Meeting of the Parliament 24 February 2016
The Budget (Scotland) (No 5) Bill for 2016-17 maintains our strong record of managing the public finances using the fiscal powers that are currently available to us. It confirms our plans for taxation and expenditure to deliver sustainable economic growth, improve Scotland’s public services and create a fairer and more prosperous economy, with opportunities for all our citizens to flourish.
It is also a historic budget, given the context provided by this week’s agreement with the United Kingdom Government on the fiscal framework that will support the Scotland Bill. The agreement has significant implications for future Scottish budgets, which the Scottish Government and Scottish Parliament will need to consider in the coming months.
Let us not forget the significant events that have already occurred in relation to the setting of this budget. Two weeks ago, the Parliament voted to set the Scottish rate of income tax at 10p. That means that the lowest-paid taxpayers in our society are protected and the rate of tax paid by Scottish residents in 2016-17 will be the same as it is today.
Our decisions on taxation have been based on the principles that I set out in earlier legislation and are designed to deliver a coherent tax framework for the people of Scotland. The first decision on setting a rate of income tax in Scotland has therefore been one of substance and one that has required me to balance the opportunities and risks that are presented by our new tax powers. It has not been a case of making proposals without identifying how they could be implemented and what their effect on individuals would be.
I have taken the same approach when setting all devolved taxes. With land and buildings transaction tax—the first tax power to be devolved to this Parliament in more than 300 years—I delivered a progressive regime. The UK Government had passed up the opportunity to deliver such reform in the past.
However, progressivity in itself is not sufficient justification for increasing the tax burden on the lowest-paid taxpayers. Taxes must also be proportionate to the ability to pay—I stress “ability to pay”. It would be of limited reassurance to our pensioners, our newly qualified teachers and our postal workers to know that people on higher salaries were paying more in increased taxes than they were paying, as they saw their weekly budgets come under increased strain. Such people will not care that other people are paying more; they will care that they are paying more. That is not a burden that I am willing to impose in this budget.