The Scottish Government is to provide an additional £159.5 million for Scottish councils to protect frontline services as part of a Budget deal with the Greens unveiled today.
Finance Secretary Derek Mackay set out revised plans, which will mean a further income tax hike for Scots middle earners.
The “higher” 41 pence rate will now start being paid on a salary of £43,430. This has been brought down from £44,273 set out in his draft Budget last year and means a tax hike for workers in this bracket.
The money will raise about £55m and be used to provide extra cash for Scottish councils, which had been facing cuts of £157m. Other cash will come from reserves and underspend this year.
Mr MacKay also announced the end to the public sector pay cap will now apply to all workers earning £36,500 – up from £30,000 initially. This means 71 per cent of workers will benefit instead of 51 per cent.
The Finance Secretary said the initial deal for local government was a “fair one.”
But he added; “As a parliament of minorities, we must work across the chamber to find compromise and consensus in order to give support, sustainability and stimulus to our economy and to our public services.
“Our changes to tax ensure Scotland has a progressive tax system, with 70 per cent of taxpayers paying less next year than they do currently and 55 per cent paying less than they would across the rest of the UK, while businesses benefit from support for investment.
“The changes I have announced ensure that people in Scotland will benefit from the best deal for taxpayers in the whole of the UK.”
The income tax change will “close the anomaly”, which meant those earning between £43,525 and £58,500 got a small tax cut under the SNP’s original plans because of changes to the personal allowance UK-wide.
Ministers insist 55 per cent of workers will pay less than they would elsewhere in the UK. Only those making £33,000 or more will face increases.
The deal today will also mean Orkney and Shetland Island Councils get an extra £10.5m to ensure lifeline ferry services are protected.
Greens co-leader Patrick Harvie said: “This deal is just the latest example of Greens leading the change in Scottish politics, from shifting the SNP and Labour’s positions on income tax toward a fairer structure, securing a ban on fracking, getting Air Departure Tax cuts removed from the budget, and delivering changes in social security to stop sanctions and ensure low-income families get the support they are entitled to.
“While other parties continue to posture from the sidelines, Greens are making Scotland fairer.”