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Homebuyers set for Scottish budget boost Scottish Budget: Boost for first-time buyers
(about 17 hours later)
Homebuyers could be in for a boost when Scottish Finance Secretary John Swinney announces details of a new tax to replace stamp duty. Homebuyers in Scotland will pay no tax on properties costing less than £135,000, Finance Secretary John Swinney has announced.
It will come as he sets out the first annual budget to make use of new tax powers, due to kick in next year. And a 12% marginal rate for houses costing more than £1m will come into force next April, when stamp duty is replaced north of the border.
Mr Swinney said Scotland's economy was back to pre-recession levels, but still faced a squeeze on public spending. Mr Swinney's plan came in his budget proposal for the year ahead.
Labour said the finance secretary had consistently failed to properly fund local authorities and colleges. Opposition politicians said the finance secretary had failed to live up to his promise of protecting health spending.
The stamp duty replacement - to be called the Land and Building Transactions Tax - will be the first time Scottish Parliament has levied taxation since the Union in 1707. Under the government's new Land and Building Transactions Tax, a marginal tax of 2% would apply to the proportion of a transaction between £135,000 and £250,000, while a 10% rate will apply to those between £250,000 and £1m.
Scottish ministers said the levy - coming into force in April 2015 - would have a progressive rather than a flat rate, and it is thought Mr Swinney will cut the burden on lower-price property purchases, making the cost match the actual price more closely. Mr Swinney told MSPs: "As a result of the rates I have announced today, nobody will pay tax on the first £135,000 of their house purchase. 5,000 more transactions will be taken out of tax, supporting first-time buyers and those buying properties in the affordable market."
"At the heart of our approach to that has been to provide a system which has been based on certainty, on convenience to pay and - crucially - on the tax being proportionate to the ability to pay," Mr Swinney told BBC Scotland. The finance secretary also said tax would be reduced for a further 44,000 house sales up to the value of £325,000.
Tax forecasts And he added that the 12% top rate would ensure the most well-off made a contribution to the public purse.
Addressing parliament, the finance secretary will also outline details of a new tax paid by companies and councils when they dispose of waste to landfill - one of several new powers devolved to Holyrood following proposals put forward by the Calman Commission to examine devolution 10 years on. Under the new system, 90% of taxpayers and 95% of non-residential taxpayers would be better or no worse off, Mr Swinney added.
Mr Swinney, whose 2015-16 spending plans will also include tax income forecasts for the first time, said, despite record-high employment in Scotland, his Treasury-funded budget faced cuts by the UK government, which is attempting to reduce the nation's spending deficit. The new charges will mark the first time Scottish Parliament has levied taxation since the Union in 1707, made possible after new powers were devolved to Holyrood following proposals put forward by the Calman Commission on strengthening devolution.
He said the reductions amounted to a 10% cut in real terms over five years, and capital spending cuts of more than 25%. "In exercising its first judgements on national taxes, this government has put fairness, equity and the ability to pay at the heart of what it has done," Mr Swinney argued.
The finance secretary, said: "What the Scottish government is determined to do is to bring forward a set of measures that are designed to create a more prosperous Scotland and a fairer Scotland, and those measures lie at the heart of the budget the government sets out." "That is the benefit of putting decisions about Scotland's future in Scotland's hands."
Mr Swinney will also announce plans to take forward spending on capital construction projects, which he said were central to boosting employment. Mr Swinney also said a new tax paid by companies and councils when they dispose of waste to landfill would be "revenue-neutral", with a standard rate of £82.60 per tonne and a lower rate of £2.60 per tonne.
Asked if there would be cuts in the budget, the finance secretary responded: "The government's obviously operating within a very constrained fiscal environment. Elsewhere, the finance secretary said the 2015-16 budget plan would see:
"We place a requirement on public authorities and public bodies to operate ever more efficiently, and that will lie at the heart of the budget propositions that we take forward. Labour finance spokesman Iain Gray welcomed the move to replace stamp duty, but said successive Scottish budgets had failed to protect the NHS.
"The limits of what we want to do are constrained by the availability of public finance." Mr Gray said the budget showed a real terms rise of about 1% - less, he told MSPs, than a quarter of the increase planned in England.
Mr Swinney will also re-state his commitment to gaining further financial powers for Scotland, as part of the Smith Commission, announced by Prime Minister David Cameron in the wake of the independence referendum "No" vote. "Health spending here has not kept up with increases, even compared to the Tory-run English NHS," said Mr Gray, adding: "Our NHS has had some £700m less than it should have, had he (Mr Swinney) kept his promises.
Labour finance spokesman Iain Gray said Mr Swinney's description of the stamp duty replacement was "a little desperate," adding: "In his seven years as finance secretary, John Swinney has never taken a single progressive, redistributive measure. "Use of the private sector in our health service has spiralled. Plans are being made for around £450m of cuts to accommodate the resulting financial pressure."
"His flagship policy has been an underfunded council tax freeze benefiting the better off and leaving council service users paying higher charges. The Conservatives' Gavin Brown also questioned whether the extra £288m announced for the health service would meet the SNP's commitment to protecting the NHS budget.
"He has funded universities with swingeing cuts to college budgets and last year he promised to fully mitigate the impact of the bedroom tax in Scotland, yet still has not put the agreed mechanism in place. And he attacked the new property tax, asking: "How can the cabinet secretary justify an eye-watering 10% tax on houses over the value of £250,000?
"If this is a progressive budget from Mr Swinney, that will be a first." "There are pockets of this country, such as Edinburgh, where family homes for hard-working families are considerably in excess of that.
The Scottish government's annual budget, worth about £30bn a year and funded by a Treasury block grant, requires the final approval of the Scottish Parliament. "We all understand that it increases as houses go up but 10% I think is difficult to justify."
However, the SNP's majority at Holyrood will ensure it goes through. Scottish Liberal Democrat leader Willie Rennie said the budget, which still needs the final approval of parliament, needed further work to ensure it delivered for families.
Spending squeeze
"We need to see action to restore college funding to 2011 levels, so more young people can get the best start in life, and on mental health so that these crucial services get the investment they need," he added.
Patrick Harvie, the Scottish Green co-leader, welcomed spending commitments on affordable housing, new colleges and the NHS - but said it was time to address the issue of council tax, which has been frozen since the SNP came to power in 2007.
"There is talk today of a historic moment as new tax rates are set, and yet the one major tax we've had control of since 1999 is council tax, which remains unfair and unreformed," he said.
Mr Swinney said Scotland's economy was back up to pre-recession levels, but added that finances still faced a squeeze on public spending, due to reductions in Scotland's Treasury-funded budget.
As the Westminster government attempts to reduce the nation's spending deficit, Mr Swinney said cuts to Scottish spending amounted to a 10% cut in real terms over five years, and capital spending cuts of more than 25%.