Scottish Government agreement with Greens secures Budget progress

MSPs have backed the general principles Scottish Government’s Budget for the year ahead following a vote in Parliament on Thursday.

They voted by 67 votes to 58 in favour of the Budget (Scotland) (No.3) Bill after the Scottish Green Party reached a last minute agreement with the government on further tax-raising powers for councils.

Background

The week began with speculation that the government would be defeated on its spending plans for the year ahead. The stand-off even fuelled suggestions that the SNP-led administration would be required to resign from office and force a Scottish election if no agreement was reached.

In return for their backing, the Scottish Greens secured commitments from the Scottish Government to formally consult on giving councils the power to set local tourist and parking taxes.

The agreement will also see the establishment of cross-party talks aimed at drafting legislation to reform Council Tax, a measure that the Finance Secretary, Derek Mackay, said would be taken forward after the 2021 Scottish Parliament elections.

Mr Mackay also confirmed that local authorities would be free to increase Council Tax by up to 4.79 per cent – up from the present cap of 3 per cent.

Other measures that will be taken forward include plans to introduce new car parking levies on workers as well as the introduction of a levy on takeaway cups and (at least) a doubling of the carrier bag charge.

There had been speculation that the Greens would also seek to add an extra penny to the higher and additional rates of Scottish Income Tax (taking those rates to 42p and 47p respectively) although this was not pursued.

The Greens emerged as the only party likely to strike a deal with the SNP after the Scottish Conservatives, Labour and Liberal Democrats all signalled their intention to vote against the Budget, citing concerns over the SNP’s stances on diverging rates of income tax from the rest of the UK and its support for a second referendum on Scottish independence.

The debate

Derek Mackay, moving the Budget on behalf of the Scottish Government, said his revised Budget agreement with the Greens would empower local authorities and maintain a “progressive and balanced” income tax system for Scottish taxpayers”.

Murdo Fraser, responding from the Scottish Conservatives, warned that the agreement between the Greens and SNP would deliver a “triple tax bombshell which will do nothing for the competitiveness of the Scottish economy”. He also accused the SNP of reneging on its 2016 manifesto commitments not to introduce a tourist tax, not to increase the amount of income tax paid by basic rate taxpayers and not to increase council tax bills by more than 3 per cent.

Bruce Crawford MSP, the convener of the Finance and Constitution Committee, said that the increasing reliance of the Scottish Budget on the devolved taxes would increase the reliance of the budget on the country’s economic performance. He said the scale of this would only become apparent once HMRC published its final outturn figures for 2017-18, which are due in the summer.

He also warned that this could provide a “reality check” for MSPs, who may have to face tough “political decisions” depending on the figures that are announced. They may have to choose whether to draw down money from the government’s reserves to meet spending shortfall or make use of the Parliament’s borrowing powers to offset these reductions.

For Scottish Labour, James Kelly MSP reiterated his party’s intention to vote against an “unfair budget based on unfair taxation”.

Patrick Harvie, the convener of the Scottish Greens, defended his party’s agreement with the SNP. He said it was because of previous Green agreements with the government that Scotland had achieved “a transformation—a restructuring—of Scotland’s income tax policy”.

Scottish Liberal Democrat leader Willie Rennie sounded a cautionary note on the government’s use of the devolved income tax raising powers. He said that while Liberal Democrats were “the first to advocate the use of (Scotland’s) income tax powers”, these had to be used in moderation. He added that annual changes may result in “adverse behavioural change” but that “modest progressive tax changes”, as advocated by his party could “give confidence that progressive modest change is possible and…good for public services”.

What next?

The deal with the Scottish Greens means that the government now has a majority in Parliament for the Budget to pass its remaining two stages of scrutiny.

The Bill will now be considered by the Finance and Constitution Committee at Stage 2 before the third and final vote takes place in the week commencing 18 February. Before the final vote, the Scottish Rate Resolution setting income tax rates and bands for 2019/20 will be voted on by MSPs, with that also expected to be a formality following this week’s agreement.

Posted in: Scottish Taxes
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