THE SCOTTISH Government would receive up to £50m more than what Scots would pay out if Boris Johnson raised national insurance, a leading economist has predicted.
The Prime Minister has come under fire from within his own party, but also from the SNP, over his plans to raise National Insurance contributions (NICs) by two per cent, in an attempt to reform England’s social care system.
Conservative critics say the plans would unfairly penalise lower earners and families, while pensioners, who do not pay NICs, would reap the benefits.
The SNP has said the measures would unfairly penalise Scotland and force Scots to pay for England’s problems.
However David Philips, senior economist at the Institute for Fiscal Studies (IFS) said if the plans go ahead, SNP ministers in Holyrood would likely receive more back in Barnett consequentials than what Scots would be paying out for the rise in national insurance.
According to reports, the policy is estimated to generate around £10bn in total, with around £8.5bn being generated from England’s additional national insurance contributions.
Mr Phillips explained: “What matters for how much Scotland gets is not what is raised across the UK as a whole, but how much is spent in England.
“Colleagues estimate that of the £10 billion that would be raised across the UK as a whole, around £8.5 billion would be from England. Let’s suppose that is what is spent in England, then Scotland would get about 10% of that – so £850 million.
“That’s a very little bit more than what Scottish residents would contribute in extra NICs.”
Mr Phillips said that Scots would be expected to pay around £775-800m in NICs if Boris Johnson implemented his 2% rise, based on current estimates, but would likely receive between £825 and £850m in Barnett funds.
Boris Johnson is expected to make an announcement on his plans for social care today, with several senior cabinet figures said to be unhappy as the policy would break a Torty manifesto commitment not to raise taxes.
Experts, including the Fraser of Allander Institute (FAI) and the IFS, have suggested a better way to raise the extra funds for social care in England would be to adjust income tax.
However an analysis by the FAI’s David Eiser, a senior fellow, explained that “raising income tax in rUK to pay for social care spending in England could create a number of potential territorial funding iniquities and administrative challenges.”
Mr Eiser also said that a rise in NICs “may not cover the sum of the additional Barnett consequential that flows to Scotland”, adding: “This is seen as ‘fair’ in the context of a tax that is ‘pooled and shared’ across the UK.”
Today Ian Blackford, the SNP Westminster leader, and his colleagues David Linden and Alison Thewliss MPs have written to the Prime Minister saying Scotland is being “shafted” by the measures.
Mr Blackford has compared the plans to the poll tax, saying: “Boris Johnson must ditch his damaging Tory tax hike, which would unfairly penalise Scottish families by forcing them to pay the bill for the Westminster social care crisis in England.
“Yet again, Scotland is being shafted with a new Tory poll tax being imposed against our will. Scottish families are already being hit hard by the £1040 Tory cuts to Universal Credit and the long-term economic damage of Brexit – they must not be forced to pay hundreds of pounds more each year for Tory failure.”
He warned that if the plans were introduced, the “Tories will descend even further into irrelevance in Scotland.”
The Scottish Conservatives said they were awaiting the full details, adding: “We will wait until all details have been published to scrutinise this decision but the IFS analysis suggests that the SNP may have jumped the gun before all the facts have emerged.”
Last night the Prime Minister was tight-lipped on how he planned to raise the extra funds, saying only that his government would “not duck the tough decisions needed to get NHS patients the treatment they need and to fix our broken social care system.”
He also stressed the importance of helping the NHS, describing it as “the pride of our United Kingdom”.
He added that the health service “has been put under enormous strain by the pandemic. We cannot expect it to recover alone.”
A Scottish Government spokesperson said: “National Insurance Contributions are payable by individuals and businesses in Scotland but policy responsibility sits with the UK Government.
“Any rise in contributions does not automatically increase funds to the Scottish Government via the Barnett formula – this will only derive from additional net spending.
“We await further details from the UK Government.”