Swinney unveils tax rises for the wealthy in Budget delayed by BBC leak
Interim finance secretary John Swinney has raised tax rates for higher earners in a move that he says will enable him to increase spending on Scotland’s NHS by £1bn in one year’s time.
In his Budget statement this afternoon, Swinney said that as the tax burden should be “proportionate” to people’s ability to pay, he will hold the starter, basic and intermediate tax rates at current levels but will increase the higher and top rates by 1p each while lowering the threshold at which the top rate kicks in from £150,000 to £125,140.
He said the respective increases to 42 per cent and 47 per cent were for the “specific purpose” of exceeding Barnett health consequentials and as such represent “an extra penny to increase spending on patient care”.
Swinney’s announcement was delayed by over half an hour after details of the tax changes were leaked to the BBC, leading Presiding Officer Alison Johnstone to suspend proceedings to investigate.
When she returned to the chamber Johnstone said she could “not express strongly enough [her] disappointment” about the leak but that both First Minister Nicola Sturgeon and Swinney had “categorically” assured her it had not come from government.
To loud jeering from the opposition benches, Swinney gave the chamber his “categorical assurance, as a member of parliament since its foundation in 1999 that no individual was authorised on my behalf to disclose any information”.
When he moved on to deliver the Budget statement, Swinney – who is covering finance secretary Kate Forbes’s maternity leave – noted it was being given against the “most turbulent economic and financial context most people can remember”, adding that the war in Ukraine, energy prices, inflation, Brexit and the UK Government’s September mini-Budget had all impacted adversely on the situation.
He added that £700m of in-year spending had had to be reallocated to fund public sector pay deals, meaning the Scottish Government would be going into the 2023-24 financial year without being able to carry forward any “fiscal resources”. The government entered the current year with £450m carried forward from the year before.
Against that backdrop – and warning that in the longer term the 2025-26 and 2026-27 financial years were looking “particularly bleak” – Swinney said his priority for the year ahead is to “commit substantial resources to protect the most vulnerable people in Scotland from the decisions made by the UK Government”.
He confirmed that the Scottish Child Payment, which is offered to low-income families and last month increased from £10 to £25 per child per week, would remain at the higher level in the year ahead and that all social security benefits the Scottish Government is responsible for will rise by 10.1 per cent – the rate of inflation as at September.
He has frozen Land and Buildings Transaction Tax (LBTT) rates for residential and non-residential properties at this year’s levels, and taken the same stance with business rates.
In terms of rises, as of tomorrow, the LBTT additional dwelling supplement will increase from 4 per cent to 6 per cent while local authorities – which will be given an additional £550m in resources – will be given the ability to raise council tax to uncapped levels.
Though Swinney said he would not “seek to agree any freeze or cap to council tax”, he urged councils to remember the “cost pressures” the public are under when setting their individual rates.
Deapite Swinney's claims about his tax changes providing funding for the NHS, Institute for Fiscal Studies associate director David Phillips, said the impact would be marginal.
“The Scottish Government has further raised tax rates on high earners relative to the rest of the UK, continuing a trend of higher, more progressive taxes," he said.
"The revenues raised – estimated at around £95m on top of the £8m from following the UK government’s decision to reduce the threshold at which people start paying the 45p additional rate of income tax – are not to be sniffed at but are small in the context of its budget and cost pressures.
"The higher tax rates would, for example, cover Scottish NHS spending for only around 48 hours.”
Meanwhile, Emma Congreve, deputy director of the Fraser of Allander Institute, questioned the rationale behind allowing local authorities to increase council tax without reforming the tax itself.
“Council tax is a regressive tax with people on middle incomes paying more than those on higher incomes," she said.
"It’s regrettable that the Scottish Government have signalled that local authorities can increase council tax without committing to reform.”
Liz Cameron, chief executive of the Scottish Chambers of Commerce, welcomed the news on business rates but said the changes to income tax would have a knock-on detrimental impact on businesses.
“As a priority ask from the business community, we welcome the Scottish Government’s decision to freeze the poundage rate and align with the rest of the UK,” she said.
“This will provide relief to ratepayers by reducing the upfront cost burden of non-domestic rates. This was the right decision, as is the incentive for businesses to invest in greener plant and machinery which supports net-zero and decarbonisation.”
She added, however, that Scottish Government should publish its economic modelling on income tax to show the “proposed impact this could have on future investment decisions by companies”.
“This is a clear disadvantage for Scotland’s businesses and workers and could position Scotland as a less-attractive place to live and work,” she said.
“With over 350,000 people alone in the higher rate bracket, questions remain on the impact this will have on talent attraction, retention, consumer confidence and indeed departure of workers to other parts of the UK.”
Scottish Labour finance spokesperson Daniel Johnson said Swinney must show how the tax rises will “support our public services”, adding that “this money is going to have to be used to fix some of the damage done by 15 years’ of SNP cuts and failure”.
“Scottish Labour supports progressive taxation, but Scots will be wondering why they are facing tax rises to pay for public services while the SNP completely fail to outline how they will ensure that they deliver value for money," he said.
Scottish Liberal Democrat leader Alex Cole-Hamilton said the Budget represented a “bleak day for our country” and that while “external factors have certainly played their parts” they have been “compounded by the manifest failures of this government”.
“There is a lot of pain in this Budget,” he said. “Pain for mental health services, for a voluntary sector on it knees that will now face another £4m cut and a local government uplift that is barely half what Cosla have asked for in order to keep the lights on.”