New ‘advanced’ income tax rate unveiled at Scottish Budget

The Scottish Government is to introduce a new tax band for those earning between £75,000 and £125,000, the finance secretary has confirmed.

Delivering her first budget, Shona Robison confirmed higher earners in Scotland would be “asked to contribute a little more” through changes to the tax system.

The new “advanced” rate will be set at 45 per cent, while the top rate of tax (paid by those earning over £125,140) will increased by a penny to 48 per cent.

The deputy first minister said these two changes would raise an additional £82m per year for the Scottish purse, though only five per cent of earners would be impacted.

Those paying the starting, basic, intermediate and higher rate will face no increase, though the thresholds for the lowest three bands will be increased by inflation.

The Scottish Conservatives said the changes set out a signal that Scotland was not “open for business”, while Scottish Labour suggested ministers were using tax as a “substitute for economic growth”.

Robison said the budget had been set in “turbulent circumstances”, pointing to global headwinds as well as decisions made by the UK Government.

She accused the prime minister of having “prioritised tax cuts at the expense of public services” in the autumn statement last month.

She said: “We cannot spend money that we do not have, and we can’t mitigate every cut made by the UK Government. We are at the upper limit of the mitigation that can be provided within the devolved settlement.”

The finance secretary also reiterated the commitment made by Humza Yousaf at the SNP conference that the government would look to freeze council tax, offering local authorities an extra £140m to do so.

This was, she said, the equivalent of an “above inflation five per cent council tax freeze”.

The powers to implement a council tax freeze lie with local government, who will be looking to set their budgets in the new year.

An uprating of Scottish benefits was also announced, including to the Scottish Child Payment which will now be worth £26.70 per week (up from £25) – though that falls short of Yousaf’s suggestions during the SNP leadership contest that it could rise to £30.

On public services, Robison warned pressures could not be addressed by tax increases alone and reform was required – but she reiterated her stance on no compulsory redundancies.

Funding for the NHS received a 4.3 per cent uplift, with £2bn going towards health and social care integration.

Police budgets are set to increase by 5.6 per cent, while the Scottish Prison Service will get an extra ten per cent.

Scottish Conservative finance spokesperson Liz Smith accused the finance secretary of trying to place the blame for the current fiscal situation on the UK Government, adding this would “not wash with the public”.

She said it was a reflection of the “policy decisions that have been made right here in Holyrood”. Smith added the SNP had failed to grow the economy and was therefore “starving” public services of cash.

She also urged ministers to “cancel” plans for a National Care Service in order to fund other local services, saying local government was getting “only a half” of what they had requested.

Scottish Labour’s Michael Marra described the statement as a “chaotic budget” from an “incompetent” government.

He said that if economic growth in Scotland has kept pace with the rest of the UK, the finance secretary would have had £8.5bn more to use.

“Tax cannot and should not be used as a substitute for economic growth,” he added.

Chair of the Scottish Fiscal Commission Professor Graeme Roy said:  “Whilst resource funding will increase next year, and by more than we predicted in May, spending commitments including social security, public sector pay and the council tax freeze will mean individual cabinet secretaries will face some difficult choices.”