During Ms Truss’ campaign, she suggested canceling the 1.25 per cent increase in National Insurance, from April 6, 2022, and which is due to become the Health and Social Care Tax in April 2023. She did not say whether this meant cutting national insurance for employees and employers. raises or just employed. She also proposed to stop the rise in corporation tax at 25%, keeping it at 19%.

Ms Truss also suggested she would not introduce new taxes, including windfall taxes on energy companies, and did not plan to cut public spending, instead committing to 10-year public sector reform to improving efficiency and a 10-year plan to achieve an average annual growth rate of 2.5%.

In summary, Ms. Truss plans to cut taxes, maintain or increase government spending and achieve economic growth. To do this, it must take advantage of the strong UK alliance by borrowing more and paying off Covid debt over a longer period.

Ross Stupart, Tax Manager, RSM Scotland

Since the Barnett formula approach to calculating the block grants which form a significant part of the Scottish devolved budget is driven by spending policies and decisions, rather than revenue raising policies, that is Say taxes, Scotland’s devolved budget could arguably benefit Ms Truss in the short term. apparent strategy of borrowing to spend our way to economic growth.

The challenge for Scotland could come if Ms Truss manages to improve the efficiency of the public sector. This would inevitably mean cuts in UK government spending, which could reduce future block grant funding for Scotland.

The Scottish Government should therefore think about how it can achieve public spending savings and a balanced budget over the long term, otherwise it should think about how to close the gap by raising taxes, which realistically could only involve an increase in Scottish income tax to increase spending capacity. This will provide the Scottish Government with a future income tax strategy conundrum, to add to the impending challenge of how to react if the base income tax bracket rate rises to £80,000. Already, Scottish taxpayers are starting to pay more than 40% in income tax faster than the rest of the UK. This gap could become wider if the Scottish government does not react quickly to changes which could eventually lead to a brain drain of middle-income earners across the border.

Other elements of Ms Truss’ policies could have a positive impact on the Scottish economy, but will be at odds with Scottish policies. For example, it seems keen to optimize production from North Sea oil and gas reserves to ease energy supply problems. This could bring investment and jobs to Scotland, benefiting local businesses. More jobs in Scotland means more Scottish income tax revenue. However, such a policy directly contradicts the Scottish Government’s policies on climate change and can therefore create tension within an already strained relationship.

It certainly looks like an area where collaboration, rather than political scoring, would benefit the UK as a whole. Working together, we can find common ground where the UK can secure energy in a time of financially crippling supply shortages, while using fiscal policies to monetise these mature energy assets. The money raised can fund carbon capture and renewable energy investments, ensuring long-term continuity of energy supply.

Decisions made today will affect future generations. We can only achieve this with a strong mix of fiscal policy and collaboration between the UK and devolved governments, as well as the support of private sector energy companies.

Ross Stupart, Tax Manager, RSM Scotland

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