UK Government must mitigate cost of tax increase for public services, SNP demands

The UK Government must ensure the anticipated national insurance hike does not negatively impact on public services, the SNP has said.

Research undertaken by the House of Commons Library, commissioned by the party, estimates that increasing national insurance contributions for employers by one or two points would cost Scotland’s public sector between £70m and £142m a year.

The latest figures show over half a million people are employed in the devolved public sector – the majority of them in local government or the NHS.

As employers, organisations such as NHS Scotland, Police Scotland and the Scottish Fire and Rescue Service would have to pay more national insurance if Labour confirms the move next week.

Chancellor Rachel Reeves is expected to make the announcement in the budget on Wednesday, in a bid to raise £40bn of revenue to avoid real-terms spending cuts.

The SNP’s Westminster leader Stephen Flynn said Reeves must mitigate any impact of the tax hike by increasing the block grant given to Scotland.

He said: “By increasing NI taxes, the Labour Party will be breaking yet another election pledge. There are serious concerns that doing so could cost the Scottish Government, NHS, schools, police and fire service hundreds of millions of pounds, which would mean, for instance, less money available in Scotland to employ nurses and teachers, or to provide healthcare and education.

“If the Labour Party goes ahead with this tax hike it must, at the bare minimum, ensure that any negative impact on the Scottish Government and Scottish public services is fully mitigated – and that any mitigation comes on top of, not in place of, significant real-terms increases to Scotland's block grant.”

First Minister John Swinney earlier this week warned that increasing employers’ national insurance contributions would impact public services in Scotland.

He said: “If the UK government does not fully fund this in public expenditure, it will be public services in Scotland that bear the cost. So my ask of the chancellor is clear: do not make Scotland’s public services pay for this increase in taxation.”

Swinney also called on the UK Government to increase investment in the public sector to three per cent of GDP.

Reeves and Prime Minister Keir Starmer have previously warned that difficult decisions will need to be taken due to a “blackhole” in the budget – for which they blame the previous Conservative government.

Labour promised in the run-up to the election not to increase taxes on “working people” but there are concerns than hiking NI contributions for employers will have a knock-on impact on workers via lower pay.