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Scotland faces a dilemma after the UK Chancellor’s mini-budget as business leaders are urging the decentralized government to make tax cuts to avoid major divergences from England that would risk economic underperformance.

Critics from the left, meanwhile, have urged Nicola Sturgeon’s government to focus on eliminating inequalities and funding services.

Kwasi Kwarteng’s mini-budget statement on Friday scrapped the top tax rate of 45p on income over £150,000, replacing it with a single rate of 40p.

The First Minister faces a difficult decision that with appropriate tax cuts the system in Scotland will become less progressive and disgruntled supporters, while increasing divergence, including stamp duty, could reduce the appeal of living and doing business there.

The Scottish Government sets its own income tax rate. The country has a top rate of 46p per pound, while that is fixed at 41p for incomes between £43,663 and £150,000.

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said business would “eagerly” welcome Kwarteng’s policies and expected the Holyrood government to deliver “parity” with the rest of the UK.

“Divergences between nations risk undermining business and investor confidence,” she said.

Edinburgh should take a “more progressive approach,” said Philip Whyte, Scottish director of the Institute for Public Policy Research, a left-leaning think tank.

He urged Scotland to use the extra £600m it expects to receive from tax cuts elsewhere in the UK to “fund collective services and social security to protect families most vulnerable to the cost crisis.” “.

The Scottish Greens, who govern with Sturgeon’s Scottish National Party, have condemned the mini-budget as “the policy for shareholders, bankers and the super-rich”.

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