Independent Scots would be hit by £1,000-a-year 'tax bombshell,' Danny Alexander warns Alex Salmond

Chief Secretary to the Treasury issues warning as Scottish Government publishes white paper on independence

The people of Scotland will be hit by a £1,000-a-year “tax bombshell” if they vote for independence in next year’s referendum, the Treasury claims.

The warning came as the Scottish Government was preparing to publish its long-awaited white paper on independence.

Danny Alexander, the Liberal Democrat Chief Treasury Secretary,  has written to Alex Salmond,  the First Minister of Scotland,  saying that Treasury officials calculate that an eight per cent rise in the basic rate of income tax would mean an average increase of about £1,000 a year for people on the basic rate. 

The move followed last week’s warning by the Institute for Fiscal Studies that an independent  Scotland would face higher taxes or deeper spending cuts than the rest of the United Kingdom because of dwindling oil revenues and an ageing population.

Mr Alexander said: “This is a very stark reminder of why it is in the interest of Scotland to pool these risks, not go it alone.”

"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 £3 billion in today's terms," Mr Alexander told the SNP leader.

"I asked Treasury officials to look at this. They calculate than an eight percentage point rise in the basic rate of income tax would mean an average increase for basic rate taxpayers in Scotland of around £1,000 a year."

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

UK Government analysis shows they currently pay an average of £2,517 a year.

But the Treasury research suggested that if the basic rate of tax was increased from 20 per cent to 28 per cent, this would rise to £3,523 a year - an increase of just over £1,000.

In his letter to Mr Salmond, the Chief Secretary to the Treasury demanded that the white paper "must address the tax rises or spending cuts required to balance the books in an independent Scotland".

A spokesman for Scotland's Finance Secretary John Swinney said Mr Alexander's letter was "rushed and panicky" and shows "just how rattled the No campaign are by the launch of the White Paper and its positive vision for Scotland's future".

"Danny Alexander's sums are 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.

"And for Danny Alexander of all people to cite the IFS almost beggars belief. 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.

"Westminster's waste has also squandered oil revenues which could have been put in a national savings fund now worth up to £22,000 for every person in Scotland.

"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 Scottish National Party-led Government in Edinburgh will today publish a White Paper outlining its road map to independence by 2016. The SNP is bound to reject the Treasury’s warning as “scaremongering.” The SNP argues that Scotland can “pay its way” as it now contributes 9.9 per cent of UK tax revenues in return for 9.3 per cent of UK spending.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Cleaner

£15000 - £16500 per annum: Recruitment Genius: If you've got first class custo...

Recruitment Genius: Mobile Applications Developer / Architect - iOS and Android

Negotiable: Recruitment Genius: This is a great opportunity to join a medium s...

Recruitment Genius: Telesales Account Executive - £40K OTE

£11830 - £40000 per annum: Recruitment Genius: Working in a friendly, sales ta...

Recruitment Genius: Web Designer

£15000 - £27000 per annum: Recruitment Genius: One of the UK's leading web des...

Day In a Page

Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test
Tour de France 2015: Twins Simon and Adam Yates have a mountain to climb during Tour of duty

Twins have a mountain to climb during Tour of duty

Yates brothers will target the steepest sections in bid to win a stage in France
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy