Mackay – ‘Holyrood defeat won’t stop me raising taxes’
● SNP fails to win support for changes ● Parties starkly split over tax plans
Finance secretary Derek Mackay has vowed to press ahead with plans to make Scotland the highest-taxed part of the UK despite suffering an embarrassing defeat at Holyrood.
Today, Mr Mackay is set to unveil a draft 2017-18 Scottish budget that will see higher-earning taxpayers denied a tax break being offered elsewhere in the UK.
Ahead of the first ever scottish budget with the power to alter income tax bands and rates, Mr Mackay has indicated that the Scottish Government will not pass on a UK government proposal to raise the tax threshold for earners in the higher rate tax band.
On the eve of the budget, Holyrood debated the Scottish Government’s plan when MSPS discussed a Scottish Conservative motion stating families and businesses in Scotland should not be taxed more than those elsewhere in the UK.
Mr Mackay lodged an amendment to the motion which called for taxes to be used in a “fair and progressive” way. Although supported by
60 SNP MSPS, Mr Mackay’s amendment was defeated by 61 opposition members who voted against him.
The symbolic vote will not derail the budget which will be formally presented to parliament for Stage One of the legislative process.
But it did illustrate the objections to the Scottish Government’s plans from the left and the right as well as the challenge Mr Mackay has as the finance secretary of a minority government. Before the budget becomes law in February, Mr Mackay will have to negotiate with his opponents to get enough support to get his plans through parliament.
The Conservatives objected to Mr Mackay’s amendment on the grounds that higher tax will discourage businesses from coming to Scotland. Labour, the Lib Dems and Greens argued that the plans did not go far enough and the wealthy should be taxed more.
Conservative finance spokesman Murdo Fraser said the SNP had “lurched to the left” under Nicola Sturgeon’s leadership with its proposal to raise income tax.
“We do not believe that families and businesses in Scotland should be taxed more highly than elsewhere in the United Kingdom,” Mr Fraser said.
“It is time for the SNP to take their hands out of the pockets of hardworking taxpayers and concentrate instead on measures which grow the economy and grow the tax base.”
But Mr Mackay indicated he would not proceed with UK government plans to raise the 40p higher rate of tax threshold to £50,000.
“It is our position that we aspire to protect low and middle income taxpayers and given the choice between raising revenues or handing out large tax cuts to the richest in Scotland we choose public services,” Mr Mackay said.
In his Autumn Statement, Chancellor Philip Hammond outlined an increase in the threshold for the 40p upper rate of income tax from £43,000 to £45,000 next year – eventually reaching £50,000 by 2020-21.
In Scotland it will increase to just £43,387 next year – a rise in line with inflation. Under this arrangement, a Scot earning £50,000 will pay £323 more in tax. When the UK threshold reaches £50,000, a Scottish taxpayer on £50,000 will pay £800 more in tax.
A Labour amendment calling for a 50p top rate of tax on those earning more than £150,000 was also defeated, with the SNP voting against it. So were amendments tabled by the Lib Dems and Greens calling for higher taxes.
Last night, Scottish Labour leader Kezia Dugdale said: “People will be appalled to learn that SNP ministers who campaigned against austerity have now voted with the Tories to block the introduction of a 50p top rate of tax for the richest few earning more than £150,000 a year.
“When Nationalist ministers present the budget tomorrow they must not simply pass on Tory cuts to local services like schools and social care.”
The Greens’ Patrick Harvie warned the Scottish Government it would be “scandalous” if it does not take action and move from its manifesto position, and make greater use of the new tax powers.
Lib Dem leader Willie Rennie said: “The Liberal Democrats believe income tax should be raised by modest 1p to invest £500 million into nurseries, schools and colleges. This small increase for a big return, I think, has a clear purpose.”
Looking at the skyline across Scotland’s capital city, a striking feature is the number of cranes signalling the rebirth of many formerly abandoned or derelict areas. The same holds true for other projects such as the V&A on Dundee’s waterfront or the new Queensferry Crossing over the Firth of Forth.
But the outward signs of activity are misleading. The latest figures showing that Scotland’s unemployment rate is now 5.3 per cent – compared with 4.8 per cent for the rest of the UK .Here we have yet another indicator that Scotland’s economy is faring worst than the UK economy as a whole.
There is no doubt the continuing uncertainty over Brexit is affecting the situation, with many businesses exercising caution, while householders too are delaying making major decisions such as moving home until their long-term financial prospects are more secure.
But the figures beg the question – “what is England doing right that Scotland isn’t?” or is the added uncertainty of a second independence referendum the additional factor?
Jamie Hepburn, minister for employability and training, has said that Scotland’s unemployment rate is down by 0.4 per cent over the year, with the country outperforming the UK on youth and female employment. Be this as it may, it does not alter the more worrying fact that Scotland’s employment rate is falling. This is a greater indicator of the heath of the economy than the unemployment figures as, quite simply, people can drop off the official unemployment figures for a range of reasons. If they are not on the employment figures it means thay are not economically active.
Mr Hepburn talked about recent initiatives such as an extra £100 million for capital projects and establishing a new £500m Scottish Growth Scheme supporting small and medium enterprises. This is absolutely right and proper and news of such endeavours is to be welcomed.
Another positive factor is that the Scottish Government now has more levers to control the economy, especially many tax powers.
Today’s draft budget proposals to be revealed by Finance Secretary Derek Mackay, provides the ideal opportunity for the Scottish Government to step in. Liz Cameron, chief executive of the Scottish Chambers of Commerce, is rightly warning of choppy waters ahead and has outlined one act that would be a real improvement. Ms Cameron said the Scottish Government has a “golden opportunity” in the budget to give businesses a tremendous boost by tackling the rising costs of business rates.
This is a measure in Holyrood’s gift and would allow businesses which form the solid foundation of Scotland’s economy to flourish.
Bringing forward big building projects provides help for a defined sector. Cutting business rates would be a real help to businesses in every sector, and allow greater opportunity for them all to grow, and a give a far bigger boost to the economy in general.