Meeting of the Parliament 09 February 2023
I thank Mr Rennie for his support for the resolution, for his instructive engagement and for his enthusiasm, because he wants to start talking now about the 2024-25 budget. As I am sure he appreciates, we will use each budget in turn to set out our decisions on tax policy and will take into account a number of factors, including the prevailing economic conditions.
Now more than ever, it is vital that we are guided by the principles that are set out in our framework for tax, which we published in December 2021.?? One of those principles is engagement.?? That is why, ahead of the Scottish budget, the Deputy First Minister and I listened to a range of stakeholders. We thank all those who were involved for their input.?? We heard a consistent message from that engagement, which is that we need to use our tax powers to support and invest in our public services, reaffirm our commitment to reaching net zero emissions, tackle child poverty and support the economy.?
?Our income tax policy for 2023-24 responds to that. It seeks to strike a balance between ensuring that there is enough money for public spending and acknowledging the challenging economic conditions facing households and businesses and it supports Scotland being a great place to live, work, study and do business.?
?Our proposed income tax policy for 2023-24 is for there to be no changes to the starter, basic or intermediate rates and bands, protecting those on lower incomes.? We also propose making no change to the current higher-rate threshold of £43,662 and lowering the top-rate threshold from £150,000 to £125,140. Finally, we propose raising the higher and top rates of tax by 1p, bringing them to 42p and 47p respectively.?
?We have estimated that the income tax policies that I am asking members to vote for today will raise an additional £519 million for the Scottish budget in 2023-24.?? Those policy changes, which are grounded in our principles for taxation, will enhance the progressive approach to tax that we have taken to date. The majority of the additional revenue that is raised by those changes will come from those individuals and households in the top two income deciles.?
Our approach will mean that we can continue supporting our leading social contract with the people of Scotland, while also ensuring that the majority of taxpayers still pay less income tax than they would if they lived elsewhere in the United Kingdom. Crucially, as set out by the Deputy First Minister in his budget statement in December, the changes that have been announced for 2023-24 mean that we will be in a position to exceed the health resource Barnett consequentials received from the UK Government and to make a substantial additional investment in our national health service.? Our NHS is a precious public asset; by choosing to raise more revenue from tax to invest in vital front-line services we are making an investment that will benefit us all.?
I close by reminding members that we have had to make these income tax policy choices not only in a difficult economic climate but within the political chaos that has been caused by the UK Government in the past year.? In 2022, there were four UK chancellors in the space of four months. We saw constant U-turns on tax policy from UK Government ministers and should not forget the ill-judged tax cuts in its short-lived mini-budget in September and the impact on financial markets that many in Scotland are still facing as a consequence.
That chaos presented significant challenges as we developed our transparent income tax policy in Scotland.? The UK Government’s financial plans look increasingly bleak and there is no doubt that they will cause significant fiscal challenges for us here in Scotland. The Office for Budget Responsibility estimates that the UK has entered a recession that will last for more than a year and the International Monetary Fund suggested last week that Britain will be the only G7 country whose economy is forecast to shrink in 2023. ?
?This Government is clear what its priorities are. We are choosing to invest in the economy, in our leading social contract and in the people of Scotland.?? That is why I ask members to vote today to ratify the proposed changes to Scottish income tax that are set out in the budget for 2023-24.
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