THE UK Government has said it will give the Scottish Government an additional £300 million to cover the planned increase to employers’ National Insurance contributions.
In the UK Budget delivered last month, Rachel Reeves announced £40 billion of tax rises which she claimed was necessary to plug a £22bn “black hole” left by the previous Tory government.
From April next year, the rate of employers’ National Insurance contributions will rise by 1.2%, from 13.8% to 15.
The Scottish Government previously raised fears about how it could fund the tax hike, as Finance Secretary Shona Robison said: “The more we look at this announcement, the more concerned we are by it.”
“With the Treasury failing to provide clarity about any mitigation process at the time of the budget’s publication, services across Scotland are feeling growing confusion and alarm at the very time where they need to be able to plan ahead,” she added.
In the latest development, a UK Government source has told the BBC “hundreds of millions of pounds” will now be heading to Holyrood.
Last week, Treasury officials are said to have told their counterparts in Edinburgh last week that they should receive in the range of between £295m and £330m extra – although the Scottish Government has previously said that the tax hike would cost them £500m.
The source told the BBC: "In total Holyrood will have more than £5bn extra to spend as a result of the UK Budget.
"There are no more excuses, Scots expect delivery from the SNP and to use this money to reduce NHS waiting times and raise attainment in our schools, not fill in a budget black hole created by years of financial mismanagement and waste."
Reeves (above) said Scotland will receive £3.4bn in additional funding in 2025-26 when she laid out her Budget plans.
However, she suggested this did not include compensation for National Insurance as she urged Holyrood ministers to spend the money "wisely".
The UK Government said that extra funds would be provided on top of the £3.4bn to make up for the extra staff costs.
The Scottish Government is also set to receive an additional £1.5bn for this financial year, 2024-25 – although it said this was in line with its Budget expectations.
National Insurance contributions are the UK's second-largest revenue stream behind income tax.
It is paid by workers and the self-employed on earnings and profits, and by employers on top of the wages they pay out.
This affects public sector employees who work for the Scottish Government.
About 600,000 people are employed in Scotland’s public sector, making up 22% of the total workforce – compared to about 17% in the UK as a whole.
This has fuelled concerns at Holyrood that Scotland could be short changed if compensation for the National Insurance increase is not proportional to its public sector.
A Scottish Government spokesperson said the Scottish Parliament had agreed the UK Government should reimburse the cost of the change – "over £500m".
They added: "This UK Government policy risks hampering economic growth and damaging public services and whilst discussions with the Treasury are ongoing, we still do not have certainty ahead of the Scottish budget.”
