Scotland faces a dilemma in the wake of the UK chancellor’s mini-budget as business leaders call on the devolved administration to match tax cuts to avoid a further divergence with England that would risk poor economic performance .
Meanwhile, critics on the left urged Nicola Sturgeon’s government to focus on fixing inequality and funding services.
Kwasi Kwarteng’s mini-budget statement on Friday abolished the top tax rate of 45p on earnings above £150,000, replacing it with a flat rate of 40p.
The First Minister faces a tough decision that by matching tax cuts the system in Scotland will become less progressive and anger supporters, while a growing divergence involving stamp duty may reduce the appeal of live and do business there.
The Scottish Government sets its own rate of income tax. The country has a top rate of 46p per pound, while that for incomes between £43,663 and £150,000 is set at 41p.
Liz Cameron, chief executive of the Scottish Chambers of Commerce, said business would “enthusiastically” welcome Kwarteng’s policies and hoped the Holyrood government would “deliver parity” with the rest of the UK.
“The divergence between nations risks undermining business and investor confidence,” he said.
Edinburgh should push for a “more progressive approach”, said Philip Whyte, Scotland director of the Institute for Public Policy Research, a left-wing think tank.
He urged Scotland to use the extra £600m it expects to receive from tax cuts elsewhere in the UK to fund “group services and social security to protect families most exposed to the cost crisis” .
The Scottish Greens, who govern with Sturgeon’s Scottish National Party, condemned the mini-budget as “politics for shareholders, bankers and the super rich”.