Derek Mackay's first Scottish Budget explained

SNP Finance Secretary Derek Mackay will unveil his first Scottish budget later, here's what you need to know.

Finance Secretary  Derek Mackay is set to unveil first budget since sweeping new tax powers were given to Holyrood. Picture: Steven Scott Taylor / J P License
Finance Secretary Derek Mackay is set to unveil first budget since sweeping new tax powers were given to Holyrood. Picture: Steven Scott Taylor / J P License

What makes this year’s draft Scottish budget so important?

Put simply Holyrood ministers will be responsible for raising about half their budget in 2017-18 - far more than ever before.

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Since the Scottish Government was set up in 1999 it operated within a fixed budget, spending money awarded to it by Westminster.

The Scottish Government was given limited powers over income tax north of the border in 2015, but chose not to use them as any changes would have had to be applied uniformly across the board.

The latest changes brought in as part of the 2016 Scotland Act now give Holyrood power over income tax rates and thresholds in Scotland.

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What is Mr Mackay likely to do with these new powers?

The Scottish Government has to first announce its budget plans to MSPs, with ministers not meant to reveal their proposals ahead of that. But the SNP did set out its approach to using the new tax powers in the run up to May’s Scottish Parliament elections.

Here the party pledged not to increase the basic rate of income tax for five years and also ruled out re-introducing a 50p top rate of tax in 2017-18.

But nationalist leaders have also said they will not increase the threshold for the 40p rate of income tax, which the Conservatives have pledged to do in the rest of the UK.

According to the Scottish Government, opting out of this could raise up to £1.2 billion additional cash for ministers to spend over the course of this Parliament.

Now the SNP are in minority administration will the Scottish Government be able to pass its budget?

To do this Mr Mackay will have to persuade some opposition MSPs to either back his spending plans, or at least abstain when Holyrood votes on them.

At the moment it appears unlikely any other party will vote in favour of the budget, with Labour, the Scottish Greens and the Liberal Democrats all wanting the SNP to increase taxes, while Conservative MSPs are strongly opposed to making Scotland the highest taxed part of the UK.

However the Finance Secretary may be able to do a deal with one or more of the opposition parties at Holyrood so that they abstain during the budget vote, allowing the spending proposals to go through.

What happens if the Scottish Government fails to pass its budget?

There has been speculation that if the Government can not pass its budget, the SNP would be forced to call an early Holyrood election.

The only precedent for such a situation is in 2009, when the budget was defeated at Holyrood by just one vote.

The then-first minister Alex Salmond said the Scottish Government would resubmit its spending plans, but warned that if MSPs voted against them for a second time, the government would not be able to remain in place.

The budget was then passed exactly one week later, after the SNP secured deals with both Labour and the Liberal Democrats.