Meeting of the Parliament 20 February 2018
That is exactly what the SNP Government is doing. However, in contrast with the Labour Party’s proposals, we will, by doing this in a proper fashion, actually raise the revenue to invest in public services, rather than allow for tax behaviours that would mean less resource for the next year. That is the reality, as verified by the Scottish Parliament information centre, the Scottish Fiscal Commission and the Council of Economic Advisers. The Labour Party should do its homework when it comes to tax setting in this country with the powers that we have.
The tax decisions that I have taken have enabled me to reverse the real-terms cut that has been imposed by the UK Government on our resource budget, and to continue to invest in our public services, our people and our businesses, thereby enabling them to develop and thrive.
We are a Parliament of minorities, so we must work across the chamber to find compromise and consensus so that we can give support, sustainability and stimulus to our economy and our public services. Reaching consensus is a task for us all, so I thank members who have engaged properly and constructively.
Since the Scottish Parliament gained powers over income tax, the SNP Government has been clear in its ambition that income tax should be fair and progressive while also supporting delivery of vital public services and enabling investment in the economy. Overall, the Scottish Government’s use of the devolved income tax powers will deliver an additional £428 million next year to support a budget that will protect our public services that are free at the point of use, including free prescriptions, free personal care and free tuition. We will invest an additional £400 million in Scotland’s national health service, and we will provide above-inflation investment in the police, in our universities and colleges and in local government services the length and breadth of Scotland. I am confident that those proposals will deliver the best outcomes for the people and economy of Scotland and the best deal anywhere in the UK.
Tax powers are not a political toy; they have an impact on individuals and the economy. The decisions that this Government has made have to be seen in the context of the UK Government’s continued pursuit of budget cuts and the harmful effects that they have on Scottish Government funding. They mean that the Scottish taxpayers with the broadest shoulders are being asked to contribute more to support investment in Scotland’s people and economy. We must also keep it in mind that no one, for any given income, will see their income tax increase by more than 1 per cent of their gross salary next year, although collectively the changes will raise an additional £219 million for investment in our economy and public services.
People who are desperate to present the changes as a major risk to Scotland’s economy are simply wrong. The Scottish Fiscal Commission has stated that the tax impact on the economy will be negligible. The tax that an individual pays is only one part of the equation. Not only is there a direct benefit to the individual in being able to access a broad range of good-quality public services, there is a wider benefit—both now and for the future—from the investment that the budget is making.
The current devolved income tax powers are significant, but because decisions over the income tax base remain reserved to Westminster, their use is either constrained or could result in unavoidable consequences that would impact on Scottish taxpayers. My officials and I have been working with Her Majesty’s Revenue & Customs to ensure that any administrative consequences are resolved. To that end, I have reached agreement with the UK Government that Scottish taxpayers who pay the starter or intermediate rates of tax will retain their eligibility for marriage allowance. The UK Government confirmed yesterday that Scottish taxpayers will continue to receive pensions relief and other allowances on the same basis as rest-of-UK taxpayers. Of course, it would be easier if Scotland had full powers over income tax. [Interruption.]
I note that no one is intervening, despite the noise coming from Tory members.
Future revenues for the Scottish Government will be driven by our policy choices and the relative growth per capita in our tax receipts. That is why this Government continues to invest in Scotland’s economy and its workforce, in order to improve the prospects for economic and employment growth. The investment is coming at a time when Scotland’s economic performance has remained resilient despite heightened economic uncertainty as the UK moves closer to leaving the European Union. It is encouraging that the latest Bank of Scotland PMI reported that business optimism in Scotland is at a three-year high. In addition, Scotland is benefiting from continued near-record low unemployment, which demonstrates the on-going strength of the Scottish labour market.
As well as our four tests, we followed the Adam Smith tax-making principles of certainty, convenience, ease of collection and proportionality to the ability to pay. Our providing certainty over income tax policy was raised as an important issue during a series of round-table events: we recognise the importance of certainty to Scottish taxpayers and to business. The income tax discussion paper marked our intention to debate and to reach a decision about income tax arrangements that will be fit for purpose now and into the future. The proposed income tax policy meets the four tests and the Adam Smith principles. I believe that we have a settled structure in income tax policy, which should provide certainty over the remainder of the current session of Parliament.
The independent Scottish Fiscal Commission is responsible for forecasting Scottish income tax receipts, and that forecast determines the funding that will be available from HM Treasury in 2018-19. The Scottish Fiscal Commission’s forecasts show that there will be growth in Scottish income tax receipts for every year over the forecast period, and forecast per capita growth is expected to be greater than that in the rest of the UK.