Scotland to become highest taxed part of UK under new tax plan

Finance Secretary Derek Mackay has vowed to press ahead with plans to make Scotland the highest taxed part of the UK despite his plans suffering an embarrassing defeat at Holyrood.

The new plans will mean Scotland is the highest taxed part of the UK. (Photo by Jeff J Mitchell/Getty Images)
The new plans will mean Scotland is the highest taxed part of the UK. (Photo by Jeff J Mitchell/Getty Images)

Mr Mackay is set to unveil a draft 2017/18 Scottish budget which will see higher earning taxpayers denied a tax break being offered elsewhere in the UK.

Ahead of the first ever Scottish budget with the power to alter income tax bands and rates, Mr Mackay has indicated that the Scottish Government will not pass on a UK Government proposal to raise the tax threshold for earners in the higher rate tax band.

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Finance Secretary Derek Mackay.

On the eve of the budget, Holyrood debated the Scottish Government’s plan when MSPs discussed a Scottish Conservative motion saying that families and businesses in Scotland should not be taxed more than those elsewhere in the UK.

Mr Mackay lodged an amendment to the motion which called for taxes to be used in a “fair and progressive” way.

Although supported by 60 SNP MSPs, Mr Mackay’s amendment was defeated by 61 opposition members who voted against him.

Finance Secretary Derek Mackay.

The symbolic vote will not derail the budget which will be formally presented to parliament for Stage One of the legislative process tomorrow.

But it did illustrate the objections to the Scottish Government’s plans for a variety of reasons across the political spectrum.

The Conservatives objected on the grounds that higher tax will discourage businesses from coming to Scotland. While Labour, the Lib Dems and Greens argued that the plans did not go far enough and the wealthy should be taxed more.

Conservative finance spokesman Murdo Fraser said the SNP had “lurched to the left” under Nicola Sturgeon’s leadership with its proposal to raise income tax.

“We do not believe that families and businesses in Scotland should be taxed more highly than elsewhere in the United Kingdom,” Mr Fraser said.

“It is time for the SNP to take their hands out of the pockets of hardworking taxpayers and concentrate instead on measures which grow the economy and grow the tax base.

“That is the way we create a more successful and prosperous Scotland, and that is how we raise the funds necessary for our vital public services, not by hiking taxes and making Scotland uncompetitive.”

But Mr Mackay was unmoved, indicating he would not proceed with UK Government plans to raise the 40p higher rate of tax threshold to £50,000.

“It is our position that we aspire to protect low and middle income taxpayers and given the choice between raising revenues or handing out large tax cuts to the richest in Scotland we choose public services,” Mr Mackay said.