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Scottish income tax changes unveiled Scottish income tax changes unveiled
(35 minutes later)
The Scottish government has announced income tax changes that will see higher earners pay more than elsewhere in the UK - and lower earners pay less.The Scottish government has announced income tax changes that will see higher earners pay more than elsewhere in the UK - and lower earners pay less.
The country's finance secretary, Derek Mackay, announced a new tax band of 21p for those earning more than £24,000.The country's finance secretary, Derek Mackay, announced a new tax band of 21p for those earning more than £24,000.
The higher rate of tax will be increased from 40p to 41p and the top rate from 45p to 46p.The higher rate of tax will be increased from 40p to 41p and the top rate from 45p to 46p.
But a starter rate of 19p in the pound will also be introduced, Mr Mackay confirmed in his draft budget.But a starter rate of 19p in the pound will also be introduced, Mr Mackay confirmed in his draft budget.
Mr Mackay said the move will mean no one earning less than £33,000 in Scotland will pay more tax.Mr Mackay said the move will mean no one earning less than £33,000 in Scotland will pay more tax.
And he told the Scottish Parliament that those earning above that figure would only pay a "proportionate amount more" than they currently do.And he told the Scottish Parliament that those earning above that figure would only pay a "proportionate amount more" than they currently do.
Mr Mackay also outlined a 3% pay rise for public sector workers earning less than £30,000, and a 2% rise for those earning more than that. Mr Mackay also outlined a 3% pay rise for public sector workers earning less than £30,000, and a 2% rise for those earning more than that - with a cap of £1,600 for those earning £80,000 or more.
And he pledged a further £600m to provide superfast broadband to all premises in Scotland by 2021.And he pledged a further £600m to provide superfast broadband to all premises in Scotland by 2021.
The Scottish government was given powers over income tax rates and bands last year, with the new rates being paid by anyone who lives in Scotland.The Scottish government was given powers over income tax rates and bands last year, with the new rates being paid by anyone who lives in Scotland.
Mr Mackay had faced warnings from business leaders and the Scottish Conservatives ahead of his budget statement that Scotland could not afford to be associated with higher taxation than the rest of the UK.Mr Mackay had faced warnings from business leaders and the Scottish Conservatives ahead of his budget statement that Scotland could not afford to be associated with higher taxation than the rest of the UK.
But others - including Scottish Labour and the Scottish Greens - had urged Mr Mackay to go further.But others - including Scottish Labour and the Scottish Greens - had urged Mr Mackay to go further.
Mr Mackay said that more than two thirds of income taxpayers will pay less tax than they currently do under his proposals, which will need to be approved by MSPs before coming into force from April 2018.Mr Mackay said that more than two thirds of income taxpayers will pay less tax than they currently do under his proposals, which will need to be approved by MSPs before coming into force from April 2018.
And he said 55% of taxpayers in Scotland will pay marginally less next year than they would in the rest of the UK.And he said 55% of taxpayers in Scotland will pay marginally less next year than they would in the rest of the UK.
'More progressive''More progressive'
The finance secretary insisted the changes - which he said would raise an additional £164m - were necessary to "mitigate UK budget cuts, protect our NHS and other public services, support our economy and tackle inequality in our society."The finance secretary insisted the changes - which he said would raise an additional £164m - were necessary to "mitigate UK budget cuts, protect our NHS and other public services, support our economy and tackle inequality in our society."
He said the tax reforms would make "Scotland's income tax system even fairer and more progressive".He said the tax reforms would make "Scotland's income tax system even fairer and more progressive".
And he said a bigger increase in the top rate of tax for those earning more than £150,000 - which some opposition parties had called for - would actually reduce revenue as high earners would find ways to avoid paying it.And he said a bigger increase in the top rate of tax for those earning more than £150,000 - which some opposition parties had called for - would actually reduce revenue as high earners would find ways to avoid paying it.
What else did Mr Mackay announce?What else did Mr Mackay announce?
Among the other measures in the budget were:Among the other measures in the budget were:
Read our at-a-glance guide to the key points from the budget hereRead our at-a-glance guide to the key points from the budget here
What is the outlook for the Scottish economy?What is the outlook for the Scottish economy?
Mr Mackay's budget statement was accompanied by the first economic estimates from the new Scottish Fiscal Commission, which said the country is is facing "subdued" growth over the next five years.Mr Mackay's budget statement was accompanied by the first economic estimates from the new Scottish Fiscal Commission, which said the country is is facing "subdued" growth over the next five years.
The independent body predicted the Scottish economy will grow at less than 1% per year until 2022 - lower than that predicted by other economists.The independent body predicted the Scottish economy will grow at less than 1% per year until 2022 - lower than that predicted by other economists.
Its five-year forecast suggests GDP growth will be 0.7% in both 2017 and 2018, rising to 1.1% in 2022.Its five-year forecast suggests GDP growth will be 0.7% in both 2017 and 2018, rising to 1.1% in 2022.
It said the outlook was "driven by slow productivity growth and exacerbated by demographic challenges".It said the outlook was "driven by slow productivity growth and exacerbated by demographic challenges".
Read more hereRead more here
What has the reaction to the budget been?What has the reaction to the budget been?
Scottish Conservative finance spokesman Murdo Fraser branded the creation of a new basic rate the "Nat tax".Scottish Conservative finance spokesman Murdo Fraser branded the creation of a new basic rate the "Nat tax".
He accused the SNP of breaking a 2016 manifesto promise pledging not to increase the basic rate of income tax for those on low or middle incomes, and called on Mr Mackay to apologise, adding "no one will believe a word they say ever again". He accused the SNP of breaking a 2016 manifesto promise pledging not to increase the basic rate of income tax for those on low or middle incomes, and claimed the real reason was that Scottish economic growth is lagging behind the UK.
Mr Fraser said there was "no justification" for the tax rises being imposed on middle and high earners, and claimed the real reason was that Scottish economic growth is lagging behind the UK.
Scottish Labour leader Richard Leonard said the Scottish government's tax and spending plans had "tinkered round the edges" instead of implementing radical change and delivering a genuine alternative to "Tory austerity".Scottish Labour leader Richard Leonard said the Scottish government's tax and spending plans had "tinkered round the edges" instead of implementing radical change and delivering a genuine alternative to "Tory austerity".
He argued that "a penny on the top rate just does not do it," and accused Mr Mackay of producing a "Tory-lite draft budget". Scottish Greens co-convener Patrick Harvie said he was "delighted that the argument for a more progressive tax structure appears to have won the day", but said Mr Mackay should have gone further.
Scottish Greens co-convener Patrick Harvie said he was "delighted that the argument for a more progressive tax structure appears to have won the day". And Scottish Liberal Democrat leader Willie Rennie said the budget was a "missed opportunity" and "does not do enough to meet the long term needs in the economy".
But he said the changes outlined by Mr Mackay did not go as far as he would have wanted. Elsewhere, the Federation of Small Businesses said a majority of its members were against income tax rises, and that the Scottish government was steering the country into "uncharted economic waters".
The Scottish Chambers of Commerce welcomed much of the budget as being positive for business, but repeated its concerns about "Scotland's new status as the highest-taxed part of the UK."
And local government body Cosla said councils would continue to face "really difficult times" in the future, despite the "more measured approach" by the Scottish government.
Follow live reaction to the budget on Holyrood LiveFollow live reaction to the budget on Holyrood Live
What happens next?
The minority SNP government will need to secure the support of at least one other party in order to eventually pass its budget, with the final vote due to be held on 19 February.
A deal with the Tories or Labour seems somewhat unlikely, which leaves the Scottish Greens and Liberal Democrats as potential suitors - with the Greens the most likely.
It was the pro-independence Greens who rode to Mr Mackay's rescue last year, with a budget deal finally being struck in February after nearly two months of negotiations.
At the time, Scottish Greens co-convenor Patrick Harvie hailed it as the "the biggest budget compromise in the history of devolution in Scotland".
It is likely he would be looking for concessions on a similar - or even greater - scale this time.