Meeting of the Parliament (Hybrid) 25 February 2021
It is a peculiarity of the budget process that we have to set the rate resolution before our final vote on the budget. We do not yet know the final overall size of the budget, or how it will be allocated.
However, this is an important part of the process: if we did not agree on a rate resolution, no income tax would be collected at all in Scotland. Some of my colleagues might welcome that prospect. It might give an interesting foretaste of what an independent Scotland might look like, with a large black hole in the public finances, but it is probably not a responsible way in which to proceed, at present.
As we consider our approach to the rate resolution, let us not forget that the Scottish National Party was elected on a manifesto promise not to raise taxes. In its 2016 manifesto it pledged to
“freeze the basic rate of income tax throughout the next Parliament to protect those on low and middle incomes”.
Nicola Sturgeon herself has said:
“I have been very clear that the government will not increase income tax”.—[Official Report, 2 February 2017; c 10.]
I could bore the chamber for hours with similar quotations from SNP figures, perhaps even from the finance secretary herself, making similar pledges, all of which have now been broken.
Everyone who earns more than around £27,000 pays more tax than their equivalent south of the border. Many of those who are paying much more are basic-rate taxpayers. There is also, as we have often raised, particular concern about those who earn between £43,000 and £50,000, who pay tax at a marginal rate of more than 50 per cent. That is a disincentive to people in that tax bracket to work harder.
That is not the only tax promise that the SNP has broken. It also promised at election time to raise the personal allowance to £12,750. That is another pledge that the SNP has broken: we have had two broken tax promises in the course of one session of Parliament.
That said, I welcome the fact that we will not have further tax increases in the current year. Although that does not narrow the gap between Scotland and the rest of the UK, at least it does not make matters worse.
It is classic Keynesian economics to increase spending and reduce taxation at a time of economic downturn. The Scottish Government is not choosing to reduce taxation; we will see what the Chancellor of the Exchequer decides to do for the other parts of the UK in his budget next week. To increase taxes at this time would go against all orthodox economic thinking. The minister gave a nod to that idea in his remarks. This is not the time for fiscal consolidation. That might be different in the long run. We await what the chancellor announces in the UK Budget next week, but I would be very surprised if he took any steps to increase personal taxation at this time.
In subsequent years, the story might be different. There might be a need to increase taxes in order to reduce borrowing and then to start to make repayments, but now is not the time to do that. In that respect, the minister and I are in the same place; we agree with that general approach. It remains to be seen whether that meeting of minds will last much longer. For now, we agree that that is a sensible approach to taxation.
However, we would prefer it if we were going further towards meeting tax rates in the rest of the UK, because we have to be very careful about increasing tax divergence between Scotland and down south. Scotland needs to be a competitive place to live, work and do business. Our aspiration as a party is for taxes in Scotland to be competitive relative to those in the rest of the UK. That is how we will attract people to come to live in Scotland, and that ambition is as important now as it ever was.