Reform’s self-financing tax cuts ‘a mirage’, says Institute for Fiscal Studies

Reform UK’s plan to introduce tax cuts that pay for themselves with increased economic growth is “not credible”, according to a leading think tank.

The Institute for Fiscal Studies (IFS) said self-funding tax cuts were a “mirage” created by a “misunderstanding or misrepresentation” of the devolution settlement.

Launching his party’s Holyrood manifesto on Thursday, Reform’s Scotland leader Malcolm Offord said he would cut income tax for Scots to a penny below the rest of the UK while reducing the number of bands from six to three.

But David Phillips, head of devolved and local government finance at the IFS, said: “Reform UK claims that the income tax cuts would, in fact, pay for themselves via higher economic growth. This is not credible.”

He said Reform’s manifesto claim that increased economic growth over the next decade would repay the cost of the tax cuts “four times over” was wrong because the £2bn cost would be an annual – not a one-off – cost.   

He added: “Even if the figure were correct, £8bn over 10 years does not exceed £2 billion per year, let alone repay it four times over.

“The ‘self-funding’ tax cuts are therefore a mirage created by a misunderstanding or misrepresentation of the current devolution settlement and incorrectly comparing cumulative and annual figures. This is not good enough.”

The IFS said Reform’s analysis of the potential revenue effects of the tax cuts was “unserious at best”.

Addressing his party’s conference yesterday, Offord said: “If you work in Scotland, you’ll pay 1p less on each [income tax] band than you do in England.

“The cost of this is £2bn. All the commentators say, where are you going to get £2bn from – that’s impossible. The reality is that £2bn is three per cent of the Holyrood budget, so we can find that without any need to cut frontline services to achieve these savings.”

Responding to what he called the IFS’s “damning verdict”, Scottish Liberal Democrat economy spokesperson Jamie Greene MSP said: “Coming after a clown show of a launch event and the deselection of a candidate 24 hours after they were announced, this is further confirmation that Reform UK are not a party to be taken seriously.

“Malcolm Offord and Nigel Farage's offer to Scottish voters is incoherent to the point of insult, and will do nothing to fix public services in dire need of repair after two decades of mismanagement.”