Scots finance minister plans maximum use of borrowing to offset austerity

11 Jan 17

Scottish finance secretary Derek Mackay has told MSPs that he plans to use the Scottish Parliament’s new borrowing powers “to the max” to offset the effects of UK fiscal austerity.

He also said he would consider putting up the top rate of income tax to 50p in the pound – provided UK chancellor Philip Hammond did it first.

Mackay was facing questions from Holyrood’s finance committee on the tax plans in his draft Budget, introduced shortly before Christmas. He came under pressure from Labour and the Scottish Green as to why he had not used Scotland’s new tax powers under the 2016 Scotland Act to finance a more radical departure from the UK austerity programme.

He said that these pressures failed to recognise the continuing realities of how Holyrood’s block grant from Westminster works, though he did also promise that he would take maximum possible advantage of the capital borrowing powers that the Act gave Holyrood for the first time.

Mackay is locked in negotiations with other parties to secure the backing the ruling Scottish National Party, now a minority government, requires to get its budget through parliament. Speculation is largely focused on a possible deal with the Greens.

But yesterday’s exchanges made it clear that they too are looking for a significant easing of the fiscal stays. Their co-convener, Patrick Harvie, challenged Mackay on whether he had been sufficiently progressive in merely declining to follow Hammond in cutting the top income tax rate from 45 to 40p. Mackay said that he was keeping tax rates under annual review.

Pressed by Labour’s Neil Bibby as to whether he would only put the top rate up to 50p if Hammond did, Mackay said he thought it unlikely Hammond would do so any time soon, adding: “Of course we would have to look at it if the UK government introduced it." He also said he would need persuading that the net effect would be to increase revenue.

  • 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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