UK tax warning over independence

Shoppers on Edinburgh's Princes StreetThe SNP say Scotland’s finances are in better shape than those of the UK as a whole

Taxes in Scotland could rise by £1,000 per person per year if it leaves the UK, a British government minister says.

Danny Alexander said Treasury analysis suggested millions of taxpayers would pay more if Scotland voted for independence in next year’s referendum.

His comments come as the Scottish government prepares to publish a long-awaited white paper on independence.

SNP First Minister Alex Salmond has said the document will make the “economic case” for independence.

The referendum on Scotland’s constitutional future will take place on September 18, 2014.

On Tuesday, Mr Salmond will set out the most detailed prospectus to date on what an independent Scotland would look like, saying his priorities would be creating jobs, delivering growth and guaranteeing security.

He will say “a better Scotland can only be achieved by putting the decisions about Scotland’s future in the hands of the people of Scotland” and if Scotland votes yes, it would become independent on March 24 2016.

‘Stark reminder’

A recent report by the Institute for Fiscal Studies (IFS) claimed an independent Scotland would need to raise taxes, cut spending, or both, to create a sustainable economy over the next 50 years.

The think tank said Scotland would face a “tougher” challenge than the UK as a whole in the long-term although the scale of it would depend on factors such as how much debt it inherited from the UK, the interest paid on the debt, the age of the population and potential changes in oil revenues and immigration rates.

Alex SalmondAlex Salmond has said an independent Scotland’s priority would be job creation

However, it said said bringing national debt down would require something like a 6% reduction in total public spending, a rise of 9% on the basic rate of income tax, or a VAT rate of 28%.

In a calculated intervention ahead of the white paper’s publication, Mr Alexander said the report was a “very stark reminder” of why Scotland should not go it alone and was better off inside the UK.

“Even under the most optimistic scenario the IFS considered, in 2021-22 an independent Scotland could have to find permanent tax increases or spending cuts that would be equivalent to £3bn in today’s terms,” he said.

Lib Dem Mr Alexander, who is MP for Inverness and number two at the Treasury, said the department’s own analysis suggested a 8% rise in the basic rate of income tax would equate to an average £1,000 rise in annual taxes.

‘Fairer society’

According to Treasury figures, there are currently more than 2.4 million basic rate taxpayers in Scotland, who in total contribute some £6.1bn in income tax.

Under their projections, the average annual income tax bill would rise from £2,517 to £3,523 if income tax levels rose from 20% now to 28%.

Mr Alexander said the “yes” campaign for independence “must address the tax rises or spending cuts required to balance the books in an independent Scotland”.

But a Scottish government spokesman said Mr Alexander’s figures were “all over the place”.

“Earlier this year he was claiming independence would cost £1 per person a year, but the reality is, the policies of his Tory-led government have cost many ordinary Scots far more than £1,000 each since they came to office,” the spokesman said.

“It is the failing policies of Mr Alexander and his Treasury colleagues which the IFS’s forecasts are based on – forecasts which show the UK in fiscal deficit for every one of the next 50 years.”

The SNP have said Scotland’s public finances are in better shape than the UK’s as a whole and Scotland has raised more in tax per head of the population than the UK in each of the last 30 years.

“Only independence will give us the chance to change things for the better, creating jobs, boosting growth and delivering a more prosperous and fairer society,” the spokesman added.

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