Nicola Sturgeon 'could cut £200 million of waste instead of increasing taxes'

Nicola Sturgeon could save more than £200 million by running her government more efficiently instead of increasing taxes, the Tories have claimed after a world-renowned economist warned her hike would damage Scotland.

Murdo Fraser, the Scottish Conservatives’ Shadow Finance Minister, published a list of spending commitments by the Scottish Government that he said could be cut without endangering core public services.

They included £88.6 million spending on private agency staff for the NHS, £58.8 million of savings from treating more people as day cases instead of inpatients and £1.3 million from reducing her team of spin doctors and advisers.

Mr Fraser said the total savings of £209.3 million were “almost” enough to match the sum generated by the SNP government’s plan, unveiled in last week’s Scottish Budget, to increase tax for people earning more than £33,000 from April.

The changes also mean will mean 45 per cent of Scottish workers – around 1.1 million people - will pay more income tax than if they earned the same salary in England. The total includes 800,000 basic rate taxpayers whom the SNP promised to protect in last year’s Holyrood election.

Although Mr Mackay also introduced a 19p rate for lower earners, the maximum cut on their tax bills will be £20, or 38p per week. Accompanying official forecasts predicted the weakest economic growth trends for 60 years.

Arthur Laffer, whose famous Laffer Curve theory states that lower taxes can increase growth and revenues for the public purse, yesterday warned the tax hike will “drive businesses and skilled workers” out of the country.

The US-based economist, whose work was praised by Alex Salmond in the 1990s and who has advised the Reagan and Trump presidencies, said: “These sort of measures will put Scotland on a par with Greece; they discourage growth.”

He also expressed his surprise that Derek Mackay, the SNP Finance Minister who drew up the Scottish Budget, had not heard of the Laffer Curve.

Mr Mackay made the embarrassing admission during evidence to a Holyrood committee last year. The theory is based on the principle that there are diminishing returns beyond an “optimal” tax rate

The minister used his Budget to put a penny on both the higher and top rates, increasing them to 41p and 46p respectively. He also unveiled an extra 21 per cent income tax band for earnings between £24,000 and £44,000 that will sit between the basic and higher rates.

But Mr Fraser said: “Our spending analysis clearly shows where the Scottish Government can make substantial savings that could be ploughed back into public services; almost as much as can be raised by raising taxes on hardworking taxpayers.

"The Scottish Government should instead seek to tackle areas of inefficient spending or else these inefficiencies will continue to spiral and take up a larger amount of spending in future.”

The list also included £38 million from reducing ‘bed blocking’ in Scotland’s hospitals by people who are well enough to go home and collecting £4.6 million in unpaid court fines.

Prof Laffer told the Sunday Times that there are “clear disadvantages” to living in a Scotland with higher taxes than the rest of the UK and the SNP government “needs to understand you cannot distribute more than you can produce.”

He said: “Scotland has a large number of large-paid jobs and you cannot grow an economy on low-paid jobs. You can only change that by investment, not increased taxation that ends up doing nothing to boost the economy.”

Mr Mackay said he had more than doubled spending on economic growth and it is now more than £100 per head higher than the UK Government’s.

A spokesman for the minister said: “The Tory mask has slipped, and with this hit-list of cuts they are finally admitting that they would slash health spending – in fact almost all of the £209 million they identify would be stripped out of the NHS budget.

“That is the reality of Tory tax policy – cuts for the health service and tax cuts for the wealthy.”