Swinney keeps Scots tax rate unchanged

16 Dec 15

Scottish finance secretary John Swinney has shunned his first opportunity to set a different income tax for Scotland from that of the rest of the UK, but made clear his intention to do so if and when full income tax varying powers are devolved under the 2016 Scotland Bill.

In his Budget statement today, Swinney also announced: an extension of the council tax freeze for a ninth year; a review of the business rates regime, coupled with an interim tax hike for bigger firms; stiffer property transaction taxes for second home purchases; and a £250m shift of resources from health into social care, following the merger of the two services.

Swinney set a Scottish income tax rate for the first time, using powers under the 2012 Scotland Act which devolves discretion on 10p in the pound while cutting the Scottish block grant accordingly. But he said these powers obliged him to set the same figure for all three rates of the tax, which would benefit the better off, and that he was therefore setting it the same as in the rest of the UK.

The Scottish government would lay out its plans ahead of next May’s Holyrood elections for a more distinctive Scottish income tax regime, assuming that agreement is reached on a fiscal framework that will enable income tax to be fully devolved under the 2016 Scotland Act, Swinney said.

He claimed the new emphasis on social care was the most far-reaching reform of health provision since the creation of the National Health Service in 1948, since it would remove the boundary with council-run social care and mean more people being treated in their homes, with shorter stays for those who did have to go to hospital.

NHS spending would rise by £500m to nearly £13bn next year and continue to rise in real terms each year of the next parliament if the SNP remained in power, Swinney said. But in return he wanted fundamental reform. He announced plans for six new treatment centres to deal with an ageing population and new community-based treatment models run by multi-disciplinary teams.

Other announcements included continued commitment to free prescriptions, concessionary travel, free primary 1-3 meals and free university tuition. He also pledged to almost doubt the current 600 hours of free pre-school provision and to maintain spending on frontline policing and offset UK benefits cuts.

Swinney described it as a “Budget for Scotland” and “a Scottish alternative to austerity”, though he said the UK austerity programme would cut the Scottish budget block by an eighth by 2020, as well as leaving capital spending below its 2010 level in real terms. 

However, there was some angry response. The Convention of Scottish Local Authorities claimed councils were facing a “totally unacceptable” 3.5% or £350m cut next year, which would cost 15,000 jobs.

Labour’s Jackie Baillie said big cuts were still to come, and that this was a budget for next year’s Holyrood elections, not for Scotland. “Austerity hidden is not austerity avoided,” she said.

Murdo Fraser for the Scottish Tories said Swinney had made the choice not to increase Scotland’s budget by raising tax and therefore talk of swingeing cuts “looks ridiculous”.

The Scottish Greens said the Budget had failed to make any serious attempt to curb fuel poverty, while Willie Rennie for the Liberal Democrats mocked Swinney for having spent all his life calling for tax powers, and then failing to use them.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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