Proposals for ‘modest’ income tax rise likely to be included in next Scottish budget
Nicola Sturgeon and Derek Mackay - Image credit: First Minister's Office
Proposals for an increase in income tax look likely to be included in the next Scottish budget, after the First Minister launched a consultation paper on income tax in Scotland this morning.
While underlining that nothing was a “forgone conclusion”, Nicola Sturgeon indicated that she thought the “time is right” for a “modest” increase in tax.
However, she said that she would go into discussions “with an open mind”, recognising that the SNP is a minority administration.
“Nothing is a foregone conclusion until the budget is not just presented but passed,” she said, “but I think you can get the sense from the paper today, from what I’ve said previously, from what I’m saying today, that I think the time is right to consider modest additional contributions to protecting the things that we hold dear.”
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The Scottish Government had signalled its willingness to compromise and it was incumbent on other parties to do likewise, she said.
The paper notes that if all parties “stick rigidly to manifesto positions” it will be impossible to pass a budget.
The First Minister, along with Finance Secretary Derek Mackay, was launching ‘the Role of Income Tax in Scotland’s Budget’, an outline of the Scottish Government’s views on income tax, as well as analysis of the impact of the opposition parties’ proposals from their 2016 manifestos ahead of Scotland’s draft 2018/19 budget being published.
Laying out the Scottish Government’s vision for a better future, Sturgeon said: “With all the pressure that we now face, we must consider whether the time has come for those who earn the most to enable us to do so.
“So it is to help aid and inform that discussion that this consultation paper is being published today”.
The consultation paper outlines four ‘policy tests’ which any income tax proposals would be assessed against that the Scottish Government believes “any responsible and progressive use of Scotland’s tax powers must meet”.
These are that any change must mitigate UK Government spending cuts and promote the level of public services that people in Scotland expect, that the lowest earning taxpayers do not see their taxes increase, that they make the tax system more progressive and reduce inequality, and that they support economic growth.
Sturgeon said: “I believe that these tests reflect the views of the majority of people in Scotland, namely we want worldclass public services, we shouldn’t ask the lowest earners to shoulder more of the burden, we should do all we can to make the system fairer and reduce inequality and that supporting the economy and sustainable growth should be absolutely central to our approach.”
The First Minister said that one of the reasons she could not back Labour and Lib Dem tax proposals was that they would hit those on the lowest incomes.
Asked what she would say to those on incomes of £31,000, she said she was talking about “modest increases” but would not “underplay the impact of that on household finances”.
The paper also raises the possibility of creating more income tax bands, which the First Minister said could allow tax to better match people’s ability to pay.
Models are laid out for between three and six tax bands, with lowest tax bands set at either 19 or 20 per cent and the highest, for those earning above £150,000, at between 46 and 50 per cent.
In three out of the four alternative approaches set out, those earning between £24,001 and £43,000 would pay one per cent more than they do now.
She suggest some of the increases could be used towards giving a pay rise to public sector workers.
The First Minister acknowledged that she had been criticised by some opponents for being cautious on tax, but said that the devolved powers were not “a toy”.
“These are issues that no responsible first minister or government should deal with lightly,” she said.
She added: “I absolutely have been cautious on tax and will continue to be cautious on tax, because every decision I make on tax is paid for by a household or an individual across the country, so it’s right we make these decisions in a careful, responsible and balanced way.”
Asked whether raising income tax would send a “damaging message” when it comes to attracting business and fresh talent, Sturgeon replied that Scotland would remain “the most cost effective part of the UK to be in because of the wider and broader array of social benefits”.
“There is nothing in this paper that would come even close to outweighing the value of tuition fee-free university education or personal care or free prescriptions or the extra investment that we make per head in the NHS or on public services,” she said.
“Scotland will remain not just the part of the UK with the best quality public services, the most generous social provision, but also the most cost-effective part of the UK to live in.”
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