Now is not the time to increase taxes, Kate Forbes says

Finance Secretary Kate Forbes has said that “now is not the time” to increase taxes or to return to austerity.

Forbes was giving evidence to Holyrood’s Finance committee as she prepares the Scottish Government’s budget, which is to be published in January.

She said it is important to support businesses and individuals through the pandemic and urged Chancellor Rishi Sunak to reject austerity.

The Scottish Budget has been delayed until 28 January 2021 following the UK Government’s decision to shelve its Autumn Budget.

Sunak will instead deliver a spending review on 25 November, which will not include details on taxation.

Asked about the future of tax in Scotland, Forbes said: “I'm very persuaded by pretty much every commentator right now, and every think tank from the IMF to others, who are very clear that now is not the time for fiscal consolidation.

“So now is not the time to increase taxation right across the board – or indeed to cut spending. And I think those two have to be seen hand in hand when it comes to managing our fiscal position.

“Obviously when it comes to the suite of powers required to manage the financial situation after this pandemic, most of those are reserved, although we have set out in the Fiscal Paths documents as of June what our intentions would be if we were to have the power and what we want the chancellor will do, and that includes rejecting his austerity.”

Forbes also said that she would be seeking as much information from the UK Government as possible on its future plans for taxation.

She said: “We know, particularly when it comes to income tax, it's unavoidable that our income tax rates interact with what the UK Government does on NICs [National Insurance Contributions] for example, and what they might do in terms of either additional allowances or tweaking incentives that they have.

“So we will have to bare two things in mind. One is that now's not the time for fiscal consolidation, at a time when individuals and businesses need support. Secondly, understanding that in setting our tax before the UK Government, we have to have an eye on what they might do and obviously as much intel as I can get in advance, which is pretty much unlikely because it's tax policy, is going to be an essential thing.”

Forbes said one of the “greatest areas of debate” relates to continuing the freeze on non-domestic rates, which she said would be “prohibitively expensive” to continue into the new year in Scotland without more money from the UK Government.

She said: “We do not have budget cover to fund a billion pounds worth of reliefs next year. It just doesn't exist because we don't have resources or powers to do that. Now, the UK Government doesn't set its non-domestic rates freeze until mid to end March. We are running out of room to do something equivalent here in Scotland.

“And certainly, we are not providing the certainty that I want to provide businesses to set a briefs upfront. So rather than looking at the Scottish economy, understanding business needs and then coming to a conclusion on that policy, as any normal government would do when setting its budget, we are looking ahead to the UK Government and trying to guess basically what they might do, and what consequences might flow.”