Meeting of the Parliament 09 February 2023
In fairness, that is a matter for the Minister for Public Finance, from whom we will hear later.
I am pleased to see the proposals being made. We are now seeing the powers that were granted by the Scotland Act 2016 being used. We have some £19 billion being raised directly by the powers that the Scottish Government exercises, which represents some 35 per cent of all available revenues and 44 per cent of revenue funding. It is important that we see that bit of the budget—the part that is within the Scottish Government’s control—being used and exercised. The other day, the cabinet secretary described that as being in the foothills of variation of tax policy. I am pleased to see that; it is what devolution is about.
I also note that the measures are progressive. Tax is a part of the social compact whereby those who benefit from public services are asked to contribute, and those who have the ability to pay more do so.
Scottish Labour will support the rate resolution this evening. I note the proposal on the top rate of tax, which we called for back in 2019. In reflecting—but not necessarily completely mirroring—the comments of Willie Rennie and Liz Smith, I say that we need to consider the effectiveness of such powers. The relevant behavioural impacts need to be studied. I suspect that they might be overstated, but we need to examine in detail whether such impacts detract from the mechanical increases that would have been predicted.
Likewise, we need to consider the effects of fiscal drag, which are of concern to the Finance and Public Administration Committee. Those include the interactions between the Scottish bands and rates and other aspects of taxation—in particular, national insurance.
We now have anomalies in our tax regime, which we must examine. We need to consider the fact that the inflection point—the point at which a person in Scotland starts to pay more tax than someone who lives elsewhere in the UK would—is some £28,000. That will take in people who are in promoted posts in the teaching profession and nurses. We need to examine all those issues in the round and be led by the evidence to ensure that we have a progressive taxation system that is also effective. It is important that we assess that.
I believe that although our system should be progressive, raising taxes is not a benefit in and of itself. Although I absolutely support the right of the Scottish Government to have a taxation policy that is different from that of the UK Government—that is important—if we are to have a sustained higher level of taxation we must continue to test and challenge in order to ensure that we get commensurate benefit.
Finally, the clear point of fact with the fiscal framework is that it operates on the basis of average tax receipts per person in Scotland, their growth being higher than those in the rest of the UK. If that approach is to be sustained, we will have greater tax receipts and more money to spend in Scotland. Therefore I say to the Scottish Government that we need increased focus on growing jobs and wages, because ultimately that will be good not only for the exchequer in Scotland, but for Scottish people.
Scottish Labour will support the rate resolution. I seek to debate such topics further in the months and years to come as we explore tax devolution and variation in Scotland.
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