Hansard

I had checked the choreography with my officials earlier. The process is apparently that the cabinet secretary moves then I speak to the motion. I am delighted to open part 2 of this afternoon’s fiscal double header, for those who are gluttons for punishment.

First, I draw Parliament’s attention to the procedural connection between the debate and rule 9.16.7 of the standing orders, which states that a rate resolution must be agreed before stage 3 of the budget bill is able to proceed. As members will be aware, the debate on the rate resolution normally takes place following stage 2 of the budget bill, but today’s debate is taking place after stage 1.

Any further delay would have left business and payroll operators with insufficient time to ensure that their systems would be ready ahead of the start of the new tax year on 6 April. We have brought forward today’s debate to alleviate any further disruption to them and in recognition that people need stability from the tax system now more than ever before.

The fact remains that had the United Kingdom Government been able to set its budget in timely fashion, businesses and employers would not have faced this uncertainty in the first place. In contrast with the indecision of the UK Government, our budget offers Scotland’s people and businesses certainty and stability in times that are anything but certain. On every page of the budget can be seen decisions that have been taken with the coronavirus pandemic to the fore: spending prioritised for the industries hardest hit, support for our national health service and investment in the future of our economy. Those decisions have been taken without our having the full picture of funding available to us.

We have been clear that this budget supports Scotland’s people and the economic recovery for this year and beyond; it will provide certainty and stability in the face of the disarray that is caused by Brexit, at the hands of the UK Government.

In 2017, the Scottish Government set out its vision for a fairer and more progressive income tax system in Scotland. At the time, a commitment was made that the new five-band system would remain in place for the duration of this parliamentary session. The proposals that we are debating today deliver on that commitment and maintain our fairer and progressive tax system. Under those proposals, all income tax rates will remain unchanged; the starter and basic rate bands, as well as the higher rate threshold, will increase by inflation; and the top-rate threshold will remain frozen at £150,000.

During our pre-budget engagement, we heard a clear message from stakeholders across the country that now is not the time to make significant changes to taxes and that, instead, we should focus on supporting the people and businesses that are hardest hit by the pandemic.

Leading fiscal commentators, such as the International Monetary Fund and the Organisation for Economic Co-operation and Development, agree that now is not the time to balance the books. We, too, have been clear that now is not the time for fiscal consolidation. This budget is about striking the right balance between raising the revenue that is required to fund our public services and providing certainty for all Scottish taxpayers.

Our proposed tax package has been supported by key stakeholders. David Lonsdale of the Scottish Retail Consortium wrote that

“decisions to protect ordinary taxpayers from rises in income tax rates…are spot on”.

Professor Graeme Roy from the Fraser of Allander institute said that this wise package provides certainty and stability to households and families who are living in very uncertain times. Our proposals for income tax deliver that certainty and stability.

This Government is committed to ensuring that tax policy is understood and informed by a diverse range of views and perspectives. We have committed to delivering a transparent and outward-focused tax policy making process. We embrace a collaborative approach to tax policy development, which is characterised by regular consultation with taxpayers, industry representatives and professional bodies.

Ahead of the budget, we engaged with a diverse range of stakeholders on tax policy. That engagement included a pre-budget consultation, which showed a broad-ranging interest in the devolution of further tax powers and an appetite for broader engagement on tax.

We listened to the interest in further devolution of tax powers that has been expressed by stakeholders and, as part of the medium-term financial strategy, we called for the UK Government to use the upcoming fiscal framework review to consider that. That call includes devolving a package of taxes, encompassing full income tax powers and full value added tax devolution, as well as consideration of other tax powers, such as capital gains tax and national insurance. Those powers would enable the Scottish Government to shape a recovery that is best suited to Scotland. We believe that broad-based engagement of that kind should not be limited to the annual budget cycle, but should form part of a wider conversation about the purpose of tax in our society, and what tax is designed to achieve.

Members will know that the Finance and Constitution Committee, in its “Report on Scottish Government Budget 2021-22” this week, called for

“a national conversation jointly led by the Government and Parliament and which includes a wide range of voices across Scotland.”

Although I believe that he may be back for stage 3, I pay tribute to Bruce Crawford and the efforts that he made to encourage me when I first came into this Parliament and sat on his esteemed committee.

We welcome that call from the committee and will work constructively with its successor committee to ensure that the conversation is well-grounded and valuable to the public of Scotland.

The findings of that conversation will be considered as part of the pre-budget scrutiny of future years, but we want that national engagement on taxes to broaden understanding of the links between tax and spend, and the central role of taxes in Scotland’s finances.

We want to look afresh at the social contract that underpins tax and spend and allows Scotland’s taxpayers to continue to have access to a wider and better-funded range of free-to-access public services than in the rest of UK, making Scotland an attractive place to live, work, study and do business. Those taxes support our national health service and the industries that are hardest hit by the pandemic and they deliver for Scotland.

As this parliamentary session draws to an end, it is a good opportunity to reflect on what our decisions on income tax have delivered for Scotland. People in Scotland pay their income tax in the most progressive and fair tax system anywhere in the UK; it protects low-income earners and raises additional revenue to fund public services.

Our decisions mean that, for the fourth consecutive year, Scotland will be the lowest taxed part of the UK for the majority of income tax payers. We continue to ask those with the broadest shoulders to contribute more but, in return, people who live in Scotland continue to have access to the widest range of public services available anywhere in the UK. That is progressive tax policy in action.

Members will be aware that income tax outturn data is available only after a significant time lag. Therefore it was not until September last year that we got the first insight into the results of our income tax reform in 2018-19. That data showed that Scottish tax receipts grew faster between 2017-18 and 2018-19 than those in the rest of the UK. As a result, Scotland raised £119 million over and above the corresponding block grant adjustment, largely thanks to our policy changes. That positive outlook has continued into 2019-20. Data published recently by HM Revenue and Customs suggests that Scottish receipts between 2018-19 and 2019-20 continued to grow faster than those in the rest of the UK.

If we look across this parliamentary session, the latest forecasts from the Scottish Fiscal Commission and the Office for Budget Responsibility tell us that, over the five years following 2017-18, Scottish income tax is expected to raise around £930 million more than the corresponding block grant adjustments. That is extra money that we have been able to invest in our national health service and our education system and in tackling the climate emergency. There can be no firmer evidence that our tax policies are delivering for the people of Scotland.

I recognise that people across the country are dealing with the significant economic and social impacts brought on by the pandemic. They need certainty and stability from their tax system. This policy delivers just that.