Kate Forbes: Labour's national insurance hike 'could prove disastrous for the economy'

Kate Forbes accused the UK Labour government of failing to show “basic competence”.

It comes after it emerged the Treasury will provide no more than £330 million to the Scottish Government to cover the impact on the public sector from the rise in employer contributions, which was announced by Chancellor Rachel Reeves last month.

This is based on a population share of the cash used in England to mitigate the cost. However, the Scottish Government argues the cost for the directly employed public sector north of the border will be “well over £500 million”, because it is proportionally larger. This rises to around £750 million when the likes of childcare settings, colleges and adult social care are included, it said.

Speaking ahead of a keynote speech to the Investment Association Conference in Edinburgh, Ms Forbes said: “Labour’s national insurance hike has all the hallmarks of a plan that just was not thought through. Just like the winter fuel payment debacle, it is clear that the Treasury took a decision and then considered the consequences afterwards.

“The desperate scrambling for a solution after the fact and the sheer panic which has emanated from the Treasury in the days and weeks since the Budget is proof of that.

“Then just yesterday, we saw the UK Government brief the press that they would be refusing to cover even close to the full costs, leaving hundreds of millions of pounds which they clearly expect to be absorbed by cuts to public services in Scotland.

“This is a question of basic competence – and the UK Government have failed at the first hurdle. As well at the hit of hundreds of millions of pounds to public services, industry will suffer too.

“Businesses across the country are planning their year ahead, and making decisions about whether they can afford to take on extra staff – or in some cases, whether they can continue to keep the staff they do have. Labour’s tax on jobs is the last thing they needed.

“The UK Government’s decision could seriously harm economic growth here in Scotland – forcing businesses to rethink their plans to expand, denying opportunities to workers, and in some cases forcing small businesses to close altogether.

“The national insurance hike could prove to be disastrous for the economy, public services, businesses and families – and it is vital that the UK Government reconsiders their approach.”

A spokesman for the UK Government said: “The Budget delivered more money than ever before for Scottish public services and the Scottish Government receives over 20 per cent more funding per person than equivalent UK Government spending.

“It is for the Scottish Government to allocate this across its own public sector and meet the priorities of people in Scotland.

“It will also receive additional Barnett funding on top of this record £47.7 billion settlement as part of support provided in relation to changes to employer national insurance.”

Ms Reeves’s budget provided an extra £3.4 billion for Scotland next year.