Hansard

Scottish Liberal Democrats have considered the vote on the rate resolution separately to the vote that will come on the budget after recess. In the debate that we had on this a year ago, few would have predicted double-figure inflation or that Vladimir Putin would invade the sovereign territory of Ukraine. Nobody could have foreseen the extent to which the incompetence of the Conservatives would trash the economy and the public finances.

Public services have had to brace themselves against these winds. It has been a “protection operation”, as Sir Anton Muscatelli told the Scottish Parliament’s Finance and Public Administration Committee. However, it is essential to grow the economy, because Scotland has underperformed relative to the UK since powers were first devolved to it. The Scottish Fiscal Commission believes that ministers might already be losing out on almost £700 million in income tax revenue. Worse still, it is expecting Scotland’s economy to grow more slowly over the next 50 years.

An IFS analysis published today showed that average net household income will be reduced by £110 next year by the tax and benefit changes. The bottom third of households with children will gain, on average, around £1,200 a year, due to the Scottish child payment, but poorer households without children will, in the words of the IFS,

“see virtually no change in their incomes”.

Those households have rent to pay and rising food and energy bills, which is why we need to see progressive changes to the budget, such as a new, national emergency insulation programme.

We have previously supported modest tax rises to deliver essential investment. We will do so today, as we are in an emergency.

However, for those at the higher end, the cumulative effect of tax changes matters. Next year, someone earning £50,000 will pay over £1,500 more in Scotland than if they lived elsewhere in the UK, and someone earning £150,000 will pay almost £4,000 more. Those are talented people whom we are already short of—the consultants that we desperately need in our NHS, cyberanalysts, tech innovators and the best engineers.

I do not believe that one-off, defined and limited tax rises have a significant impact on behaviour, but people need to be confident about the future intentions of Governments, which is where I think the intervention from my friend and colleague Willie Rennie came from. If people think that the Government has lost control of tax rises, their confidence drops and that affects their behaviour. When those individuals come to weigh up where they want to live and work, it could cost us dearly if the Scottish Government has lost their confidence. Those people are mobile and there are opportunities elsewhere in the United Kingdom.

It is an imperfect science, but I am not convinced that the Government understands what those people are thinking, and their behaviour really matters to the tax take. Where is that evidence? I think that higher-rate taxpayers are worried about the long-term intentions of the Scottish National Party Government. The presence of the Greens does not reassure them; it adds to the uncertainty about the direction of taxation and the perception that the Government may go much further and take tax to extraordinary levels. Those taxpayers do not know what is going to happen next.

The social contract is also being stretched by Government incompetence. The ferries have become a symbol of that. Then there is ScotWind—the best chance for generations to bring serious money into the public purse, but Scotland’s prized seabed was sold on the cheap. I fear that the national care service will be the next shambles.

I worry that we are coming to a tipping point and that some people will say, “Enough is enough”, so I am telling the Scottish Government today that it cannot guarantee to have our support if it brings forward further tax increases.

The Scottish Liberal Democrats fought for tax powers for this Parliament, and when we proposed a moderate penny for education in 2016, it was for a defined purpose and period. It was designed to make education the best again, driving the economy and growth.

Now there is a crisis in every corner of our NHS and social care. It is unprecedented, so we can see the logic in a penny—a further penny—for health at this time. Putting aside the refusal of the SNP Government to acknowledge its role in this—