Boris Johnson set to row back on tax plan after Scottish backlash

Scots won’t pay for a tax cut for the wealthy in the rest of the UK, sources close to Boris Johnson have said, after the Tory leadership frontrunner’s first big economic policy came under attack from rivals and opposition parties.

By The Newsroom Wednesday, 12th June 2019, 11:40 am

The plan to raise the threshold for the 40p tax rate from £50,000 to £80,000 sparked a major cross-Border row when it was unveiled on Monday, threatening to leave Scottish taxpayers footing the bill for a giveaway to workers south of the Border.

While tax rates are now devolved, Mr Johnson’s campaign said the £9.6 billion cost of the giveaway would be partly covered by an increase in national insurance contribution, which remain reserved to Westminster.

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Under the plan, national insurance bills for those earning between £43,431 and £80,000 in Scotland are projected to rise by up to £3,000 with no corresponding drop in their taxes.

Boris Johnson. (Photo by Christopher Furlong/Getty Images)

It prompted some Scottish Tories to call the plan “ill thought-out” and the First Minister to denounce the Conservative leadership race as a “horror show”.

The policy was defended by the Johnson campaign, which called on the SNP to match its proposal to prevent a gap of nearly £8,000 opening up between the tax bills of higher earners in Scotland and the rest of the UK.

But allies of Mr Johnson said the tax cut “can’t be funded through national insurance” and may need to be smaller than proposed.

Scottish supporters of the former foreign secretary are set to meet Liz Truss, tipped to become Mr Johnson’s Chancellor, to argue for the policy to be adapted to avoid hitting taxpayers north of the Border.

A source described the tax cut as an “aspiration” and suggested a threshold for the 40p rate of £60-65,000 could be introduced instead.

The comments come as the Institute for Fiscal Studies (IFS) published analysis that said the tax cut would produce an increase in the Scottish Government’s budget because of the way that devolved tax powers were structured. IFS associate director David Phillips said the Scottish Government “actually gets a budget boost because of the income tax cut in the rest of the UK”.

“Scotland’s fiscal framework means the reduction in tax bills and revenues in the rest of the UK translates into higher block grant funding for the Scottish Government,” Mr Phillips said.

“This would allow for higher spending on public services north of the Border. Or for the Scottish government to cut its own taxes – perhaps matching Mr Johnson’s proposed cut to income tax for high earners.”

Scottish finance secretary Derek Mackay claimed the plan was a “disaster for Ruth Davidson” and called on the Scottish Tory leader to disown it.

“The SNP has used the tax powers at our disposal to ensure that Scotland is the fairest tax part of the UK and for a majority of people it is also the lowest tax part of the UK,” Mr Mackay said.

“Boris Johnson’s plans mean that, not for the first time, our efforts to make Scotland fairer and more prosperous will be undermined by a reckless, right-wing Tory government at Westminster.”

He added: “Ruth Davidson must immediately make clear – does she support Boris Johnson’s tax hike?

“If she doesn’t, will she instruct all 13 of her MPs to vote against any UK Budget in which these outrageous tax plans are included? Or will she simply fall in to line with the Tory leadership and forget about her previous statements, as she so often does?”

Meanwhile, Labour will today lead a cross-party bid to seize control of the parliamentary agenda and prevent the next Tory leader from suspending Parliament to push through a no-deal Brexit.

Shadow Brexit secretary Sir Keir Starmer said Labour would use its opposition time today to try to give control of Parliament’s agenda to MPs on 25 June.

The motion has been backed by the Westminster leader of the SNP Ian Blackford, Liberal Democrat leader Sir Vince Cable and Tory former minister Sir Oliver Letwin, as well as Plaid Cymru and Green MPs.

Labour said if the motion passes, MPs will be able to legislate to avoid a no-deal Brexit at the end of October. “It would prevent a future prime minister proroguing Parliament to force through a no-deal Brexit against the wishes of MPs,” a source said.

It comes after a number of high-profile contenders for the Tory leadership, including Mr Johnson, said they would be prepared to take the UK out of the EU without a deal if no new agreement had been reached by 31 October.

Sir Keir said: “The debate on Brexit in the Tory leadership contest has descended into the disturbing, the ludicrous and the reckless ... MPs cannot be bystanders while the next Tory prime minister tries to crash the UK out of the European Union without a deal and without the consent of the British people.”

SNP MP Stephen Gethins said proroguing Parliament to push through no deal would be a “democratic outrage”.

“The office of Prime Minister must not be hijacked by a hardline no-deal Brexiteer and Scotland’s economic and social interests must not be left to the whims of a Tory leadership contest intent on inflicting their own extreme and damaging versions of leaving the EU,” Mr Gethins said.

Launching her leadership campaign yesterday, Andrea Leadsom said Speaker John Bercow did not have the power to block a no-deal Brexit.

Mrs Leadsom, who had a long-running feud with the Speaker in her role as Commons Leader, said “it’s simply not the case that the Speaker has the means to stop a no-deal exit”. She set out her plan for a “managed exit” and said leaving the EU on 31 October was, for her, a “hard, red line”.