Scottish and Welsh leaders say tax cuts for the rich are ‘morally bankrupt’ | Transfer

The Scottish and Welsh governments have strongly criticized Kwasi Kwarteng’s tax cuts for the wealthy, opening a deep divide over tax policies in different parts of the UK.

Nicola Sturgeon, Scotland’s first minister, described the UK chancellor’s decision on Friday to scrap the top 45p rate of income tax as “moral bankruptcy”, helping the wealthiest, hitting the value of the pound and increasing public borrowing.

Mark Drakeford, her Welsh counterpart, said the changes “embody injustice across the UK” by failing to deliver meaningful help to the poorest. “Instead, they give tax cuts to the rich, bonuses to bankers and protect the windfall profits of energy companies,” he said.

Kwarteng’s corporation tax changes, reducing the planned rise in national insurance rates, the alcohol tax freeze and VAT-free shopping for international travelers will apply across the UK.

However, as part of a series of reforms to the UK’s tax systems, the Welsh and Scottish governments set their own income tax rates and also have independent property sales tax policies unaffected by Kwarteng’s stamp duty changes.

Scotland, which can set tax rates and bands, already has a higher top tax rate for those earning more than £150,000, at 46pc. paid than in England and slightly higher for middle earners.

Sturgeon’s government is likely to keep a higher top rate next year, underscoring its centre-left credentials.

John Swinney, Scotland’s Deputy Chancellor of the Exchequer, said: “Today’s announcement by the Chancellor will provide cold comfort to millions of people across Scotland who are looking to the UK Government to use its reserved powers to provide support to those they need more. Instead, we have tax cuts for the rich and nothing for those who need it most.”

Wales must use the Treasury’s income tax rates and bands, but can change each band by up to 10p. It means the top rate of 45p will also be scrapped in Wales, benefiting around 6,000 taxpayers and raising the prospect that the Labour-led government may soon campaign for the same tax powers as Scotland.

Rebecca Evans, Chancellor of the Exchequer for Wales, said: “Today’s announcements show that the UK Government is heading in a deeply worrying direction.”

Under the financial fairness rules agreed by the Treasury when tax powers were devolved, Scotland will receive around £600m and Wales around £70m in extra funding from the Treasury next year because of Kwarteng’s announcement.

Both governments are likely to match the UK chancellor’s new starting income tax rate of £14,732 – which already matches one of Scotland’s intermediate bands. And they will face pressure to raise the threshold for property sales tax to £250,000, as well as discuss Kwarteng regional investment zones, where tax breaks will be offered.

Philip Whyte, director of centre-left thinktank IPPR Scotland, said the extra £600m of funding from the Treasury gave Scotland “a clear opportunity to take a different course. It can do this by funding collective services and social security to protect those families most exposed to the cost crisis.”

The Chartered Institute of Taxation said that if Scottish income tax rates were not changed in the Scottish Budget next year, someone earning £27,850 a year would pay £152.80 more in Scotland, while those earning £200,000 would pay 6,045.80 £ more.

Accountancy firm PwC said that as Scotland’s top rate taxpayers generated 16% of total income tax revenue, Kwarteng’s removal would give Swinney “food for thought as [he] is looking at ways to remain competitive in attracting these people to Scotland.”

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