Reform tax plans would likely require cuts to services, thinktank says

Reform’s income tax proposals would require “difficult choices” to be made on the provision of public services, an economic thinktank has said.

The party’s Scottish leader, Malcolm Offord, confirmed yesterday that it would seek to bring income tax bands back into line with the UK, followed by a 1p cut, if it were in government.

Over the length of the next parliament, the party would then aim to further reduce rates, he said.

The Institute for Fiscal Studies (IFS) has said the proposals do not “properly confront the challenges” of finding cash to fund this tax cut.

The initial realignment of rates with the rest of the UK and the penny cut would cost an estimated £2bn. The aim to cut rates further would require an additional £1.7bn, the IFS says.

Offord said this would be found through cuts to “environmental protection, economic development and 132 unaccountable quangos”.

David Phillips, head of devolved finances at the IFS, said: “It is a legitimate and indeed feasible goal to cut income tax rates to below prevailing rates in the rest of the UK. But doing so requires a credible plan for cutting spending, and a recognition that this would involve difficult choices over service provision.”

He highlighted that many of the likely targets for spending cuts have “have already been set targets to improve efficiency and productivity that outpace” savings made in recent years. “Further cuts in spending would make it even more likely that services would need to be cut back,” he added.

The thinktank also states that cuts to environmental protection and economic development programmes would require a change to the current fiscal framework, as much of this cash is capital funding which cannot be used for day-to-day spending.

The main beneficiaries of income tax cuts would be higher earners, the thinktank says. If fully implemented, someone earning £50,000 a year would pay £1,100 less tax than counterparts in the rest of the UK by the end of the next Scottish Parliament, while those earning £125,000 would pay £3,700 a year less.

Under the current system implemented by the SNP, higher earners pay more tax than they would elsewhere in the UK. Those who earn £50,000 a year currently pay £1,500 more, while those on £125,000 pay £5,200 a year more.

Offord admitted that Reform has not had a “line-by-line” look through the Scottish Government's books to see what would be cut to fund his proposed tax cuts.  

He said: “All we can be very clear about is that there’s been a huge amount of overlap, duplication, and waste.”