Treasury to give Scotland £300m as tax hike compensation

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, of course, applies to 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.

That 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.

The Scottish Finance Secretary Shona Robison had urged the Treasury to provide what she called “clarity” on how any mitigation might work.

Speaking earlier this month, Ms Robison said: “The UK government’s employer National Insurance hike could hamper services in Scotland to the tune of around £500m – and 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.”

A Scottish government spokesperson said the Scottish Parliament had agreed the UK government should reimburse the cost of the change – “over £500m”.

They said: “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.”