands, but can only make changes in its annual budget, due to be delivered next month.

Scotland’s Deputy First Minister Shona Robison yesterday warned the Chancellor against tax cuts, calling on the UK Government to use any space in fiscal headroom to invest in services and help struggling families rather than pre-election giveaways.

The Chancellor’s Commons statement this afternoon is expected to focus on backing businesses, with 110 different growth measures promised.

Read more: Shona Robison takes 'exceptionally difficult decisions' to save £680m

He will attempt to turn a corner after the pandemic and the energy price spike following Russia’s invasion of Ukraine led to the highest tax burden since the Second World War and huge state interventions to support the stricken economy and hard-pressed households.

Mr Hunt will tell MPs: “The Conservatives will reject big government, high spending and high tax because we know that leads to less growth, not more.”

With the Bank of England forecasting a stagnant economy in 2024, Mr Hunt will insist his plan can deliver growth and reduce the national debt.

He will say: “After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track.

“We have supported families with rising bills, cut borrowing and halved inflation.

“The economy has grown. Real incomes have risen.

Chancellor Jeremy Hunt (Image: PA)

“Our plan for the British economy is working.

“But the work is not done. Conservatives know that a dynamic economy depends less on the decisions and diktats of ministers than on the energy and enterprise of the British people.”

He will promise to cut business taxes, remove planning red tape and speed up access to the national grid.

Read more: Humza Yousaf could row back on 'progressive' tax plans

There will be support for entrepreneurs to raise capital, measures to “get behind our fastest growing industries”, policies to unlock foreign direct investment and measures to boost productivity, an issue which has dogged the UK economy for years.

Speculation has mounted since Humza Yousaf became First Minister that he would seek to hike income tax in Scotland to generate millions of pounds of extra investment for public services.

Despite pledging to do so during the SNP leadership campaign, Mr Yousaf has played down increased tax – and has vowed to freeze council tax in the next financial year.

Yesterday, Deputy First Minister Shona Robison warned Holyrood that the Scottish Government has been forced to take “exceptionally difficult decisions" to find £680m in savings in the current financial year.

The Deputy First Minister and finance secretary blamed inflation, higher-than-expected public sector pay deals and inadequate funding from Westminster for the situation.

She said she faced more “challenges” setting the budget for 2024/25 next month, including a projected £1 billion shortfall in resource spending and a real-term cut in capital spending.

Deputy First Minister Shona Robison (Image: PA)

Addressing MSPs, she urged Chancellor Jeremy Hunt to use his autumn statement at Westminster tomorrow to “step up” and use his powers “for the benefit of Scotland”.

She said: “Bluntly, when Westminster consistently under-invests in public services it means we have less funding to spend on our public services in Scotland.”

She said he should use any fiscal headroom, or leeway in the public finances, to invest in services and help struggling families rather than make pre-election tax cuts.

She said she had asked Mr Hunt to avert a projected 6.7% real terms fall in Holyrood’s capital budget for large building projects between 2023 and 2028.

“I have called on the Chancellor to increase working-age benefits by inflation to ensure that they retain their real-terms value for struggling families across the UK,” she said.

Read more: Humza Yousaf accused of picking workers' pockets as tax rises loom

“And I have again called upon the UK Government to remove the heinous rape clause - the two-child cap - and the benefit cap, which disproportionally affect women and children.”

She ended: “I have been frank with members about the challenges we face and difficult decisions we have had to take to balance our budget and make best use of public money.

“We are doing all that we can with the limited powers that we have, but we need the UK Government to step up and use its powers for the benefit of Scotland.

“The priority for any fiscal headroom should be investment in public services.

“Tomorrow the Chancellor has the opportunity to make a real difference for people across Scotland and I urge him to take it.”

Labour shadow chancellor Rachel Reeves said: “After 13 years of economic failure under the Conservatives, working people are worse off.

“Prices are still rising in the shops, energy bills are up and mortgage payments are higher after the Conservatives crashed the economy.

“The 25 Tory tax rises since 2019 are the clearest sign of economic failure, with households paying £4,000 more in tax each year than they did in 2010.

“The Conservatives have become the party of high tax because they are the party of low growth. Nothing the Chancellor says or does in his autumn statement can change their appalling record.”