Humza Yousaf has been issued a stark warning over the SNP's decision to raise taxes, with an opposition minister claiming that the tax gap between Scotland and the rest of the UK could lead to workers leaving the region.
Economists at Ernst and Young warned that the tax hikes that were introduced at the last budget have "created a meaningful tax cross-border divide", something they said is a "major concern for employers in Scotland looking to retain talent".
The warning came in EY's ITEM Club economic forecasting report, which indicated that Scotland's rate of growth will lag behind the UK in the coming years.
The publication said: "In what is already a constrained labour market in Scotland, the incremental increases in income tax have created a meaningful tax cross-border divide, which includes a significant number of NHS professionals, senior teachers and other civil servants.
Humza Yousaf has been issued a stark warning over the SNP's decision to raise taxes
Humza Yousaf
"This is now a major concern for employers in Scotland looking to retain talent in an already tight skilled labour market."
The report says that Scotland's Gross Value Added (GVA) - an indicator of the health of an economy - will increase by 0.7 per cent in 2024, compared to 0.1 per cent last year. The report said it is expected to rise by increments of 1.4 per cent in 2025 and 1.6 per cent in 2026 and 2027.
But this "lags" behind the rest of the UK, the report said. The wider UK saw a 0.3 per cent increase in GVA last year. The report predicts a 0.8 per cent rise in 2024, as well as 1.9 per cent in both 2026 and 2027.
Scottish Conservative finance spokesman Liz Smith described the situation in Scotland as "disastrous".
Hitting out at the SNP's tax plan, she said: "Ernst & Young are just the latest organisation to warn of the dangers of the SNP's everwidening tax gap between Scotland and the rest of the UK.
"They recognise the additional hike in the disastrous tax-and-axe Budget will make matters even worse, when it comes to retaining staff or encouraging them to live and work here, and that it will affect not just the very wealthy but a significant number of NHS workers, senior teachers and civil servants.
"This poses a significant threat to future growth - an area where Scotland is already lagging behind the rest of the UK.
She added: "Shona Robison must heed the siren calls of businesses and economists and redraft her Budget or else our public services will quickly become unaffordable."
But a spokesperson for the Scottish Government said: "It is encouraging that economic growth is forecast to strengthen. People base their decisions on where to live on a range of factors. "Scotland enjoys a range of support not available throughout the UK such as free university tuition and prescriptions."
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Scottish Conservative finance spokesman Liz Smith described the situation in Scotland as "disastrous"
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Workers in Scotland who earn more than £28,850 pay more income tax than their counterparts in the rest of the UK as a result of frozen thresholds and higher rates. The average person earning £50,000 in Scotland pays £1500 more than their equivalent in England.
And last year, the Government introduced a new "advanced" income tax rate aimed at high earners. The 45 per cent rate will apply to earnings between £75,000 and £125,140 from April. But in England, people on those salaries will be taxed at 40 per cent.
